Note

1. According to WEF (2014), commercial banks provided an estimated 90% of all private debt for infrastructure financing from 1999 to 2009.

2. The 12 countries are Argentina, Brazil, Chile, Colombia, India, Indonesia, Malaysia, Mexico, the People's Republic of China, South Africa, Thailand, and Turkey.

3. The standard literature on project finance contains detailed explanations of the advantages and disadvantages of using bond markets rather than bank loans. See, for example, Hoffman (1980) and Yescombe (2002, 2007).

4. Applying the Arellano and Bover (1995) and Blundell and Bond (1998) one-step system for the GMM approach for dynamic panel models to the data augmented through multiple imputation by chained equations is an increasingly popular approach for dealing with missing observations.

5. Tax increment financing is a public financing tool used to subsidize redevelopment, infrastructure, and other community-improvement projects by allocating property tax revenue increments from assessed values within a designated tax increment financing district.

6. Among the few regions and countries where market conditions are largely in place for infrastructure project bond markets are Australia, the Benelux countries, Canada, Germany, Latin America (especially Brazil), Mexico, the United Kingdom, and the United States, according to PwC (2013).

7. The Asian Bond Markets Initiative was launched in 2003 by the ASEAN Plus Three cooperation to strengthen the resilience of Asia's financial system by developing local currency bond markets as an alternative source to foreign currency-denominated short-term bank loans for long-term investment financing.

Table 6.3: PPP Determinants-Panel Regression with Fixed Effect

Dependent Variable

Variable

PPP-GDP Ratio

PIP-GDP Ratio

Credit-GDP ratio

0.0149

(0.67)

0.0154

(0.70)

0.0225

(1.33)

0.0228

(1.33)

Bond-GDP ratio

-0.0123**

(-3.03)

-0.00936**

(-2.65)

Government bond-GDP ratio

-0.0179**

(-2.21)

-0.0122*

(-1.98)

Corporate bond-GDP ratio

-0.00315

(-0.23)

-0.00478

(-0.52)

Stock market capitalization-GDP ratio

0.00294

(1.08)

0.00292

(1.01)

0.00230

(1.00)

0.00230

(0.96)

Log of GDP per capita

-0.00794*

(-1.81)

-0.00995*

(-2.08)

-0.0108*

(-2.03)

-0.00564

(-1.45)

-0.00792**

(-2.21)

-0.00833*

(-2.04)

GDP growth

0.0262

(1.14)

0.0278

(1.10)

0.0293

(1.20)

0.0213

(1.36)

0.0252

(1.38)

0.0260

(1.39)

Inflation rate

-0.0293**

(-3.00)

-0.0270**

(-2.53)

-0.0314**

(-2.35)

-0.0246***

(-4.00)

-0.0202***

(-3.71)

-0.0224***

(-3.43)

GDP growth volatility

-0.0261

(-0.49)

-0.00917

(-0.17)

-0.0184

(-0.33)

-0.0225

(-0.46)

-0.0129

(-0.27)

-0.0175

(-0.35)

Inflation volatility

0.000274

(0.44)

0.000484

(0.65)

0.000325

(0.40)

0.000510

(0.86)

0.000857

(1.41)

0.000778

(1.24)

Real effective exchange rate volatility

0.000860

(0.01)

-0.00699

(-0.09)

-0.000701

(-0.01)

0.0195

(0.36)

-0.00668

(-0.10)

-0.00353

(-0.06)

Exchange rate regime

0.00510

(1.42)

0.00200

(0.55)

0.00214

(0.58)

0.00624*

(1.87)

0.00253

(0.77)

0.00260

(0.78)

Log of government stability index

0.0104

(1.30)

0.00785

(1.51)

0.00816

(1.60)

0.00671

(1.08)

0.00454

(1.20)

0.00470

(1.31)

Constant

0.0690

(1.46)

0.0811

(1.78)

0.0887*

(1.81)

0.0502

(1.26)

0.0602*

(1.94)

0.0640*

(1.80)

Country fixed effects

Time fixed effects

Yes

Observations

Number of markets

212

Adjusted R2

0.182

0.245

0.132

0.229

0.226

GDP = gross domestic product, PIP = private investment in PPP, PPP = public-private partnership.

Notes:

1. t values are calculated from standard errors clustered at the country level in parenthesis.

2. Time and country fixed effects are controlled.

*** p < 0.01 ** p < 0.05 * p < 0.10

Source: Authors' estimates.

