Testing the validity of crowding-out effect based on time-varying parameter var model in agricultural sector: evidences from an emerging market

Sönmez H.

Analysis of Economics Applications, Savaş DURMUŞ, Editör, Yaz Yayınları, Afyonkarahisar, ss.71-97, 2023

  • Yayın Türü: Kitapta Bölüm / Mesleki Kitap
  • Basım Tarihi: 2023
  • Yayınevi: Yaz Yayınları
  • Basıldığı Şehir: Afyonkarahisar
  • Sayfa Sayıları: ss.71-97
  • Editörler: Savaş DURMUŞ, Editör
  • Dokuz Eylül Üniversitesi Adresli: Evet

Özet

Public and private sector fixed capital investments are two significant investment instruments affecting economic growth in emerging markets. Economic approaches differ depending on whether there is substitutability or complementarity between these two significant investment instruments. The purpose of this study is to determine the crowding-out or crowding-in effect of public fixed capital investments on private sector fixed capital investments in the agricultural sector between 1998 and 2021 in Turkey. The sensitivity of private sector fixed capital investments to public sector fixed capital investments has been evaluated using the Time-Varying Parameter VAR (TVP-VAR) model in this study. The endogenous variables within the vector include ΔGDPagricultural, ∆INVESTMENTpublic, ∆INVESTMENTprivate represents agricultural gross domestic product, public sector fixed capital investment, and private sector fixed capital investments in the agricultural sector, respectively. The natural logarithms and first differences of all variables have been taken to estimate the model parameters.  According to the impulse-response function estimates from the TVP-VAR model, private sector fixed capital investments have consistently responded negatively to public sector fixed capital investment shocks throughout the entire analysis period.  This result indicates that public sector fixed capital investments decrease private sector fixed capital investments, and the crowding-out effect is valid in the agricultural sector in Turkey.  Furthermore, the study's findings reveal that a 1 standard deviation positive shock in public sector fixed capital investments resulted in a 17.6 percent reduction in private sector fixed capital investments throughout the 2008 global financial crisis period. Also, the lowest impact of public sector fixed capital investments on private sector fixed capital investments has been estimated between 2001 and 2008. This negative effect gradually increased in a after the 2008 global crisis. Private sector fixed capital investments exhibit greater sensitivity to public sector fixed capital investment shocks during economic crises than in other periods. It has been believed that the government has provided investment incentives and increased access to credit in the agricultural sector, which has prioritized for infrastructure investments in Turkey.