The Linkage between Public, Private Investment and Economic Growth—Evidence for the Developing ASEAN and Asian Countries

Abstract

This study used a quantitative method to assess the impact of public investment on private investment and economic growth based on data from 18 developing countries over a 21-year period (1995-2015) by applying PVAR model combined with GMM. The findings show that all public investment and public-private partnership investments affect private investment as well as affect economic growth but the effects vary cyclically, by time period, and by group of countries.

For the ASEAN developing countries, public investment crowds out private investment in short term and crowds in private investment in the medium and long term, but it crowds out public-private partnership investment. For the developing countries in Asia, public investment has a positive impact on economic growth with the inverted U-shaped pattern which stimulates growth in the short and medium term, but in the long-term effects of stimulation growth tend to decrease.