Do government purchases crowd out investment?

The objective of this study is to determine whether federal government purchases negatively impact private investment using times series regression analysis. This study uses quarterly data from the years 1986.1 to 2004.4 in order to provide a relatively contemporary evaluation of the effects of federal purchases on private investment. The empirical results in this study reveal that increases in federal urchases, expressed as a percent of GDP, act to reduce new investment, which provides further support for the theory that government expenditures crowd out private investment. (JEL: E22, E62)[PUBLICATION ABSTRACT]