ecbwp864 | Covariance | Vector Autoregression

WO R K I N G PA P E R S E R I E S

N O 8 6 4 / F E B R UA RY 2 0 0 8

MACROECONOMIC RATES OF RETURN OF PUBLIC AND PRIVATE INVESTMENT CROWDING-IN AND CROWDING-OUT EFFECTS

by António Afonso and Miguel St. Aubyn

WO R K I N G PA P E R S E R I E S
N O 8 6 4 / F E B R U A RY 20 0 8

MACROECONOMIC RATES OF RETURN OF PUBLIC AND PRIVATE INVESTMENT CROWDING-IN AND CROWDING-OUT EFFECTS 1
António Afonso 2,3 and Miguel St. Aubyn 3

In 2008 all ECB publications feature a motif taken from the 10 banknote.

This paper can be downloaded without charge from http://www.ecb.europa.eu or from the Social Science Research Network electronic library at http://ssrn.com /abstract_id=1090278.

1 We are grateful to Peter Claeys, Hubert Gabrisch, José Marín, Thomas Stratmann, and to participants at the Vereins für Socialpolitik (Bayreuth), at the Netwerk Algemene en Kwantitatieve Economie (Amesterdam), at the 63rd International Atlantic Economic Conference (Madrid), at the EcoMod (S. Paulo) conference, and to an anonymous referee for helpful comments and suggestions. The opinions expressed herein are those of the authors and do not necessarily reflect those of the ECB or the Eurosystem. 2 European Central Bank, Directorate General Economics, Kaiserstraße 29, D-60311 Frankfurt am Main, Germany; e-mail: antonio.afonso@ecb.europa.eu 3 ISEG/TULisbon – Technical University of Lisbon, Department of Economics; UECE – Research Unit on Complexity and Economics, R. Miguel Lupi 20, 1249-078 Lisbon, Portugal; e-mails: aafonso@iseg.utl.pt; mstaubyn@iseg.utl.pt UECE is supported by FCT (Fundação para a Ciência e a Tecnologia, Portugal), financed by ERDF and Portuguese funds. Miguel St. Aubyn thanks the Fiscal Policies Division of the ECB for its hospitality.

© European Central Bank, 2008 Address Kaiserstrasse 29 60311 Frankfurt am Main, Germany Postal address Postfach 16 03 19 60066 Frankfurt am Main, Germany Telephone +49 69 1344 0 Website http://www.ecb.europa.eu Fax +49 69 1344 6000 All rights reserved. Any reproduction, publication and reprint in the form of a different publication, whether printed or produced electronically, in whole or in part, is permitted only with the explicit written authorisation of the ECB or the author(s). The views expressed in this paper do not necessarily reflect those of the European Central Bank. The statement of purpose for the ECB Working Paper Series is available from the ECB website, http://www.ecb. europa.eu/pub/scientific/wps/date/html/ index.en.html ISSN 1561-0810 (print) ISSN 1725-2806 (online)

CONTENTS
Abstract Non-technical summary 1 Introduction 2 Literature and stylised facts 2.1 Related literature 2.2 Some stylised facts 3 Methodology 3.1 VAR specification 3.2 Macroeconomic rates of return 4 Empirical analysis 4.1 Data 4.2 VAR estimation 4.3 The rates of return 4.4 Crowding-in and crowding-out effects 5 Conclusion References Appendix – Data sources Tables and figures European Central Bank Working Paper Series 4 5 7 8 8 10 11 11 14 17 17 18 20 21 22 24 26 27 53

ECB Working Paper Series No 864 February 2008

3

Abstract Using annual data from 14 European Union countries, plus Canada, Japan and the United States, we evaluate the macroeconomic effects of public and private investment through VAR analysis. From impulse response functions, we are able to assess the extent of crowding-in or crowding-out of both components of investment. We also compute the associated macroeconomic rates of return of public and private investment for each country. The results point mostly to the existence of positive effects of public investment and private investment on output. On the other hand, the crowding-in effects of public investment on private investment vary across countries, while the crowding-in effect of private investment on public investment is more generalised. JEL: C32, E22, E62 Keywords: fiscal policy, public investment, private investment, impulse response, vector autoregression, European Union

4

ECB Working Paper Series No 864 February 2008

public investment can create additional favourable conditions for private investment. Second. This would result in having a crowding-in effect on private investment. From a theoretical perspective. which can then take advantage of better overall infrastructures and potentially improved business conditions. The existence of infrastructure facilities may increase the productivity of private investment.Non-technical summary In this paper we address two key questions: does public investment have a significant effect on GDP. This would reduce the amount of savings available for private investors and decrease the expected rate of return of private capital. Canada. by estimating VARs for 14 European Union countries. public partial and total investment rates of return derived from a VAR procedure are systematically computed and compared across countries and periods of time. sewage systems. but also the effects of private investment on public capital formation decisions. for instance. between 1960 and 2005: . via computing macroeconomic rates of return. by providing or promoting relevant infrastructure such as roads. we estimated that. Japan and the United States. ECB Working Paper Series No 864 February 2008 5 . a rise in public investment can have two effects on private investment. and does public investment induce more private investment. and therefore we are also able to compute private investment rates of return. plus Canada. First. Secondly. This allows us to analyse not only the more studied question of private investment being crowded in or out by public investment. harbours or airports. therefore causing interest rates to rise. In our paper. and for the first time in the literature. the United Kingdom and the Netherlands) with positive public investment impulses leading to a decline in private investment (crowding-out). we extend our analysis and methodology towards the consideration of innovations in private investment. Ireland. the increase of public investment needs to be financed.public investment had a contractionary effect on output in five cases (Belgium. leading to a crowding-out effect on private investment. Our work contains some innovative features worth mentioning. First. highways. which may imply more taxes or impose a higher demand for funds from the government in the capital markets.

When it is possible to compute it. as 95 percent confidence bands concerning public investment effects on output always include the zero value. either partial or total – Belgium. Public investment responded positively to private investment in all but three countries (Belgium. by contrast.81 percent. These effects correspond to point estimates and care should be taken in their interpretation. Portugal and Sweden. and negative for the cases of Austria. with the exception of France.. Greece. Germany. Finland. Private investment impulses. the partial rate of return of public investment is mostly positive. The highest estimated return was in Japan (5. expansionary effects and crowding-in prevailed in eight cases (Austria. Italy and Sweden. were always expansionary in GDP terms and effects were usually significant in statistical terms. the total rate of return associated with public investment is generally lower. Portugal. 6 ECB Working Paper Series No 864 February 2008 . and there were very few cases of slightly negative private investment rates of return.on the other hand. Taking into account the induced effect on private investment. with the exceptions of Finland. Greece and Sweden). Finland. Denmark and Greece. countries where the increase in GDP was not sufficiently high to compensate for the total investment effort. partial). Greece. Spain and Sweden). Denmark.

but this method has not been widely used in the literature. public investment can create additional favourable conditions for private investment. a rise in public investment can have two effects on private investment. if the main result is crowding-out. which may imply more taxes or impose a higher demand for funds from the government in the capital markets. Macroeconomic rates of return this have been previously computed by Pereira (2000) and Pina and St. which can then take advantage of better overall infrastructures and potentially improved business conditions. Aubyn (2005). via computing macroeconomic rates of return. sewage systems. therefore causing interest rates to rise. First.1. we ask if crowding-in prevails or else. This would reduce the amount of savings available for private investors and decrease the expected rate of return of private capital. highways. leading to a crowding-out effect on private investment. From a theoretical perspective. Building on such framework. This would result in having a crowding-in effect on private investment. Second. for instance. Japan and the United States. The existence of infrastructure facilities may increase the productivity of private investment. In other words. we evaluate the macroeconomic effects of public and private investment through a Vector Autoregression analysis using annual data from 14 European Union countries. and in order to tackle the main issue of the paper. harbours or airports. by providing or promoting relevant infrastructure such as roads. Introduction In this paper we address two key questions: does public investment have a significant effect on GDP. the increase of public investment needs to be financed. We use impulse response ECB Working Paper Series No 864 February 2008 7 . and does public investment induce more private investment. plus Canada.

First. Related literature The relevance of public investment is usually stressed in the implementation of budgetary measures taken by governments. The paper is organised as follows. Our work contains some innovative features worth mentioning. Section Three outlines the methodological approach used in the paper both regarding the VAR specification and the analytical framework to compute the macroeconomic rates of return. but also the effects of private investment on public capital formation decisions. in the European Union (EU).functions to assess the extent of crowding-in or crowding-out of both components of investment. in the context of the recent discussions about the revision of the Stability and Growth Pact. For instance. In Section Two we briefly review some of the literature and previous results. we extend our analysis and methodology towards the consideration of innovations in private investment. some proposals have 8 ECB Working Paper Series No 864 February 2008 . Literature and stylised facts 2. In Section four we present and discuss our results. and for the first time in the literature.1. 2. Section Five summarise the paper’s main findings. This allows us to analyse not only the more studied question of private investment being crowded in or out by public investment. Secondly. and therefore we are also able to compute private investment rates of return. public partial and total investment rates of return derived from a VAR procedure are systematically computed and compared across countries and periods of time. notably its particular growth enhancing potential.

either directly or indirectly via private investment decisions. private investment. ECB Working Paper Series No 864 February 2008 1 9 . innovations to public investment crowd out private investment. public investment. and that public and private capital could be seen as complementary. the related relevant economic policy question seems to be whether or not public government investment is productive and does contribute positively to growth. Mittnik and Neumann (2001) Musgrave (1939) discussed the appropriateness of financing via government debt.2 Therefore. For instance. the real interest rate. which he critically considered to be limited. public investment had an overall crowding-in effect on private investment. for the period 1947-1996. 2 The high output elasticity estimated by Aschauer with respect to public capital was later criticised on econometric grounds. According to the reported results. Moreover. the so-called selfliquidating investments. and the crowding-in hypothesis in the context of VAR analysis. and also by the imposition of formal rules that budget deficits cannot exceed public investment. as well as in assessing whether public investment crowds in or crowds out private investment. the significance of public investment has been further illustrated by the idea of the Golden Rule. The results of Aschauer (1989b) indicated that for the US. and price deflators of private and public investment. 1989b) initial contributions regarding the derivation of the elasticity of output with respect to public capital stock. suggesting that such spending should only be financed by issuing government debt. Some related studies have addressed the effects of public investment on GDP. Voss (2002) estimates a VAR model with GDP.1 Since Aschauer’s (1989a. there has been considerable interest in measuring the effects of public investment on aggregate economic activity. for the US and Canada.called for the exclusion of public investment from the budget deficit threshold established under the Maastricht Treaty.

