A Note on the Relationship between Public and Private Investment in Brazil

Abstract

This study reexamines the relationship between public investment and private investment in Brazil from January 2007 to February 2023, with a focus on the asymmetries observed during periods of elevated public debt. The findings indicate that the effects of public investment—whether substitution (crowding-out) or complementarity (crowding-in) with private investment—are contingent upon the prevailing economic conditions. Specifically, in contexts of high public debt, crowding-out effects tend to dominate. The analysis underscores the importance of aligning public investment programs with the country’s fiscal and debt dynamics. Failure to do so may undermine their effectiveness, given the asymmetric nature of these interactions.