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Public investment and economic activity in Mexico, 1925-1981

Author

Listed:
  • de Jesús Fonseca, Felipe
  • Gómez-Zaldívar, Manuel
  • Ventosa-Santaulària, Daniel
Abstract
The authors construct a historical database of public investment (both total and broken down into its main components) for the period 1925 to 1981 in order to measure its impact on economic activity. Given the possible presence of crowding-out effects between public investment and private investment, in their analysis they control for the latter. The results suggest that: i) public investment had a significant impact on output, one which varies depending on the category of public investment considered, and; ii) private and public investment are positively related, i.e., public investment has a crowding-in effect on private investment, and both have a positive and significant impact on GDP. The results contrast with those of previous studies that have analyzed this relationship, though using a different time period, one that includes the economic liberalization era. Nevertheless, these differences can be rationalized by the findings of Ilzetzki et al. (How Big (Small?) are Fiscal Multipliers? 2013), who point out that key country-specific characteristics such as trade openness and the exchange rate regime are determinant in the relationship between public investment and output.

Suggested Citation

  • de Jesús Fonseca, Felipe & Gómez-Zaldívar, Manuel & Ventosa-Santaulària, Daniel, 2020. "Public investment and economic activity in Mexico, 1925-1981," Economics - The Open-Access, Open-Assessment E-Journal (2007-2020), Kiel Institute for the World Economy (IfW Kiel), vol. 14, pages 1-24.
    • Handle: RePEc:zbw:ifweej:20206
    DOI: 10.5018/economics-ejournal.ja.2020-6
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    References listed on IDEAS

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    1. John Geweke & Susan Porter‐Hudak, 1983. "The Estimation And Application Of Long Memory Time Series Models," Journal of Time Series Analysis, Wiley Blackwell, vol. 4(4), pages 221-238, July.
    2. Ventosa-Santaulària Daniel & Gómez-Zaldívar Manuel, 2011. "Testing for a Deterministic Trend When There is Evidence of Unit Root," Journal of Time Series Econometrics, De Gruyter, vol. 2(2), pages 1-26, January.
    3. Aschauer, David Alan, 1989. "Is public expenditure productive?," Journal of Monetary Economics, Elsevier, vol. 23(2), pages 177-200, March.
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    7. Easterly, William & Rebelo, Sergio, 1993. "Fiscal policy and economic growth: An empirical investigation," Journal of Monetary Economics, Elsevier, vol. 32(3), pages 417-458, December.
    8. Ilzetzki, Ethan & Mendoza, Enrique G. & Végh, Carlos A., 2013. "How big (small?) are fiscal multipliers?," Journal of Monetary Economics, Elsevier, vol. 60(2), pages 239-254.
    9. D. Ventosa-Santaul a & M. G -Zald & F. H. Wallace, 2015. "The real exchange rate, regime changes and volatility shifts," Applied Economics, Taylor & Francis Journals, vol. 47(24), pages 2445-2454, May.
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    Cited by:

    1. Valdez , Rolando I., 2019. "Spatial diffusion of economic growth and externalities in Mexico," INVESTIGACIONES REGIONALES - Journal of REGIONAL RESEARCH, Asociación Española de Ciencia Regional, issue 45, pages 139-160.

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    More about this item

    Keywords

    economic activity; federal public investment; long-term equilibrium relationship;
    All these keywords.

    JEL classification:

    • N16 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations - - - Latin America; Caribbean
    • H54 - Public Economics - - National Government Expenditures and Related Policies - - - Infrastructures
    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models

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