Table 6.4: PPP Determinants-Difference Generalized Method of Moments Regression

Dependent Variable

Variable

PPP-GDP Ratio

PIP-GDP Ratio

Credit-GDP ratio

0.00952

(0.95)

0.00987

(0.97)

0.0184**

(2.20)

0.0189**

(2.25)

Bond-GDP ratio

-0.0110***

(-2.75)

-0.00887***

(-2.63)

Government bond-GDP ratio

-0.0137*

(-1.95)

-0.0115**

(-1.98)

Corporate bond-GDP ratio

-0.00672

(-0.66)

-0.00459

(-0.54)

Stock market capitalization- GDP ratio

4.02e-05

(0.01)

0.000128

(0.04)

0.000901

(0.36)

0.000903

(0.36)

Log of GDP per capita

-0.00658*

(-1.73)

-0.00828**

(-2.15)

-0.00867**

(-2.19)

-0.00451

(-1.41)

-0.00701**

(-2.17)

-0.00740**

(-2.24)

GDP growth

0.0219

(0.82)

0.0251

(0.93)

0.0260

(0.96)

0.0157

(0.71)

0.0239

(1.08)

0.0249

(1.11)

Inflation rate

-0.0289***

(-3.51)

-0.0280***

(-3.11)

-0.0299***

(-3.01)

-0.0249***

(-3.73)

-0.0217***

(-2.97)

-0.0235***

(-2.94)

GDP growth volatility

0.0220

(0.33)

0.0264

(0.39)

0.0227

(0.33)

0.0210

(0.37)

0.00422

(0.07)

0.000155

(0.00)

Inflation volatility

-0.000306

(-0.49)

-0.000141

(-0.22)

-0.000189

(-0.29)

0.000337

(0.64)

0.000546

(1.00)

0.000494

(0.89)

Real effective exchange rate volatility

-0.0133

(-0.26)

0.00149

(0.03)

0.00522

(0.09)

0.00517

(0.12)

-0.00228

(-0.05)

0.00112

(0.02)

Exchange rate regime

0.00502*

(1.86)

0.00251

(0.87)

0.00259

(0.89)

0.00683***

(3.06)

0.00311

(1.30)

0.00317

(1.31)

Log of government stability index

0.00584

(1.15)

0.00554

(1.09)

0.00577

(1.13)

0.00306

(0.73)

0.00333

(0.79)

0.00354

(0.83)

Country fixed effects

Time fixed effects

Yes

Observations

Number of markets

199

F value

4.075

4.143

3.984

3.243

3.544

3.428

GDP = gross domestic product, PIP = private investment in PPP, PPP = public-private partnership.

Notes:

1. t values are calculated from standard errors clustered at the country level in parenthesis.

2. Time and country fixed effects are controlled.

*** p < 0.01 ** p < 0.05 * p < 0.10

Source: Authors.

Table 6.5: PPP Determinants-Panel Fixed Effect Regression

Dependent Variable

Variable

PPP-GDP Ratio

PIP-GDP Ratio

Lagged dependent variable

0.290***

(3.10)

0.238***

(3.21)

0.230**

(2.83)

0.295*

(1.96)

0.194

(1.41)

0.197

(1.33)

Credit-GDP ratio

0.00622

(0.27)

0.00677

(0.31)

0.0158

(0.97)

0.0160

(1.00)

Bond-GDP ratio

-0.0112**

(-2.77)

-0.00889**

(-2.92)

Government bond-GDP ratio

-0.0199**

(-2.48)

-0.0161**

(-2.60)

Corporate bond-GDP ratio

0.00271

(0.21)

0.00263

(0.30)

Stock market capitalization-GDP ratio

0.00156

(0.80)

0.00145

(0.67)

0.00117

(0.67)

0.00108

(0.56)

Log of GDP per capita

-0.00623

(-1.59)

-0.00820*

(-1.84)

-0.00963*

(-1.99)

-0.00476

(-1.43)

-0.00730*

(-2.04)

-0.00839**

(-2.25)

GDP growth

0.0451*

(1.97)

0.0417*

(1.89)

0.0429*

(1.99)

0.0402*

(1.99)

0.0354

(1.76)

0.0369*

(1.85)

Inflation rate

-0.0254**

(-2.54)

-0.0262*

(-2.16)

-0.0331**

(-2.37)

-0.0219***

(-3.50)

-0.0203**

(-2.72)

-0.0258***

(-3.66)

GDP growth volatility

-0.0186

(-0.37)

-0.0114

(-0.19)

-0.0270

(-0.45)

-0.0162

(-0.33)

-0.0170

(-0.33)

-0.0294

(-0.56)

Inflation volatility

-0.000162

(-0.36)

