Analysis of Economics Applications

Public and private sector fixed capitalinvestments are two significant investment instruments affecting economicgrowth in emerging markets. Economic approaches differ depending on whetherthere is substitutability or complementarity between these two significantinvestment instruments. The purpose of this study is to determine thecrowding-out or crowding-in effect of public fixed capital investments onprivate sector fixed capital investments in the agricultural sector between1998 and 2021 in Turkey. The sensitivity of private sector fixed capitalinvestments to public sector fixed capital investments has been evaluated usingthe Time-Varying Parameter VAR (TVP-VAR) model in this study. The endogenousvariables within the vector include ΔGDPagricultural, ∆INVESTMENTpublic, ∆INVESTMENTprivaterepresents agricultural gross domestic product, public sector fixed capitalinvestment, and private sector fixed capital investments in the agriculturalsector, respectively. The natural logarithms and first differences of allvariables have been taken to estimate the model parameters.  According to the impulse-response functionestimates from the TVP-VAR model, private sector fixed capital investments haveconsistently responded negatively to public sector fixed capital investmentshocks throughout the entire analysis period. This result indicates that public sector fixed capital investments decreaseprivate sector fixed capital investments, and the crowding-out effect is validin the agricultural sector in Turkey.  Furthermore,the study's findings reveal that a 1 standard deviation positive shock inpublic sector fixed capital investments resulted in a 17.6 percent reduction inprivate sector fixed capital investments throughout the 2008 global financialcrisis period. Also, the lowest impact of public sector fixed capitalinvestments on private sector fixed capital investments has been estimated between2001 and 2008. This negative effect gradually increased in a after the 2008global crisis. Private sector fixed capital investments exhibit greater sensitivityto public sector fixed capital investment shocks during economic crises than inother periods. It has been believed that the government has provided investmentincentives and increased access to credit in the agricultural sector, which hasprioritized for infrastructure investments in Turkey.