A Note on the dependence of the capital stock in Brazil

Abstract

This work adds to the discussion on public and private investment in Brazil by addressing the transmission mechanisms of internal and external shocks to capital stock variation. Baseline specification is estimated using Time-Varying Parameter VAR with dynamic structures, following Gabauer and Gupta (2018). The purpose is to quantify the magnitude and direction of pairwise spillovers, accounting for their persistence across different time horizons. The results from April 2007 to September 2024 show that capital stock variation is typically a net receiver. Public debt, enterprise credit, and household credit exert influence with higher intensity. This dependence on financial sources (credit and debt) suggests agents' rationality but also prompts us to consider whether the downward trend in capital stock will persist, given the high level of household and government indebtedness. Most of this influence occurs at a frequency longer than one year. This study also explores the specific relationship between capital stock variation and economic growth.