5.76e-05

(0.08)

-0.000147

(-0.19)

0.000183

(0.46)

0.000604

(1.05)

0.000424

(0.75)

Real effective exchange rate volatility

0.000745

(0.01)

0.00524

(0.06)

0.0175

(0.20)

0.0243

(0.41)

0.00831

(0.11)

0.0190

(0.26)

Exchange rate regime

0.00482

(1.53)

0.00262

(0.78)

0.00297

(0.86)

0.00530

(1.77)

0.00271

(0.87)

0.00298

(0.92)

Log of government stability index

0.00364

(0.65)

0.00327

(0.71)

0.00372

(0.84)

0.00176

(0.35)

0.00174

(0.43)

0.00201

(0.54)

Constant

0.0572

(1.33)

0.0764

(1.76)

0.0881*

(1.99)

0.0465

(1.24)

0.0640*

(1.92)

0.0731**

(2.20)

Country fixed effects

Time fixed effects

Yes

Observations

Number of markets

199

Adjusted R2

0.221

0.248

0.252

0.179

0.227

0.230

GDP = gross domestic product, PIP = private investment in PPP, PPP = public-private partnership.

Notes:

1. t values are calculated from standard errors clustered at the country level in parenthesis.

2. Time and country fixed effects are controlled.

*** p < 0.01 ** p < 0.05 * p < 0.10

Source: Authors.

Table 6.6: PPP Determinants-System Generalized Method of Moments Regression

	Dependent Variable
Variable	PPP-GDP Ratio			PIP-GDP Ratio
Lagged dependent variable	0.343*** (4.48)	0.242*** (3.13)	0.247*** (3.19)	0.314*** (3.87)	0.187** (2.28)	0.190** (2.31)
Credit-GDP ratio		0.0215** (2.45)	0.0224** (2.49)		0.0224*** (3.14)	0.0239*** (3.28)
Bond-GDP ratio		-0.0105*** (-2.65)			-0.00826** (-2.57)
Governmentbond-GDP ratio			-0.0158** (-2.14)			-0.0144** (-2.38)
Corporate bond-GDP ratio			-0.00211 (-0.20)			0.00125 (0.15)
Stock market capitalization-GDP ratio		-0.000185 (-0.07)	7.59e-05 (0.03)		0.000235 (0.11)	0.000155 (0.07)
Log of GDP per capita	-0.00293 (-1.19)	-0.00518* (-1.90)	-0.00593* (-1.97)	-0.00148 (-0.74)	-0.00380* (-1.75)	-0.00500** (-2.08)
GDP growth	0.0101 (0.41)	0.0161 (0.68)	0.0175 (0.73)	0.0170 (0.85)	0.0226 (1.18)	0.0249 (1.29)
Inflation rate	-0.0121 (-1.41)	-0.0139* (-1.78)	-0.0182** (-2.16)	-0.0142** (-2.02)	-0.0151** (-2.40)	-0.0188*** (-2.69)
GDP growth volatility	-0.0278	-0.0312	-0.0399	-0.0221	-0.0218	-0.0354
	(-0.36)	(-0.43)	(-0.54)	(-0.35)	(-0.37)	(-0.59)
Inflation volatility	0.000503	0.000437	0.000460	0.000554	0.000567	0.000521
	(0.72)	(0.66)	(0.69)	(0.96)	(1.06)	(0.96)
Real effective exchange rate volatility	-0.0309	-0.0420	-0.0345	0.00380	-0.00599	-0.00286
	(-0.53)	(-0.73)	(-0.60)	(0.08)	(-0.13)	(-0.06)
Exchange rate regime	0.00568*	0.00141	0.00144	0.00617**	0.00233	0.00237
	(1.88)	(0.46)	(0.47)	(2.46)	(0.94)	(0.95)
Log of government stability index	0.00376	0.00300	0.00380	0.000902	0.000497	0.000813
	(0.77)	(0.63)	(0.80)	(0.23)	(0.13)	(0.21)
Country fixed effects	Yes	Yes	Yes	Yes	Yes	Yes
Time fixed effects	Yes	Yes	Yes	Yes	Yes	Yes
Observations	186	186	186	186	186	186
Number of markets	13	13	13	13	13	13
F value	6.010	6.448	6.078	5.467	6.358	5.907

GDP = gross domestic product, PIP = private investment in PPP, PPP = public-private partnership.

Notes:

1. t values are calculated from standard errors clustered at the country level in parenthesis.

2. Time and country fixed effects are controlled.

*** p < 0.01 ** p < 0.05 * p < 0.10

Source: Authors.