Infrastructure gaps in Ecuador: an estimate based on a Vector Error Correction Models (VECM)

Abstract

In this article, we estimate the vertical gap in infrastructure for Ecuador in the transportation and energy sectors during the period 1967-2015. In order to achieve this, we use a cointegration analysis based on a VEC model. We find that the gap has narrowed significantly during this period, reaching its low in 2015, when it represented 16.8% of GDP, or about US$ 17 billion. We also analyze investment in economic infrastructure for each budget stage during the period 2008-2016. We determine that investment has been highly procyclical with an important pressure to increase spending within budget stages and between annual budgets. Based on this evidence, we conclude that the main challenges of investment in economic infrastructure in Ecuador are: in the short run, the scarcity of economic resources the country faces and, in the long run, the difficulty to achieve sustainable investment while escaping procyclicality.