Business and Economics > Econometrics

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International Monetary Fund
This paper is a Statistical Appendix to complement the Quota Formula Review—Further Considerations.
Martin Feldkircher and Stefan Zeugner
Default prior choices fixing Zellner's g are predominant in the Bayesian Model Averaging literature, but tend to concentrate posterior mass on a tiny set of models. The paper demonstrates this supermodel effect and proposes to address it by a hyper-g prior, whose data-dependent shrinkage adapts posterior model distributions to data quality. Analytically, existing work on the hyper-g-prior is complemented by posterior expressions essential to fully Bayesian analysis and to sound numerical implementation. A simulation experiment illustrates the implications for posterior inference. Furthermore, an application to determinants of economic growth identifies several covariates whose robustness differs considerably from previous results.
Issouf Samaké
We investigate the nexus of public and private investment and assess the impact of both types of investment on growth. Using annual data for 1965-2005, we employ a coherent set of structural VAR outputs to model investment and growth in Benin. We find that in addition to institutional and regulatory developments, public investment and private capital formation facilitated by access to financial services have a significant impact on growth. The analysis supports the crowding-in effect of public investment. It also confirms that the slow pace of improvement in Benin's economic freedom index, which reflects its relatively weak institutions and slow pace of reform, deters private investment. From the cointegration regressions, the speed-of-adjustment analysis suggests that 27 percent of the deviation of GDP from its long-run equilibrium is corrected every year, which implies that it takes two to three years to cut the gap in half.
Ms. Jenny E Ligthart
The paper investigates the growth effects of public capital in Portugal using annual data for the period 1965-95. Both a production function and a vector autoregressive model are estimated. Public capital is shown to be a significant long-term determinant of output growth. The size of the estimated production elasticity indicates, in line with studies for other countries, a substantial growth payoff from public investment. Disaggregating public capital shows that investment related to, among other things, roads, railways, and airports is more productive than public investment in other major categories.
International Monetary Fund
This Selected Issues paper examines the education system and public investment in Portugal. Both areas are generally considered as critical for Portugal’s prospects for sustaining or accelerating the drive toward real income convergence. Moreover, both areas absorb a substantial share of public resources and thus have important implications for fiscal balances, which are, under European Monetary Union, constrained by the Stability and Growth Pact. The paper assesses the performance of the Portuguese education system and delineates a possible agenda for reform. It also attempts to shed light on the role of public investment in Portugal.