2. Portugal. Their results indicate that public investment tends to exert positive effects on GDP. Germany and Denmark. private investment. Additionally. These developments have to be seen against the background of a catching-up effort undertaken by countries like Greece. through the positive impact of infrastructure on private investment productivity. the rising of the public investment ratio in Spain can be compared to the historical decreases that occurred over the period in such countries as Austria. 2. public investment and public consumption for six industrialised economies. a somewhat different pattern emerges in the cases of Greece. Italy and Portugal. González-Páramo and Roldán (1997) present results that support the existence of a crowding-in effect of private investment by public investment. and that there is no evidence of dominant crowding-out effects. Perotti (2004) and Kamps (2004) assess the output and labour market effects of government investment in a VAR context. for a panel of 14 OECD countries. Argimón. and Spain after EU accession. For instance. On the other hand. while in other more mature European economies public 10 ECB Working Paper Series No 864 February 2008 . Some stylised facts The share of both public and private investment in GDP varies across our country sample and also throughout the time sample dimension. or did not decrease significantly. Belgium.estimate a VAR with GDP. particularly in the 1980s and in the 1990s. where the public investment-to-GDP ratio either increased. These developments are summarised in Table 1. the public investment-to-GDP ratio has declined for most countries in the sample. Overall.

The variables in the VAR are the logarithmic growth rates of real public investment. The inclusion of output.1. it is also possible to observe a decline from quite above-average sample levels in the investment ratio for the case of Japan. R. Tax. the ratio even went as high as 28 per cent in the case of Japan. ECB Working Paper Series No 864 February 2008 11 . and real interest rates. For instance. some heterogeneity also prevails in our country sample. real output. In more recent years. Italy. (1) 3 Greece entered the EU in 1981. Taxes and real interest rates are included as they may have important linkages with the above mentioned key variables. In terms of private investment ratios. Spain and the US. Spain. in 1970.investment ratios were already on a downward path. Ipriv. real taxes. and a rather stable ratio for the US. the US and Sweden. private investment-to-GDP ratios ranged from around 15 per cent in such countries as the UK. Ipub. to around 24 per cent in the cases of Finland. private investment and public investment is crucial in what concerns the computation of macroeconomic rates of return. Methodology 3. with Portugal and Spain following suit in 1986. real private investment. Y.3 Additionally. while some upward trends were visible from the second half of the 1990s onwards in countries such as France. 3. Ireland. VAR specification We estimate a small five-variable VAR model for each country throughout the period 1960-2005. as explained later. The VAR model in standard form can be written as p Xt c i 1 Ai X t i t . the private investment-to-GDP in Spain was above average.

with the orthogonal restrictions and by means of an adequate normalisation we have Cov( )=I. it is possible to identify orthogonal shocks. .where Xt denotes the (5 1) vector of the five endogenous variables given by X t log Ipubt log Iprivt log Yt log Taxt Rt . will be determined by the usual information criteria. for each of the variables in (1). (3) (4) BCov ( t ) B ' . A is the matrix of autoregressive coefficients of order (5 5) . and to compute these orthogonal innovations via the random disturbances: t B t. essentially from the five variances and from the ten 12 ECB Working Paper Series No 864 February 2008 . where I (5 5) identity matrix. c is a (5 1) vector of ' intercept terms. By imposing of a set of restrictions. B has then 25 parameters that need to be identified. Since B is a square (n n) matrix. and the vector of random disturbances t Ipub t Ipriv t Y t Tax t R t ' contains the reduced form OLS residuals. Therefore. from (4) only 15 parameters can be determined. and we can write Cov ( t ) Cov ( B t ) I BCov ( t ) B ' . The lag length of the endogeneous variables. By imposing orthogonality. p. which in our case has dimension five. (2) The estimation of (1) allows Cov( ) to be determined.

which requires all elements above the principal diagonal to be zero. However. In other words. to lags in government decision-making. for instance. A n-variable VAR provides automatically n(n+1)/2 restrictions and an identical number of known parameters. provides the necessary additional ten restrictions. and the system is then exactly identified. 0 d 55 (5) D d 31 d 41 d 51 which makes possible to write the residuals t as a function of the orthogonal shocks in each of the variables: t D t. d11 d 21 B 1 0 d 22 d 32 d 42 d 52 0 0 d 33 d 43 d 53 0 0 0 d 44 d 54 0 0 0 . with public investment ordered first. ECB Working Paper Series No 864 February 2008 4 13 . The use of a Choleski decomposition of the matrix of covariances of the residuals. As a result. public investment does not respond contemporaneously to any structural disturbances to the remaining variables due. a shock in public investment may have an instantaneous effect on all the other variables.4 For the complete identification of the model we need ten more restrictions.covariances. (6) Our VAR is ordered from the most exogenous variable to the least exogenous one. which requires an additional (n2-n)/2 restrictions to be imposed on the system in order to identify all the n2 parameters. We can then impose a lower triangular structure to B-1.

and it is assumed that its shocks do not affect the other variables simultaneously. The real interest rate is the least exogenous variable.r2.r1. the rate of return of total investment (originated by an impulse to private investment). . Moreover. For instance. taxes and the real interest rate affect public investment sequences with a one-period lag. the partial rate of return of private investment.private investment.r4. does not have an instantaneous impact on public investment – only on output. a shock in private investment. the partial rate of return of public investment. GDP. it does react contemporaneously to shocks to the remaining variables in the model. one can recall that governments typically announce their spending and investment plans in advance. 3. but not to shocks to the other variables. taxes and the real interest rate. economic agents can use such information in making their investment decisions. this ordering implies that private investment responds to public investment in a contemporaneous fashion. in the context of their budgetary planning. the second variable. 14 ECB Working Paper Series No 864 February 2008 . private investment affects GDP contemporaneously. . Macroeconomic rates of return Based on impulse response functions. the rate of return of total investment (originated by an impulse to public investment). we compute four different rates of return: . Additionally.2. Moreover. . Therefore.r3. Indeed.

log Ipub (7) The above mentioned long-run elasticity is the ratio between the accumulated change in the growth rate of output and the accumulated change in the growth rate of public investment. 2006). Following an orthogonal impulse to public investment. Aubyn (2005. as public investment can either ECB Working Paper Series No 864 February 2008 15 . Ipub (8) Then r1. The long-term marginal productivity of public investment is given by MPIpub Y Ipub Ipub Y . the partial-cost dynamic feedback rate of return of public investment. which will be obtained from the estimation of the country-specific VAR models. this rate could either overestimate or underestimate the return on public investment. as Ipub log Y . (9) As discussed by Pina and St. derived from the accumulated impulse response functions of the VAR.The partial rate of return of public investment is computed as suggested by Pereira (2000). Ipub. we can compute the long-run accumulated elasticity of Y with respect to public investment. is obtained as the solution for: (1 r1 ) 20 MPIpub .

implies taking into account both the long-term marginal productivity of public and private investment. Since private investment also changes. Ipriv (11) Therefore. and if one only considers the latter. that more public capital induces more private investment. for example. computing the marginal productivity of total investment. as follows: MPTI Y Ipub Ipriv MPIpub 1 1 MPIpriv 1 . (12) 16 ECB Working Paper Series No 864 February 2008 . the long-term accumulated elasticity of Y with respect to Ipriv can also be derived from accumulated impulse response functions of the VAR in a similar fashion: Ipriv log Y . log Ipriv (10) and now the long-term marginal productivity of private investment is given by MPIpriv Y Ipriv Ipriv Y . MPTI. Suppose.crowd in or crowd out private investment respectively. the rate of return is overstated. The total investment that caused the detected product increase exceeds the public effort.

while the average life of a personal computer could be three or four years. is obtained as the solution for: (1 r2 ) 20 MPTI . Finland (1961–2005). r3. 4. Belgium (1970–2005). Portugal (1981–2005). Data We use annual data for 14 EU countries (sample in parenthesis): Austria (1965–2005). Germany (1970–2005).1. Ireland (1971–2005). Empirical analysis 4. the life expectancy of a bridge is certainly to be measured in decades. The rate of return of total investment (originated by an impulse to public investment). (13) In our described benchmark framework we use 20 years to compute both the partial and the total rates of return. Using the accumulated impulse responses of the VAR following an impulse on private investment. The partial rate of return of private investment. Greece (1973–2005). Denmark (1971–2005). Spain (1979– ECB Working Paper Series No 864 February 2008 17 . r2.Following Pina and St. the Netherlands (1969–2005). As public investment may also respond positively or negatively to private efforts. In other words. and then a marginal productivity and a rate of return can be calculated. Italy (1970–2005). a rate of return of total investment. France (1970–2005). is computed in a way analogous to r1. Aubyn (2006). r4. we assume an average life of 20 years for a capital good. we compute a rate of return of total investment. the long-run output elasticity is obtained. For instance. is also estimated.

taxes and investment variables are transformed into real values using the price deflator of GDP and the price deflator of the gross fixed capital formation of the total economy. gross fixed capital formation of the private sector at current prices. All data are taken from the European Commission Ameco database. private investment.2005). where first differences of original values were taken. public investment. GDP. 18 ECB Working Paper Series No 864 February 2008 . used as public investment. except the interest rate. direct taxes. I (0) time series. aggregated into taxes. Japan (1972–2004).. plus Canada (1964–2004). indirect taxes and social contributions. the nominal long-term interest rate and the consumer price index.6 4. All variables enter the VAR as logarithmic growth rates.2. we use the same deflator to compute both public and private investment variables. 6 The data sources are explained in the Appendix. general government gross fixed capital formation at current prices. and the United States (1961–2004). Sweden (1971–2004) and the UK (1970–2005). In order to estimate our VAR for each country. the unit root analysis that we undertook showed that these first differenced variables are mostly stationary. 5 Due to the lack of information on a price deflator for private investment. price deflator of GDP. Moreover. used as private investment. VAR estimation In the estimation of each country’s VAR. its GDP. taxes and the interest rate are used in real terms. we use information for the following series: GDP at current market prices.5 A real ex-post interest rate is computed using the consumer price index inflation rate. Table 2 shows unit root test stastistics.

