How Does Public Investment Affect Economic Growth in HIPC? An Empirical Assessment

A better assessment of the impact of public investment on economic performance is crucial in order to design and implement effective fiscal policies for adjustment with growth in highly indebted poor countries. In this paper we investigate empirically the relationship between public investment, private investment and output, providing a dynamic econometric procedure on a selected group of Highly Indebted Poor Countries (HIPCs). Our results provide empirical support for both the crowding-in hypothesis and a positive effect of public investment on output.