Does Government Expenditure Crowds Outthe Private Domestic Investment? Empirical Evidence of Indonesia Cover Image

Does Government Expenditure Crowds Outthe Private Domestic Investment? Empirical Evidence of Indonesia
Does Government Expenditure Crowds Outthe Private Domestic Investment? Empirical Evidence of Indonesia

Author(s): Retno Fitrianti, Munawar Ismail, Ghozali Maski, Devanto Shasta Pratomo
Subject(s): National Economy, Business Economy / Management, Public Administration, Recent History (1900 till today), Economic policy, Economic development
Published by: Reprograph
Keywords: government expenditure; crowding out; private domestic investment; error correction model;

Summary/Abstract: The objective of this study is to examine the effect of government expenditure on private domestic investment in Indonesia. Based on the previous studies, there is no clear justification whether government expenditure is crowding in or crowding out the private investment. Using quarterly time series data during period 1985 to 2012, the empirical results show that government expenditure (total) is crowding out private domestic investment in both short term and long term. Specifically, government expenditure for public service is crowding out the private investment in both short term and long term. Unlike public services, the economic expenditure is crowding in the private investment in the long term. Moreover, health expenditure is crowding out the private investment in the short term while education expenditure is crowding out in the short term and crowding in in the long term.

  • Issue Year: X/2015
  • Issue No: 35
  • Page Range: 685-688
  • Page Count: 4
  • Language: English