The diagnostic tests regarding residual autocorrelation and normality are also reported in Table 3. Additionally. for the case of Germany we included a dummy variable that takes the value of one in 1991 and zero otherwise in order to capture the break in the series related to German reunification. taxes. for all cases we chose to privilege the absence of autocorrelation of the residuals. and to force this relationship could introduce an unwanted structure into our empirical endeavour. ECB Working Paper Series No 864 February 2008 19 . Those tests led us to choose a more parsimonious model with only one lag for most of the countries. With such specifications we usually could not reject the null hypothesis of no serial residual correlation. 7 Indeed. private investment. there is no theoretical reason to expect a long-run relationship between public investment. which helped avoid the use of too many degrees of freedom. even in the eventuality of the residuals being non-normal. 297) points out that the assumption of normality does not impinge on the asymptotic properties of the estimated VAR parameters. Moreover. the null hypothesis of no residual autocorrelation cannot be rejected for all countries. even at a significance level of 10 per cent. Therefore. In addition.Note that we chose not to estimate a “levels VAR” or to infer possible co-integration vectors.7 As can be seen from Table 3. This variable is highly statistically significant in all equations. Lutkepohl (2005. or between any two of these three variables. The chosen VAR order used in the estimation of each model was selected with the Akaike and the Schwarz information criteria. all p-values exceed ten per cent. we did not reject the null hypothesis of normality of the VAR residuals in most cases. the real interest rate and GDP. In fact. pp.

4. whenever the marginal productivity is positive. A 95 percent (two standard deviations) confidence band around estimates is also included. Overall. with the exceptions of Finland. which takes into account the effects of private investment 20 ECB Working Paper Series No 864 February 2008 . Greece. Italy and Sweden. Taking into account the induced effect on private investment. the total rate of return associated with public investment is generally lower. In those cases where rates of return can be calculated or. and even negative for the cases of Austria. On the other hand. with the exception of France. Table 5 reports the computed output elasticity and the rates of return of public and private investment for each country for the respective period of available data. Figures in bold correspond to cases where those confidence bands include positive or negative values only. Regarding private investment (panel b) of Table 5). the partial rate of return of public investment is mostly positive. Finland. impulses to private investment have in most cases a positive and significant impact on output. we can notice that partial marginal productivity is positive for all countries. one can observe that the output elasticity of private investment is always positive and higher than the output elasticity of public investment.3. Portugal and Sweden. in other words. The rates of return Table 4 contains information on accumulated responses of all VAR variables to public and private investment innovations (the impulse response functions are plotted in the Annex). Note that impulses to public investment are never statistically significant at 95 percent level in what concerns effects on other variables. The same is true for the associated total marginal productivity. and in some instances on taxes.

with the exception of Belgium. ECB Working Paper Series No 864 February 2008 21 . which allows us to assess the possible existence of crowding-in or crowding-out effects of public investment on private investment. where the rate is moderately negative. Denmark and Greece. Of the nine countries in which there is a crowding-out effect on private investment. Canada. Ireland. public investment has a crowding-in effect on private investment in eight of the 17 countries analysed. 4. Italy. Ipub (14) As Figure 1 demonstrates. Such effects can be easily derived from Ipriv Ipub Ipub Ipriv Ipriv . Greece and Sweden. while Belgium. on the vertical axis we plot the marginal effects of public investment on private investment. Crowding-in and crowding-out effects On the basis of the values of the partial marginal productivity of public investment. The partial rates of return of private investment are mostly positive. it is possible to determine the impact of public investment on output. taken from Table 5. the Netherlands and the UK show a contractionary effect. four (France. That information. The total rate of return of private investment is mostly somewhat below the partial rate of return. is displayed on the horizontal axis of Figure 1. albeit slightly higher in the cases of Italy. Japan and the US) still experience a slight output expansion.on public investment. Additionally.4.

Figure 2 also reveals that private investment has a crowding-in effect on public investment for most of the countries in the sample. 5. with twenty and ten years respectively for public and for private investment. Greece and Sweden.Figure 2 shows the values of the marginal productivity of private investment and the marginal effects of private investment on public investment. Japan and the United States. it is possible that increased public investment could lead to a decrease in GDP. while it crowds out public investment in the cases of Belgium. plus Canada. The effects of both public and private investment impulses for all countries are summarised in Figure 3. private investment has an expansionary effect on output for all countries in the sample. between 1960 and 2005: 22 ECB Working Paper Series No 864 February 2008 . not reported in the paper. In strong crowding-out cases. The results. In addition. and also by assuming differentiated horizons. we estimated that. provided similar overall conclusions. Finally. This chart is useful in visualising both the effect of private investment on output and the existing crowdingin or crowding-out effects of private investment on public investment. by estimating VARs for 14 European Union countries. Conclusion Public investment can either crowd in or crowd out private investment. we also performed a sensitivity analysis by using only ten years for both public and private investment. In our paper.

Italy. Greece. Finland. partial). Denmark. as 95 percent confidence bands concerning public investment effects on output always include the zero value. Canada.8 These effects correspond to point estimates and care should be taken in their interpretation. Public investment responded positively to private investment in all but three countries (Belgium. Ireland. were always expansionary in GDP terms and effects were usually significant in statistical terms. expansionary effects and crowding-in prevailed in eight cases (Austria. the total rate of return associated with public investment is generally lower. The highest estimated return was in Japan (5. while in the US the relevance for economic growth of private investment is higher than the one from public investment. by contrast.public investment had a contractionary effect on output in five cases (Belgium. When it is possible to compute it. Private investment impulses.81 percent. Greece. Germany. Spain and Sweden). with the exceptions of Finland. and negative for the cases of Austria. and there 8 In somewhat related work Zou (2006) reports that public and private investment have expansionary effects on Japanese economic growth. Japan and Sweden. Finland. the United Kingdom and the Netherlands) with positive public investment impulses leading to a decline in private investment (crowding-out). . the partial rate of return of public investment is mostly positive.. Greece and Sweden). Portugal. Portugal and Sweden. ECB Working Paper Series No 864 February 2008 23 .on the other hand. countries where the increase in GDP was not sufficiently high to compensate for the total investment effort. Taking into account the induced effect on private investment. with the exception of France.

Lütkepohl. Kiel Institute. J. Kamps. (1939). Dynamic effects of public investment: Vector autoregression evidence from six industrialized countries. New introduction to multiple time series analysis. Perotti. Springer. American Economic Review 29 (2). Aschauer.. (2005). Mittnik. D. Is Public Expenditure Productive? Journal of Monetary Economics 23 (2). Public investment: another (different) look. H. Empirical Economics 26. IGIER. either partial or total – Belgium. Musgrave. D.. Pereira. (2001). Working Paper 277. (2000). References Argimón. R. (2004). (1989b). Working Paper 1224. (1997). 513-518. (2004). Berlin. 429-446. Denmark and Greece. 171-188. 24 ECB Working Paper Series No 864 February 2008 . 260-271. Evidence of public spending crowding-out from a panel of OECD countries. González-Páramo. Applied Economics. Does public capital crowd out private capital? Journal of Monetary Economics 24 (2).were very few cases of slightly negative private investment rates of return. Neumann. C. 177-200. The dynamic effects of public capital: VAR evidence for 22 OECD countries. J. R. A. 29 (8). 10011010. The Nature of Budgetary Balance and the Case for the Capital Budget. S. T. I. Is All Public Capital Created Equal? Review of Economics and Statistics 82 (3). Aschauer. (1989a). and Roldán.

Journal of Policy Modelling 27. ECB Working Paper Series No 864 February 2008 25 . 585-598. M. Y. Economic Modelling 19. Empirical studies on the relationship between public and private investment and GDP growth. and St.Pina. A. Aubyn. Public and private investment in the United States and Canada. Pina. (2005). G. and St. How should we measure the return on public investment in a VAR? Economics Bulletin 8(5). Aubyn. (2002). Zou. 1-4 Voss. Applied Economics 38. (2006). (2006). 641-664. M. 1259-1270. A. Comparing macroeconomic returns on human and public capital: An empirical analysis of the Portuguese case (1960–2001).

national currency. Nominal long-term interest rates .0. national currency.1.1.0. general government National currency.0.UTVGF . general government . general government .0.0.0.0.ILN .% National consumer price index .0.0. 1.UIGP 3.UTSGF 26 ECB Working Paper Series No 864 February 2008 .UTYGF .UVGD currency.0.0.National currency.0. thousands national 1.0.0.0. 1995 = 100.1995 = 100 Current taxes on income and wealth (direct taxes).0. 1995 = 100.Appendix – Data sources Original series Ameco codes * Gross Domestic Product at current market prices.0.0.0. 3. general government.National currency. current prices Social contributions received. current prices Note: * series from the EC AMECO database.3. Gross fixed capital formation at current prices.0.PVGD Gross fixed capital formation at current prices. national currency.0. Price deflator of Gross Domestic Product. Price deflator gross fixed capital formation.0.1.0.ZCPIN .0. private sector. total economy. national currency.0.1.PIGT . current prices Taxes linked to imports and production (indirect taxes).UIGG 1.0.1.1.0.1.

