TITLE:
The Macroeconomic Effect of Public Investment
AUTHORS:
Chen He
KEYWORDS:
Public Investment, GDP, Private Investment, Employment
JOURNAL NAME:
Modern Economy,
Vol.8 No.11,
November
10,
2017
ABSTRACT: This paper establishes a VAR model and VEC model using
the data of Chinese public investment, GDP, private investment and employment from
1997 to 2013 aiming to analyze the influence of Chinese public investment on GDP,
private investment and employment through ADF unit root test, Granger causality
test, Johansen co-integration test, impulse response function, variance decomposition
and other empirical methods. Results show that there is a stable equilibrium relationship
among Chinese public investment, GDP, private investment and employment in the long
term; Public investment has a positive effect on GDP in the short term, which is
not obvious even negative in the long term though; Public investment has a crowding
out effect on private investment in the short term, while has a positive impact
instead in the long term; The positive influence that public investment has on employment
is very weak both in the short term and long term. For the stable and healthy development
of social economy, the government should improve the efficiency of public investment
by means of controlling the scale, optimizing the structure and strengthening the
supervision of public investment; A series of policies should be introduced as well
to encourage private investment at the same time.