EIB Papers Volume 13. n°1/2008 - European Investment Bank

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Has the impact of public capital on output changed over time? Estimate of LR e�ect on GDP 74 Volume13 N°1 2008 EIB PAPERS 3 2 1 0 -1 -2 -3 FRA CAN ITA (d) Variability in the public-capital-to-GDP ratio 0 0.05 0.10 0.15 0.20 Note: The vertical axis shows the long-run impact on income of a shock to public capital, while the horizontal axis shows the standard deviation of the public-capital-to-GDP ratio over 1960-2001 for the country concerned. 4. Recursive and panel VARs In the previous section we have focused on our first research question to see to what extent the impact of public capital differs across countries. In this section we will address our second research question, i.e., to what extent the impact of public capital on output differs over time. To address this issue, we use ‘recursive’ VARs and ‘rolling-window’ panel VARs. 4.1 Recursive VARs SWE NOR ICE AUS POR AUT GRE ESP FIN USA St. error of government capital / GDP This subsection reports our findings for so-called ‘recursive VARs’. The purpose of this analysis is to examine whether the impact of public capital on output has changed during the 1990s in comparison to the earlier decades. Recursive estimates are done for all countries in our sample starting with the period 1960-1989 up to 1960-2001. So we start with a VAR for the period 1960-89 and then add one year to the estimation period in each step. In all VARs we impose the same number of cointegrating vectors as found for the full sample period. For each regression, the longrun effect (accumulated GDP response relative to a one-standard deviation shock in public capital) is estimated. The estimated long-run effects are shown in Table 5, with significant long-run elasticities shown in italics. The final column in Table 5 shows the results of a regression of the estimated long-run elasticities on a time trend. We have made three groups of countries, depending on the change in the estimated elasticity over time. In the first group (“P”) the estimated coefficient of the trend variable is positive and significant, suggesting that in these countries public capital has become more productive over time. In the second group (“N”) the estimated coefficient is negative and significant, suggesting that public capital has become less productive over time. Finally, if the estimated coefficient of the trend variable is insignificant, the country is in the “O” group. DEN NET NZL GBR BEL SWI IRE JAP
Table 5. Estimated long-run effects of public capital on output: Recursive VARs Country 60-89 60-90 60-91 60-92 60-93 60-94 60-95 60-96 60-97 60-98 60-99 60-00 60-01 Trend Australia 0.07 0.05 0.11 0.10 0.10 0.09 0.09 0.08 0.07 0.06 0.06 0.06 0.06 O Austria 0.13 0.09 0.14 0.14 0.15 0.11 0.11 0.14 0.15 0.24 0.11 0.10 0.15 O Belgium -1.07 -1.13 -0.90 0.11 0.54 0.38 -0.02 0.25 -0.08 -0.46 -0.52 -0.65 -0.41 O Canada 1.94 1.78 1.51 1.60 1.32 1.25 1.07 0.89 0.93 0.91 0.97 0.87 0.85 N Denmark 0.13 0.15 0.15 0.14 0.13 0.12 0.11 0.11 0.11 0.11 0.12 0.11 0.12 N Finland -0.09 -0.27 0.16 0.20 0.43 0.24 0.44 0.40 0.53 0.62 0.63 0.62 0.71 P France 2.58 2.40 2.31 2.22 1.91 1.84 1.79 1.57 1.62 1.48 1.44 1.42 1.37 N Greece -7.00 -2.85 2.19 0.87 0.21 0.30 0.87 0.99 1.57 1.31 1.44 2.33 2.60 P Iceland 2.32 2.07 1.87 1.91 1.65 1.33 1.60 1.22 1.06 1.04 0.84 0.84 0.77 N Ireland 0.82 0.51 0.78 0.28 -0.18 -0.91 -1.77 -1.79 -2.26 -2.30 -2.64 -2.52 -2.38 N Italy 0.34 0.22 0.12 0.05 0.04 0.26 -0.17 -0.30 -0.21 -0.17 -0.14 -0.11 -0.13 N Japan -1.17 -1.34 -0.87 -0.63 -0.30 -0.30 -0.25 -0.22 -0.41 -0.50 -0.60 -0.54 -0.51 P Netherlands 3.62 2.39 -0.47 -0.20 -0.12 -0.33 -0.19 -0.24 0.29 0.19 0.10 -0.20 -0.13 O New Zealand -4.98 -0.46 1.37 2.12 0.97 -1.36 -3.81 -2.39 -1.72 -0.18 -0.42 -0.41 -0.15 O Norway 1.07 1.00 0.73 1.20 1.11 2.87 1.84 1.84 1.68 1.73 1.54 1.54 1.21 O Portugal -0.99 -0.94 -0.96 -0.73 -1.07 -1.14 -1.21 -1.32 -1.33 -1.20 -1.04 -0.95 -0.95 O Spain 1.92 -0.31 -0.91 -1.35 -0.92 -0.18 -0.27 -0.42 -0.43 -0.63 -0.72 -0.76 -0.36 O Sweden -1.05 -1.36 -0.07 1.01 0.97 0.84 0.17 0.04 -0.01 0.00 0.16 0.49 0.42 O Switzerland -0.68 -1.49 -1.21 -0.88 -0.36 -0.26 0.01 0.09 0.22 0.29 0.86 0.70 0.77 P United Kingdom -0.70 -0.51 -0.41 -0.11 -0.74 -0.80 -0.92 -0.98 -0.46 -0.26 -0.67 -0.75 -0.95 O United States 1.98 2.28 1.97 1.90 1.49 1.38 1.37 1.43 1.51 1.53 1.44 1.38 1.16 N Note: Figures in italics are significant at the 10-percent level. The final column indicates whether the trend in the evolution of recursive coefficients is insignificant (O), positive (P), or negative (N) (5-percent significance level). EIB PAPERS Volume13 N°1 2008 75
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Preface This year the European Inve
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Infrastructure investment, growth a
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Despite progress, infrastructure de
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Table 7. Infrastructure indicators
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EU funds provide additional resourc
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Various empirical studies confirm t
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In some new member states there is
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PPPs offer new opportunities to fin
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Strong legal and institutional fram
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Additional fiscal reporting - even
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Fiscal adjustment and reforms need
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