6 2.7 3.0 3.0 15.6 3.7 2.1 26.9 4.6 8.4 18.5 25.9 2.2 3.7 17.2 20.1 (JAP) (GRC) (ESP) (PRT) 14.3 2.7 16.0 18.3 21.3 23.2 2.0 3.5 17.4 25.8 3.7 2.1 16.1 1.4 19.3 21.1 20.8 2.6 17.Tables and figures Table 1 – Public and private investment -to-GDP ratios Public investment-to-GDP ratios Average 1970 1980 2005 1960-05 4.8 3.1 # 2.9 7.0 9.9 17.5 20.1 14.6 17.4 4.3 18.8 4.1971.7 15.8 3.7 23.9 14.1 19.5 15.1 2.7 22.7 # 7.9 (USA) (SWE) (SWE) (SWE) AUT BEL DEU DNK ESP FIN FRA GBR GRC IRL ITA NLD PRT SWE CAN JAP USA Maximum Minimum Source: EC.8 5.1 16.8 12.7 1. updated on 14 November 2005.3 3.6 (JAP) (JAP) (JAP) (JAP) 2.3 14.0 17.5 22.1 22.0 3. * .1 4.3 4.0 5.1 26.9 4.8 1.8 20.7 16.6 18.3 2.5 23.2 1.1 2.5 3.0 2.6 3.2 3.9 # 14. AMECO Database.6 20.8 3.8 19.8 2.2004. ECB Working Paper Series No 864 February 2008 27 .6 25.7 14.9 28.8 4.7 20.9 # 21.4 4.2 22. # .1 2.5 1.2 (PRT) (ESP) (AUT) (GBR) Private investment-to-GDP ratios Average 1970 1980 2005 1960-05 19.3 15.9 16.6 17.4* 3.9 20.1 16.8 12.0 2.6 21.1 3.0 9.2 2.7 22.6 16.7 2.4 4.2 2.0 22.9 # 2.1 17.7 23.8 18.0 # 15.5 18.5 19.0 3.7 4.7 3.2 1.6 # 18.8 5.7 20.3 18.6 # 8.9 2.1 28.1 4.7 17.0 4.9 4.1 7.2 2.1 2.2 16.5 22.6 3.7 22.7 19.4 3.2 3.0 2.5 1.1 19.

91 -3.59 -3.64 -4.59 -4.65$ -5.46 -3.49 -3.59 -4.79 -3.95$ -3.23 -3.88 -2.73 -3.59 -8.31 -3.59 -4.59 -3.34 -3.59 -6.89 -3.62# -6.59 -4.60# -4.05 -2.23 -3.53 -3.59 -6.32 -2.78 -3.64 -3.64 -3.05 -3.11 -3.59 -5.63 -3.94 -4.59 -3.95$ -4.41 -3.57 -3.25 -3.43 -3.62 -3.82 -3.04 -4.59 -4.61 -5.75 -5.65 -3.97 -3.87 -3.79 -3.59 -5.65 -5.59 -7.72 -12.60 -3.83 -3.98 -3.64 -4.59 -6.42 -4.59 -6.59 -7.80 -3. 28 ECB Working Paper Series No 864 February 2008 .59 -2.93$ -4.59 -4.65 -3.59 -4.95$ -4.59 -4.90 -3.67 -3.68 -3.93$ -6.61 -3.65 -2.65 -5.59 -10.66 -3.59 -4.18 -2.96 -3.59 dlog(Ipriv) t-Statistic critical value -6.46 -2.59 dlog(tax) t-Statistic critical value -4.64 -3.64 -3.64 -4.59 -4.70 -3.85 -3.73 -3. variables in first differences: Augmented Dickey-Fuller test statistics dlog(Y) t-Statistic critical value -4.15 -3.59 -3.27 -3.25 -3.Table 2 – Unit root tests.78 -3.74 -3.59 -3.65 -6.64 -4.25 -3.79 -3.84 -3.59 -2. # – 10% level.58 -3.18 -3.62 -8.59 -4.59 -8.19 -2.76 -3.59 -2.71 -3.63 -6.22 -2.40 -3.57 -3.46 -3.64 -4.83 -3.59 -3.23 -3.59 -4.42 -3.93$ -3.59 -7.49 -3.87 -3.59 -4.59 dlog(Ipub) t-Statistic critical value -5.56 -3.39 -3.64 -5.89 -3.59 -7.49 -3.64 -4.64 -5.16 -3.18 -5.26 -3.59 -4.6 -9.95$ -3.93$ -3.64 -6.26 -3.68 -3.29 -3. $ – 5% level.70 -3.59 -5.64 -4.59 -3.59 -3.59 -7.59 Austria Belgium Denmark Finland France Germany Greece Ireland Italy Netherlands Portugal Spain Sweden UK Canada Japan US Note: critical values are for 1% level unless otherwise mentioned.59 dir t-Statistic critical value -4.33 -3.59 -3.59 -3.66 -4.45 -3.58 -2.95 -3.26$ -3.64 -3.84 -3.

310 0.215 0.782 0. For the null hypothesis of normality.259 0. a similar dummy variable for 1992 was not statistically significant. dynamic feedbacks VAR Autocorrelation test (p-value) 1 Austria Belgium Denmark Finland France Germany Greece Ireland Italy Netherlands Portugal Spain Sweden United Kingdom Canada Japan United States 0.112 0. 1 – Multivariate residual serial correlation LM test.247 0.322 0.481 0. For Finland and Sweden. For Germany we included a dummy variable that takes the value one in 1991 and zero otherwise.000 0.138 0.281 Number of lags 1 1 1 1 1 1 1 1 1 1 1 2 1 1 1 2 1 Number of observations 39 34 33 43 34 34 31 33 34 35 23 24 33 34 40 31 43 Notes: We considered the maximum VAR order to be three.445 0.931 0.050 0.379 0.100 0.754 0.226 0.349 0.000 0.220 0.101 0. ECB Working Paper Series No 864 February 2008 29 .264 0.100 0.335 0.451 0.233 0.934 0.214 0. 2 – Multivariate Jarque-Bera residual normality test.423 0.514 0.003 0.Table 3 – Diagnostic tests.101 Normality test (p-value) 2 0.397 0. the test statistic has an asymptotic chi-square distribution with 8 degrees of freedom. For the null hypothesis of no serial autocorrelation (of order 1) the test statistic as an asymptotic chi-square distribution with k2 degrees of freedom.

240 -0. Y – GDP.493 -0.012 0.103 -0.010 0.023 0.001 0.091 -1. central + 2 S.043 0.011 -0.557 0.334 -0.048 0.193 0.004 0.093 0. E.480 2.030 0.011 0.030 0.012 0.180 -0.026 -0. – standard error.086 -2.034 0.319 -0.534 -1.024 0.420 -0.004 0.089 0.308 -0.030 0.002 0.031 0.060 0.005 0.026 0.004 0.088 0.097 0.005 0.049 0.041 0.032 0.024 -1.027 0.713 1.097 -0.Table 4 – Accumulated responses to shocks in public and in private investment Accumulated responses of Ipub Ipriv Y Taxes Interest rate Ipub Ipriv Y Taxes Interest rate Ipub Ipriv Y Taxes Interest rate Ipub Ipriv Y Taxes Interest rate Ipub Ipriv Y Taxes Interest rate Ipub Ipriv Y Taxes Interest rate Ipub Ipriv Y Taxes Interest rate Ipub Ipriv Y Taxes Interest rate Ipub Ipriv Y Taxes Interest rate Shock to Public Investment .080 0.033 -0.003 0.044 0.301 0.E.022 -0.253 -0.048 -0.020 -0.041 -0.005 0.082 -0.085 0.059 0.022 -0.231 DEU PRT BEL FIN DNK AUT CAN JAP ESP Notes: Ipub – public investment.045 -0. Taxes – direct and indirect taxes plus social security contributions.198 -0.017 1.035 0.014 -0.143 0.244 -0.085 0.675 0.029 0.635 -0.032 0.027 -0.041 0.015 0.026 -0.138 -0.013 -0.434 -0.004 0.004 0.018 0.002 0.011 -0.166 -0.087 0.640 0.921 -0.031 -0.001 0.040 0.010 0.019 0.022 0.157 0.020 -0.029 -0.040 0.048 0.028 0.035 0.049 0.131 1.025 0.018 0.040 -0.018 0.443 -0.008 0.210 -0.266 -0.002 0.642 0.066 0.014 0.046 0.041 -0.007 0.281 0.020 -0.073 0.009 0.030 0.109 -3.016 0.016 0.018 -0.907 -0.232 -0.E.051 -1.001 0. S.001 0.039 0.166 0. central + 2 S.003 -0.206 -0.114 0.103 0.083 -0.010 0.127 -0.710 -0.584 0.101 -0.099 -0.042 0.330 0. The numbers in bold are statistically significant at the 95% level.099 0.017 0.093 -0.061 0.933 -0.045 -1.421 0.010 -0.048 0.005 0.036 0. 0.000 0.073 -1.008 0.010 0.003 0.057 -0. Ipriv – private investment.046 -0.013 0.027 -0.073 -0.022 0.222 -0.051 0.040 0.592 -0.188 -1.850 -0.2 S.063 -0.001 0.030 0.010 0.008 0.058 0.104 3.185 -0.120 0.152 -0.132 0.084 0.E. 30 ECB Working Paper Series No 864 February 2008 .029 0.009 0.056 -0.244 0.022 0.014 -0.003 0.018 -0.018 -0.385 0.009 0.032 0.021 0.149 0.009 0.000 0.001 0.009 -0.028 0.036 -0.507 0.001 0.295 -0.818 0.150 -0.024 0.054 0.006 0.066 0.057 0.023 0.026 0.089 0.069 -0.006 0.019 0.040 0.031 -0.020 0.471 1.002 0.218 1.839 1.007 0.049 Shock to Private Investment .008 0.083 0.705 -0.823 0.463 -0.309 -0.005 0.018 0. -0.102 0.041 0.E.146 0.063 -0.025 -0.025 0.028 0.098 0.036 -0.072 0.075 -0.027 0.109 0.082 0.031 0.006 0.018 0.084 -0.071 0.2 S.039 0.235 -0.016 -0.059 0.614 0.075 0.

158 -0.E.008 0.022 -0.040 0.041 0.893 0.095 -0.055 0.721 0.008 0.010 0.121 -0.299 -0.009 0.059 0.680 1.020 0.719 -0.023 0.007 0.038 0.005 0.277 -0.078 0.353 -0.040 -0.113 -0.026 0.007 0. Ipriv – private investment.008 0.005 0.004 0.059 -0. E.060 -0.153 -0. Taxes – direct and indirect taxes plus social security contributions.015 -1.033 -0.252 -0.446 0.005 0.146 0.011 -0.005 0.009 0.Table 4 – Accumulated responses to shocks in public and in private investment (cont.031 0.026 -0.062 0.011 -0.001 0.028 0.031 0.187 Shock to Private Investment .002 0.015 0.127 0.) Accumulated responses of Ipub Ipriv Y Taxes Interest rate Ipub Ipriv Y Taxes Interest rate Ipub Ipriv Y Taxes Interest rate Ipub Ipriv Y Taxes Interest rate Ipub Ipriv Y Taxes Interest rate Ipub Ipriv Y Taxes Interest rate Ipub Ipriv Y Taxes Interest rate Ipub Ipriv Y Taxes Interest rate Shock to Public Investment .070 0.074 -0.031 -0. central + 2 S.009 0.040 -0.165 0.002 0.031 -2.058 0.039 -0.044 -0.102 -0.024 0.048 -1.096 -0.115 0.777 -0.022 0.011 0.120 0.021 0.013 -0.763 0.034 0.337 2.016 0.034 -2.002 0.766 0.013 -0.012 -0.006 0.009 -0.028 0.017 0.081 -0.451 0.383 0.017 0.007 0.211 -0.035 0. Y – GDP.045 0.014 0.022 -1.028 -0.008 0.018 0.011 0.065 0.249 -0.072 -0.007 0.022 -0.110 0.873 0.029 0.061 0.058 -0.347 0.009 0.106 0.011 -1.002 0. The numbers in bold are statistically significant at the 95% level.010 0.065 0.008 0.131 -0.371 0.105 0.002 0.026 0.062 0.031 -0.2 S.028 -1.014 0.026 0.025 0.044 0.024 0.040 0.776 -0.030 -0.041 -0.014 0.063 0.024 0.029 0.046 0.032 0.004 0.003 0.039 -0.010 0.052 0.2 S.004 0.009 0.015 -0.096 0.182 FRA GBR GRC IRL ITA NLD SWE USA Notes: Ipub – public investment.188 0.034 0.006 0.011 0.000 0.448 0.025 0.009 0.220 1.023 -0.019 0.005 0.024 0.019 0.007 0. – standard error.016 0.040 0.966 -0.080 -0.165 0.028 -0.440 0.106 0.136 -0.090 0.799 1.583 -0.023 -0.013 0.218 -0.004 -0.677 -0.016 0.067 0. ECB Working Paper Series No 864 February 2008 31 .000 0.023 0.279 0.218 -0.016 0.001 0.220 -0.348 -1. 0. central + 2 S.018 0.011 0.038 -0.102 -0.027 -0.923 -0.049 0.565 0.022 -1.170 0.573 0.092 0.E.029 -0.E.149 -0.110 -0.022 0.095 0.137 -0.047 0.072 -0.014 -0.019 0.006 0.010 0.170 0.021 0.103 0.071 -0.068 -0.049 0.969 -0.021 -0.046 -3.031 -0.466 2. -0.E. S.029 -0.029 -1.066 -0.061 0.036 0.083 -0.002 -0.122 -0.

348 1. equation (12) in the text.65 1.76 -7.317 -0.53 1.93 1.14 3.329 0. MPTI – marginal productivity of total investment.001 0. MPIpub – marginal productivity of public investment.690 0.623 na 1.015 0. see.949 -0.068 2.434 na 0. marginal productivity and rates of return (full period) a) Impulse on public investment Output Partial MPTI MPIpub elasticity rate of return (%) 0.66 2.999 0.322 2.308 na 1.152 5.14 1.89 1.81 0.465 -0.10 3.298 1.454 1.510 -3.208 1.52 -0.289 1.927 -0.353 0.044 0.77 1.57 -0.321 1.81 2.215 0.01 1.351 1.02 0.005 0.909 0.090 -2.920 Austria Belgium Denmark Finland France Germany Greece Ireland Italy Netherlands Portugal Spain Sweden United Kingdom Canada Japan United States Total rate of return (%) -3. MPIpriv – marginal productivity of private investment.112 0.182 8.121 0.52 1.31 Austria Belgium Denmark Finland France Germany Greece Ireland Italy Netherlands Portugal Spain Sweden United Kingdom Canada Japan United States Notes: na – not available.02 1.00 -5.571 -0.328 1.036 -1.014 0.40 0.285 1.558 2.41 6.40 0.51 4.80 2.689 0.57 0.423 0.28 2.719 2.660 0.272 0.33 2.252 0.03 3.47 0.047 1.500 0.40 1.94 1.21 1.26 1.26 0.09 5.12 1.863 -0.047 1.126 -9.721 na 2.050 1.233 1.886 0. The rate of return cannot be computed in this case since the marginal productivity is negative.769 0.049 1.89 2.168 0.915 -0.161 1.082 0.74 1.60 -0.22 -11.57 -0.38 -0.81 3.01 0.602 2. 32 ECB Working Paper Series No 864 February 2008 .923 b) Impulse on private investment Output Partial MPTI MPIpriv elasticity rate of return (%) 0.245 0.44 0.052 -1.94 3.284 1.826 3.168 0.78 -0.055 2.164 0.24 1.671 3.839 3.06 -0.902 0.76 na Total rate of return (%) 1.30 1.46 0.835 0.21 1.51 1.280 1.011 -0.068 -2.551 0.232 1.855 3.90 2.89 0.57 1.597 na 0.73 0.441 -4. for instance.150 0.213 1.30 2.56 -0.09 1.079 2.540 4.Table 5 – Long-run elasticities.39 0.390 4.45 0.60 1.000 0.783 2.014 -19.526 2.13 1.468 1.193 0.428 0.186 0.665 5.321 0.317 1.061 0.

CAN – Canada. GBR – United Kingdom. SWE – Sweden. PRT – Portugal. DNK – Denmark. GRC – Greece. NLD – Netherlands. FIN – Finland. ESP – Spain. ITA – Italy. DEU – Germany. IRL – Ireland. JAP – Japan. USA – United States.Figure 1 – Public investment: marginal productivity (horizontal) and marginal effect on private investment (vertical). FRA – France. BEL – Belgium. 33 . (1960-2005) Positive effect on private investment 6 5 4 3 Output contraction 2 1 0 -1 -2 -3 -4 -9 -6 -3 0 3 6 9 Negative effect on private investment GBR CAN NLD IRL USA BEL DNK GRC SWE ESP DEU FIN FRA JAP ITA AUT Output expansion ECB Working Paper Series No 864 February 2008 PRT Note: AUT – Austria.

JAP – Japan.35 IRL 0.15 -0.0 1.25 Output contraction 0. ESP – Spain.5 2. ITA – Italy. (1960-2005) Positive effect on public investment 0.05 DNK FIN PRT FRA GBR DEU ESP USA NLD AUT CAN -0.15 .45 0.0 2. IRL – Ireland. DNK – Denmark.Figure 2 – Private investment: marginal productivity (horizontal) and marginal effect on public investment (vertical). PRT – Portugal. GRC – Greece.0 0. USA – United States.05 BEL SWE GRC -0. NLD – Netherlands.0 Negative effect on public investment Note: AUT – Austria. BEL – Belgium. DEU – Germany. FRA – France. FIN – Finland. 34 ECB Working Paper Series No 864 February 2008 Output expansion 0. SWE – Sweden.5 0.5 1.5 3. GBR – United Kingdom. CAN – Canada.

ITA. ESP. Effect on output Crowding-in AUT. PRT - Crowding-out BEL. SWE Crowding-out FRA. USA BEL. Effect on output Crowding-in AUT. DEU. ITA. DNK. PRT. JAP. FIN.Figure 3 – Summary of public and private investment effects (1960-2005) Public investment impulse Effect on priv. IRL. DEU. DNK. ESP. NLD. IRL. FIN. BEL. CAN. SWE Expansionary Contractionary - ECB Working Paper Series No 864 February 2008 35 . CAN. inv. inv. JAP. GBR. GRB. GRC. GRC. NLD Expansionary Contractionary - Private investment impulse Effect on pub. ESP.

02 -.4 2 4 6 8 10 12 14 16 18 20 .004 -.010 .04 2 4 6 8 10 12 14 16 18 20 Response of DLY to DLIPUB Response of DLTAX to DLIPUB Response of DLY to DLIPRIV .02 . Innovations ± 2 S.0050 2 10 12 14 16 18 20 4 6 8 -.0075 .012 .0 -.0050 .2 .016 Response of DLTAX to DLIPRIV .03 .0 -.12 .D.0025 -.E.008 . Response of DLIPUB to DLIPRIV .008 .03 2 10 12 14 16 18 20 4 6 8 .015 2 4 6 8 10 12 14 16 18 20 Response of DIR to DLIPUB Response of DIR to DLIPRIV .2 -.2 .004 2 4 6 8 10 12 14 16 18 20 2 4 6 8 10 12 14 16 18 20 -.04 Response of DLIPUB to DLIPUB .0025 -.08 .00 -.6 -.2 -.020 .004 .008 .4 .8 2 4 6 8 10 12 14 16 18 20 .03 -.02 .016 .06 Annex – Responses to shocks in public and in private investment Austria Response to Cholesky One S.012 .000 .02 ECB Working Paper Series No 864 February 2008 Response of DLIPRIV to DLIPRIV .00 -.02 2 4 6 8 10 12 14 16 18 20 2 4 6 8 10 12 14 16 18 20 .005 .00 -.01 -.01 .4 .000 -. Response of DLIPRIV to DLIPUB .005 .04 .020 .004 .4 -.03 .04 -.01 .010 -.000 -.01 .36 Response to Cholesky One S.0100 .02 -. Innovations ± 2 S.0000 .D.00 .E.

005 -.03 -.8 .005 .005 -.004 . Innovations ± 2 S.01 Response of DLIPUB to DLIPUB Response of DLIPRIV to DLIPRIV . Response of DLIPRIV to DLIPUB .0 -.02 -. Response of DLIPUB to DLIPRIV .008 -.00 .010 2 10 12 14 16 18 20 4 6 8 -.04 -.04 -.00 -.020 .010 -.4 .010 .D.10 .000 .010 2 4 6 8 10 12 14 16 18 20 2 Response of DLTAX to DLIPRIV .08 .8 ECB Working Paper Series No 864 February 2008 2 4 6 8 10 12 14 16 18 20 4 6 8 10 12 14 16 18 20 37 .02 -.02 .005 .000 -.000 -.02 2 10 12 14 16 18 20 4 6 8 2 4 6 8 10 12 14 16 18 20 -.005 -.06 .Belgium Response to Cholesky One S.00 -.004 -.E.16 .08 .015 .012 2 4 6 8 10 12 14 16 18 20 4 6 8 10 12 14 16 18 20 Response of DIR to DLIPUB 0.04 .000 .02 .6 2 Response of DIR to DLIPRIV .015 .01 .02 Response to Cholesky One S.005 .12 .E.4 -0.04 .00 -.05 .8 0.010 .4 0.8 -1.06 2 10 12 14 16 18 20 4 6 8 -. Innovations ± 2 S.04 .0 -0.4 -.010 Response of DLTAX to DLIPUB Response of DLY to DLIPRIV .04 2 4 6 8 10 12 14 16 18 20 Response of DLY to DLIPUB .D.2 -1.008 .

2 2 Response of DIR to DLIPRIV 0.12 .06 . Response of DLIPRIV to DLIPUB .000 -.00 .D.005 -.02 -.00 -. Innovations ± 2 S.015 .02 -.00 -0.03 .75 4 6 8 10 12 14 16 18 20 -1.04 .010 .25 -0.25 0.00 -.01 -.E.005 .03 .04 .D.01 .02 .50 -0.08 .02 2 10 12 14 16 18 20 4 6 8 .04 2 4 6 8 10 12 14 16 18 20 Response of DLY to DLIPUB Response of DLY to DLIPRIV . Response of DLIPUB to DLIPRIV .08 .02 . Innovations ± 2 S.08 .16 .38 Response to Cholesky One S.8 -1.02 .02 .01 .02 .04 2 10 12 14 16 18 20 4 6 8 Response of DLIPUB to DLIPUB Response of DLIPRIV to DLIPRIV ECB Working Paper Series No 864 February 2008 Response of DLTAX to DLIPUB .00 -.00 Denmark Response to Cholesky One S.04 2 10 12 14 16 18 20 4 6 8 2 4 6 8 10 12 14 16 18 20 .01 -.E.8 0.04 .04 .00 2 4 6 8 10 12 14 16 18 20 .01 .0 -0.4 -0.12 .01 2 4 6 8 10 12 14 16 18 20 2 Response of DLTAX to DLIPRIV .06 .4 0.50 0.04 .010 2 4 6 8 10 12 14 16 18 20 4 6 8 10 12 14 16 18 20 Response of DIR to DLIPUB 0.00 -.00 -.

01 Response of DLIPUB to DLIPUB Response of DLIPRIV to DLIPRIV .02 -.01 .02 .03 .004 .01 Response to Cholesky One S.024 Response of DLTAX to DLIPUB Response of DLY to DLIPRIV .00 .00 -.008 .02 .01 -.D. Response of DLIPUB to DLIPRIV .008 2 Response of DLTAX to DLIPRIV .03 .0 -1.004 .E.0 -0.8 ECB Working Paper Series No 864 February 2008 2 4 6 8 10 12 14 16 18 20 4 6 8 10 12 14 16 18 20 39 .020 .00 .4 0.008 6 8 10 12 14 16 18 20 -.010 .008 .01 -.00 -.03 .005 -.02 2 10 12 14 16 18 20 4 6 8 2 4 -.04 .04 .01 .03 -.000 -.016 .004 -.E.00 . Innovations ± 2 S.012 . Response of DLIPRIV to DLIPUB .04 .04 2 4 6 8 10 12 14 16 18 20 Response of DLY to DLIPUB .020 .08 .2 0.5 1.02 2 10 12 14 16 18 20 4 6 8 2 4 6 8 10 12 14 16 18 20 2 10 12 14 16 18 20 4 6 8 .08 .004 -.8 0.5 0.03 .016 .4 -0.02 -.000 -.0 0.000 -.06 .005 .02 -.Finland Response to Cholesky One S.D.0 -0. Innovations ± 2 S.012 .5 -1.024 .5 2 Response of DIR to DLIPRIV 1.02 .010 2 4 6 8 10 12 14 16 18 20 4 6 8 10 12 14 16 18 20 Response of DIR to DLIPUB 1.

03 .004 2 10 12 14 16 18 20 4 6 8 2 4 6 8 10 12 14 16 18 20 -.005 -.008 .008 Response of DLTAX to DLIPRIV .8 -1.00 .00 -.6 2 4 6 8 10 12 14 16 18 20 4 6 8 10 12 14 16 18 20 .01 .02 2 10 12 14 16 18 20 10 12 14 16 18 20 4 6 8 2 4 6 8 -.E.0 -0.005 .03 .02 Response of DLIPUB to DLIPUB Response of DLIPRIV to DLIPRIV ECB Working Paper Series No 864 February 2008 Response of DLTAX to DLIPUB .000 -.000 .02 2 4 6 8 10 12 14 16 18 20 Response of DLY to DLIPUB Response of DLY to DLIPRIV .0 -.2 .6 .01 .40 Response to Cholesky One S.04 .010 .00 .000 .016 .01 -.2 -.02 .05 .4 0.010 2 4 6 8 10 12 14 16 18 20 Response of DIR to DLIPUB 0.8 0.2 2 Response of DIR to DLIPRIV .015 .004 .004 -. Innovations ± 2 S.004 .01 .4 -.04 . Innovations ± 2 S.D.4 -0.012 .008 2 4 6 8 10 12 14 16 18 20 .02 .D.004 .E.06 .004 -.016 .00 -. Response of DLIPUB to DLIPRIV .012 .02 France Response to Cholesky One S. Response of DLIPRIV to DLIPUB .01 -.000 -.008 .01 2 4 6 8 10 12 14 16 18 20 .4 .

03 .008 2 4 6 8 10 12 14 16 18 20 4 6 8 10 12 14 16 18 20 Response of DIR to DLIPUB . Innovations ± 2 S.1 -.1 .01 .005 .02 -.2 .4 .012 .000 .04 .04 .E.D.1 .00 -.1 .3 .0 -.01 .012 .004 6 8 10 12 14 16 18 20 .4 ECB Working Paper Series No 864 February 2008 2 4 6 8 10 12 14 16 18 20 4 6 8 10 12 14 16 18 20 41 .000 -. Innovations ± 2 S.2 .01 2 10 12 14 16 18 20 4 6 8 2 4 6 8 10 12 14 16 18 20 .E.020 .0 -.2 -.0 -.3 2 10 12 14 16 18 20 4 6 8 2 4 -.01 -.1 -.Germany Response to Cholesky One S.2 -.02 .06 .01 2 4 6 8 10 12 14 16 18 20 Response of DLY to DLIPUB Response of DLTAX to DLIPUB .00 -.3 .02 Response of DLIPUB to DLIPUB .2 -.02 2 10 12 14 16 18 20 4 6 8 -.005 .010 .004 .2 -.2 .2 .05 .004 .008 .0 -.000 .015 Response to Cholesky One S.D.3 2 Response of DLTAX to DLIPRIV .00 .010 -.008 . Response of DLIPRIV to DLIPUB .016 Response of DLY to DLIPRIV . Response of DLIPUB to DLIPRIV Response of DLIPRIV to DLIPRIV .03 .004 -.05 .01 .3 2 Response of DIR to DLIPRIV .1 -.

8 -1.00 -.10 .D.02 .01 . Response of DLIPRIV to DLIPUB .00 -.08 .5 Response of DIR to DLIPRIV 0.02 .20 .15 . Innovations ± 2 S.01 .02 2 10 12 14 16 18 20 4 6 8 2 4 6 8 10 12 14 16 18 20 .8 0.0 -0.4 0.03 .10 .01 2 10 12 14 16 18 20 4 6 8 2 4 6 8 10 12 14 16 18 20 -.01 -.02 2 4 6 8 10 12 14 16 18 20 Response of DIR to DLIPUB 0.04 Response of DLIPUB to DLIPUB Response of DLIPRIV to DLIPRIV ECB Working Paper Series No 864 February 2008 Response of DLTAX to DLIPUB Response of DLY to DLIPRIV .04 2 4 6 8 10 12 14 16 18 20 Response of DLY to DLIPUB Response of DLTAX to DLIPRIV .02 .10 -.00 .01 .4 -0.04 .01 -.00 -.0 0.42 Response to Cholesky One S.2 -1.E.06 -.02 .08 2 10 12 14 16 18 20 4 6 8 Greece Response to Cholesky One S.00 -.04 -.06 .E.02 . Innovations ± 2 S.6 2 4 6 8 10 12 14 16 18 20 .06 .05 -.5 2 4 6 8 10 12 14 16 18 20 -1.02 -.5 -0.02 -.02 -.04 .04 .00 -.0 -1.D.02 .02 2 4 6 8 10 12 14 16 18 20 .00 -. Response of DLIPUB to DLIPRIV .02 .05 .01 .00 .01 .

02 .0 -0.0 0.02 -.00 -.010 .10 . Innovations ± 2 S.4 -0.D.01 .04 .5 -1.0 -0.01 .04 2 10 12 14 16 18 20 4 6 8 2 4 6 8 10 12 14 16 18 20 2 10 12 14 16 18 20 4 6 8 -.E.015 2 4 6 8 10 12 14 16 18 20 Response of DIR to DLIPUB 1.005 -.03 2 4 6 8 10 12 14 16 18 20 .2 0.5 1.000 -.02 Response of DLIPUB to DLIPUB Response of DLIPRIV to DLIPRIV .5 0. Response of DLIPUB to DLIPRIV .06 .02 -.04 -.01 -.8 2 Response of DIR to DLIPRIV 1.00 -.00 -.015 .010 -.01 -.04 .03 2 10 12 14 16 18 20 4 6 8 2 4 -.020 .02 -.Ireland Response to Cholesky One S.E.015 .02 .06 .03 .D.04 2 4 6 8 10 12 14 16 18 20 Response of DLY to DLIPUB Response of DLTAX to DLIPUB Response of DLY to DLIPRIV .08 .0 ECB Working Paper Series No 864 February 2008 2 4 6 8 10 12 14 16 18 20 4 6 8 10 12 14 16 18 20 43 .005 .12 .12 .02 -.08 .00 .00 Response to Cholesky One S.8 0.010 .02 .04 .4 0.005 Response of DLTAX to DLIPRIV .04 . Response of DLIPRIV to DLIPUB .00 -.005 6 8 10 12 14 16 18 20 . Innovations ± 2 S.08 .000 .

0 0.5 0.0 0.01 2 10 12 14 16 18 20 4 6 8 2 4 -.01 2 10 12 14 16 18 20 4 6 8 2 4 6 8 10 12 14 16 18 20 -.010 -.000 -.03 .5 -1.5 2 Response of DIR to DLIPRIV 1.5 1.010 .E.00 -.00 -.00 -.D.E.00 .D.015 .02 -.04 Response of DLIPUB to DLIPUB Response of DLIPRIV to DLIPRIV ECB Working Paper Series No 864 February 2008 Response of DLTAX to DLIPUB .10 2 4 6 8 10 12 14 16 18 20 Response of DLY to DLIPUB Response of DLY to DLIPRIV .02 .01 .005 -.03 -.015 .01 -. Innovations ± 2 S.010 6 8 10 12 14 16 18 20 . Response of DLIPRIV to DLIPUB .15 .0 -1.04 .03 .06 Italy Response to Cholesky One S.06 .000 -.0 -0.05 .004 .010 .015 2 4 6 8 10 12 14 16 18 20 .02 2 10 12 14 16 18 20 4 6 8 .004 .005 .00 -.02 .08 .05 .04 . Response of DLIPUB to DLIPRIV . Innovations ± 2 S.01 .000 -.020 .0 -0.005 Response of DLTAX to DLIPRIV .05 -.02 .10 .01 .5 0.008 -.02 .008 .005 -.012 2 4 6 8 10 12 14 16 18 20 Response of DIR to DLIPUB 1.5 2 4 6 8 10 12 14 16 18 20 4 6 8 10 12 14 16 18 20 .44 Response to Cholesky One S.

020 2 4 6 8 10 12 14 16 18 20 4 6 8 10 12 14 16 18 20 Response of DIR to DLIPUB Response of DIR to DLIPRIV .D.004 .004 .02 .00 -.03 -.012 -.E.4 .016 -.000 -.010 2 Response of DLTAX to DLIPRIV .008 -.02 .008 -.01 .2 -.02 2 4 6 8 10 12 14 16 18 20 Response of DLY to DLIPUB Response of DLTAX to DLIPUB .6 -.01 -.000 -.00 -.00 -.D.000 -.04 .2 .005 .004 .04 .02 2 10 12 14 16 18 20 4 6 8 2 4 6 8 10 12 14 16 18 20 . Innovations ± 2 S.08 .04 .06 .01 .015 .012 .8 ECB Working Paper Series No 864 February 2008 2 4 6 8 10 12 14 16 18 20 45 .4 -.012 -.016 .010 . Innovations ± 2 S.4 .0 .03 .000 -.Netherlands Response to Cholesky One S. Response of DLIPRIV to DLIPUB . Response of DLIPUB to DLIPRIV .06 .8 2 4 6 8 10 12 14 16 18 20 -.0 -.004 .E.08 .008 .004 -.02 -.005 -.04 Response of DLIPUB to DLIPUB Response of DLIPRIV to DLIPRIV .00 -.004 2 10 12 14 16 18 20 4 6 8 2 4 6 8 10 12 14 16 18 20 Response of DLY to DLIPRIV .4 -.02 .01 2 10 12 14 16 18 20 4 6 8 Response to Cholesky One S.008 .

010 2 4 6 8 10 12 14 16 18 20 -.03 .00 -.02 .04 .04 2 10 2 10 12 14 16 18 20 4 6 8 12 14 16 18 20 4 6 8 -.00 .015 .02 8 10 12 14 16 18 20 2 4 6 8 10 12 14 16 18 20 Response of DIR to DLIPUB 2 1 0 -1 -2 -3 2 Response of DIR to DLIPRIV 3 2 1 0 -1 -2 -3 2 4 6 8 10 12 14 16 18 20 4 6 8 10 12 14 16 18 20 . Response of DLIPRIV to DLIPUB Response of DLIPUB to DLIPUB Response of DLIPRIV to DLIPRIV ECB Working Paper Series No 864 February 2008 .E.04 2 4 6 8 10 12 14 16 18 20 .46 Response to Cholesky One S. Response of DLIPUB to DLIPRIV .04 .D.00 .005 .01 .D.02 .04 .01 .06 .02 2 10 2 4 12 14 16 18 20 4 6 8 -.03 Response of DLTAX to DLIPRIV .02 .00 -.000 -.01 . Innovations ± 2 S.12 .010 .00 -.00 -.04 .E.01 .005 -.01 .08 . Innovations ± 2 S.08 .08 .04 .02 Portugal Response to Cholesky One S.02 -.04 2 4 6 8 10 12 14 16 18 20 Response of DLY to DLIPUB Response of DLTAX to DLIPUB Response of DLY to DLIPRIV .020 .05 .01 6 -.00 .

004 .04 .4 .000 .000 -.04 .05 .0 .004 .4 .08 .012 .D.008 .01 -. Innovations ± 2 S.04 .02 2 4 6 8 10 12 14 16 18 20 .02 -.4 -.08 Response to Cholesky One S. Response of DLIPUB to DLIPRIV .008 .8 Response of DIR to DLIPRIV .4 -.Spain Response to Cholesky One S.004 -.01 .004 2 10 12 14 16 18 20 4 6 8 2 4 6 8 10 12 14 16 18 20 .D.E.02 .8 .0 -.01 .016 Response of DLTAX to DLIPUB Response of DLY to DLIPRIV Response of DLTAX to DLIPRIV .01 .12 .02 Response of DLIPUB to DLIPUB Response of DLIPRIV to DLIPRIV .16 .01 -.06 2 10 12 14 16 18 20 10 12 14 16 18 20 4 6 8 2 4 6 8 -.03 .00 .E.04 2 4 6 8 10 12 14 16 18 20 Response of DLY to DLIPUB .00 -.04 .02 .02 .012 .02 .03 .02 . Innovations ± 2 S.04 -.8 2 4 6 8 10 12 14 16 18 20 ECB Working Paper Series No 864 February 2008 2 4 6 8 10 12 14 16 18 20 47 .8 -.00 .00 -.00 -.06 . Response of DLIPRIV to DLIPUB .01 2 4 6 8 10 12 14 16 18 20 2 4 6 8 10 12 14 16 18 20 Response of DIR to DLIPUB .00 -.

0 1 0.03 Response of DLTAX to DLIPRIV .020 .02 -.04 .D.02 .01 .02 2 4 6 8 10 12 14 16 18 20 Response of DLY to DLIPUB Response of DLY to DLIPRIV .012 .015 .0 -2 2 4 6 8 10 12 14 16 18 20 -1.01 2 4 6 8 10 12 14 16 18 20 2 4 6 8 10 12 14 16 18 20 Response of DIR to DLIPUB 2 Response of DIR to DLIPRIV 1.02 .004 .5 -1 -1.00 -.01 .000 -.01 -.00 -.08 .06 . Response of DLIPRIV to DLIPUB .004 -.01 . Innovations ± 2 S.01 -.03 .00 . Response of DLIPUB to DLIPRIV .E.03 -.04 2 10 10 12 14 16 18 20 12 14 16 18 20 2 4 6 8 4 6 8 -.00 .E.000 -.06 .02 .04 .02 2 10 12 14 16 18 20 4 6 8 2 4 -.02 -.48 Response to Cholesky One S.D.02 2 4 6 8 10 12 14 16 18 20 .005 -.03 Response of DLIPUB to DLIPUB Response of DLIPRIV to DLIPRIV ECB Working Paper Series No 864 February 2008 Response of DLTAX to DLIPUB .08 Sweden Response to Cholesky One S.02 .01 . Innovations ± 2 S.00 -.005 6 8 10 12 14 16 18 20 .0 -0.5 2 4 6 8 10 12 14 16 18 20 .010 .01 .5 0 0.5 1.008 -.04 .00 .008 .

0 Response of DIR to DLIPRIV 1. Innovations ± 2 S.03 -.000 -.010 2 Response of DLTAX to DLIPRIV .020 .015 2 4 6 8 10 12 14 16 18 20 4 6 8 10 12 14 16 18 20 Response of DIR to DLIPUB 1.02 .00 -.01 Response of DLIPUB to DLIPUB Response of DLIPRIV to DLIPRIV .000 -.0 -1.015 -.5 0.010 .01 -.005 -.005 .005 -.005 .12 .08 .04 Response to Cholesky One S.04 2 10 12 14 16 18 20 10 12 14 16 18 20 4 6 8 2 4 6 8 -.0 -0.00 -.04 .010 .D.02 .E.00 .0 2 4 6 8 10 12 14 16 18 20 -1.005 2 10 12 14 16 18 20 4 6 8 2 4 6 8 10 12 14 16 18 20 Response of DLTAX to DLIPUB Response of DLY to DLIPRIV .02 .005 -.06 .005 .E. Innovations ± 2 S.5 ECB Working Paper Series No 864 February 2008 2 4 6 8 10 12 14 16 18 20 49 . Response of DLIPUB to DLIPRIV .015 .02 .0 0.04 -.04 .000 -.16 .5 0.010 .02 .UK Response to Cholesky One S.010 .08 .D.5 -0.005 .0 0.00 -.02 2 4 6 8 10 12 14 16 18 20 -.015 .000 .04 2 4 6 8 10 12 14 16 18 20 Response of DLY to DLIPUB .010 -. Response of DLIPRIV to DLIPUB .5 -1.010 -.06 .

06 .000 .8 Response of DIR to DLIPRIV .015 Response of DLY to DLIPRIV .03 -.005 . Response of DLIPRIV to DLIPUB .08 .02 .004 -.02 2 4 6 8 10 12 14 16 18 20 Response of DLY to DLIPUB Response of DLTAX to DLIPUB .012 -.D.6 -.4 -.0 -.005 -.01 -.000 .02 .008 .004 -.02 Response of DLIPUB to DLIPUB ECB Working Paper Series No 864 February 2008 .00 -.008 .2 .008 -.020 .000 .04 .4 -.012 .00 -.50 Response to Cholesky One S.02 .02 .01 .04 2 10 12 14 16 18 20 4 6 8 -.2 -.8 2 4 6 8 10 12 14 16 18 20 2 4 6 8 10 12 14 16 18 20 .08 .01 -.E.012 2 10 12 14 16 18 20 4 6 8 -.01 12 14 16 18 20 2 4 6 8 10 12 14 16 18 20 -.03 Response of DLTAX to DLIPRIV .03 Canada Response to Cholesky One S.01 -.06 .02 .00 -.00 -.016 2 4 6 8 10 12 14 16 18 20 Response of DIR to DLIPUB .010 .4 .0 -.004 .04 .E. Innovations ± 2 S.004 .D.01 .02 2 10 12 14 16 18 20 4 6 8 2 4 6 8 10 12 14 16 18 20 .010 2 4 6 8 10 -. Response of DLIPUB to DLIPRIV Response of DLIPRIV to DLIPRIV .008 . Innovations ± 2 S.00 .

5 -1.005 -. Response of DLIPUB to DLIPRIV .02 .02 -.020 Response of DLY to DLIPRIV .005 .02 .01 -.06 .0 -0.06 .06 Response to Cholesky One S.5 1.04 .00 -.02 .03 -.Japan Response to Cholesky One S.0 -0.02 .04 .02 2 10 12 14 16 18 20 4 6 8 2 4 -.08 . Innovations ± 2 S.000 -.5 2 Response of DIR to DLIPRIV 1.04 2 4 6 8 10 12 14 16 18 20 -.04 2 10 10 12 14 16 18 20 12 14 16 18 20 2 4 6 8 4 6 8 -.01 .005 -.01 .02 2 Response of DLTAX to DLIPRIV .0 0.010 .01 -.01 .E.010 . Innovations ± 2 S.D.0 ECB Working Paper Series No 864 February 2008 2 4 6 8 10 12 14 16 18 20 4 6 8 10 12 14 16 18 20 51 .D.E.00 -.04 .02 .0 0.02 -.00 -.5 -1.01 -.02 .03 .010 6 8 10 12 14 16 18 20 .03 .015 .0 -1.02 .02 -.005 . Response of DLIPRIV to DLIPUB .000 -.5 0.00 .00 .5 0.00 -.04 Response of DLIPUB to DLIPUB Response of DLIPRIV to DLIPRIV .04 2 4 6 8 10 12 14 16 18 20 Response of DLY to DLIPUB Response of DLTAX to DLIPUB .010 2 4 6 8 10 12 14 16 18 20 4 6 8 10 12 14 16 18 20 Response of DIR to DLIPUB 1.04 .

005 .01 USA Response to Cholesky One S.02 2 10 12 14 16 18 20 4 6 8 2 4 6 8 10 12 14 16 18 20 .02 -.8 2 4 6 8 10 12 14 16 18 20 .01 .010 -.E.D.00 -.0025 -.016 . Response of DLIPUB to DLIPRIV Response of DLIPRIV to DLIPRIV .000 .03 2 10 12 14 16 18 20 4 6 8 -.04 .08 .2 .024 .4 -.0050 2 10 12 14 16 18 20 4 6 8 -.04 .03 .05 .01 2 4 6 8 10 12 14 16 18 20 -.02 .02 . Innovations ± 2 S.02 .2 .01 -.05 .012 .E.010 .015 .06 .D.01 .00 -.02 2 4 6 8 10 12 14 16 18 20 -.0075 .005 .4 -.00 .004 .04 .0050 .020 .0 .0025 .4 -.015 2 4 6 8 10 12 14 16 18 20 4 6 8 10 12 14 16 18 20 Response of DIR to DLIPUB Response of DIR to DLIPRIV . Response of DLIPRIV to DLIPUB .008 Response of DLY to DLIPUB Response of DLTAX to DLIPUB Response of DLY to DLIPRIV .01 .03 .000 -.0000 -. Innovations ± 2 S.0100 .0 -.02 Response of DLIPUB to DLIPUB ECB Working Paper Series No 864 February 2008 .02 .52 Response to Cholesky One S.00 -.00 -.6 -.004 .008 -.01 .8 2 4 6 8 10 12 14 16 18 20 -.01 2 Response of DLTAX to DLIPRIV .

J. García and A. M. Tujula and J. Manolova Kalamova. Tristani and D.europa. Leal. December 2007. León-Ledesma. Furceri. 832 “The yield curve and macroeconomic dynamics” by P. December 2007. Marqués. Manzanares. November 2007. García and T. November 2007. Ferrucci and C. 830 “The term structure of euro area break-even inflation rates: the impact of seasonality” by J. ECB Working Paper Series No 864 February 2008 53 . Pérez. T. Ca’ Zorzi and B. December 2007. Amisano. November 2007. J.-P. Ejsing. 827 “How is real convergence driving nominal convergence in the new EU Member States?” by S. 845 “Run-prone banking and asset markets” by M. Habib and M. Schnatz. 843 “Fiscal forecasting: lessons from the literature and challenges” by T. 838 “Securitisation and the bank lending channel” by Y. 841 “Should we take inside money seriously?” by L. M. 844 “Business cycle synchronization and insurance mechanisms in the EU” by A. November 2007. M. Wintr. Stracca. Hoerova. November 2007. 839 “Are there oil currencies? The real exchange rate of oil exporting countries” by M. Santos Rivera. 836 “Reporting biases and survey results: evidence from European professional forecasters” by J. A.ecb. 834 “International frictions and optimal monetary policy cooperation: analytical solutions” by M. November 2007. 831 “Hierarchical Markov normal mixture models with applications to financial asset returns” by J. Cahn and A. O. A. and C. 828 “Potential output growth in several industrialised countries: a comparison” by C. Miralles. Vidal. Werner. 835 “US shocks and global exchange rate configurations” by M. Lenza. Fratzscher. November 2007. Darracq Pariès. Afonso and D. Vestin. Altunbas. 837 “Monetary policy and core inflation” by M. J. Mehrotra. Gambacorta and D. L. December 2007. 829 “Modelling inflation in China: a regional perspective” by A. 840 “Downward wage rigidity for different workers and firms: an evaluation for Belgium using the IWFP procedure” by P. C. 833 “Explaining and forecasting euro area exports: which competitiveness indicator performs best?” by M. 842 “Saving behaviour and global imbalances: the role of emerging market economies” by G. November 2007. M.European Central Bank Working Paper Series For a complete list of Working Papers published by the ECB. Du Caju. December 2007. Geweke and G. December 2007. December 2007. Peltonen and A. Fuss and L. Saint-Guilhem. please visit the ECB’s website (http://www. December 2007. November 2007. A. Nerlich. Lein-Rupprecht.eu). December 2007. December 2007. Hördahl.

Afonso. Kaufmann and M. Sánchez.846 “Information combination and forecast (st)ability. G. A. 861 “Income distribution determinants and public spending efficiency” by A. Ciccarelli. 852 “Determinants of economic growth: will data tell?” by A. Tanzi. volatility and economic growth” by A. January 2008. Vermeulen. Taglioni and F. Rother and A. Evidence from vintages of time-series data” by C. 847 “Deeper. 859 “Assessing the compensation for volatility risk implicit in interest rate derivatives” by F. January 2008. Marcet and J. Kapetanios. Eastern enlargement and competitiveness in the European Union” by G. Manovskii. wider and more competitive? Monetary integration. Smets and R. composition. February 2008. Mann. González Alegre. January 2008. 849 “Government size. 856 “Markups in the euro area and the US over the period 1981-2004: a comparison of 50 sectors” by R. Benati. Theophilopoulou. 863 “Population ageing and public pension reforms in a small open economy” by C. Coenen. St. Camba-Méndez and G. L. January 2008. Aubyn. February 2008. Afonso and M. A. December 2007. K. Adam. January 2008. Gasteuil. Grant and T. January 2008. Fornari. Nicolini. Christopoulou and P. 864 “Macroeconomic rates of return of public and private investment: crowding-in and crowding-out effects” by A. January 2008. Nickel. 860 “Oil shocks and endogenous markups: results from an estimated euro area DSGE model” by M. February 2008. Afonso and J. P. Ciccone and M. D. Fuss. 54 ECB Working Paper Series No 864 February 2008 . 858 “International transmission and monetary policy cooperation” by G. 862 “Stock market volatility and learning” by K. Peltonen. Afonso and D. Lombardo. Dées. January 2008. 854 “How do firms adjust their wage bill in Belgium? A decomposition along the intensive and extensive margins” by C. Schuknecht and V. Straub. January 2008. 851 “Investigating inflation persistence across monetary regimes” by L. January 2008. 850 “Statistical tests and estimators of the rank of a matrix and their applications in econometric modelling” by G. P. R. Jarocinski. di Mauro. 853 “The cyclical behavior of equilibrium unemployment and vacancies revisited” by M. Ottaviano. January 2008. January 2008. December 2007. 848 “Economic growth and budgetary components: a panel assessment for the EU” by A. January 2008. 857 “Housing and equity wealth effects of Italian households” by C. F. Altavilla and M. 855 “Assessing the factors behind oil price changes” by S. Furceri. Hagedorn and I. January 2008.

Sign up to vote on this title
UsefulNot useful