The Macroeconomic (and Distributional) Effects of Public Investment in Developing Economies
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Summary:
This paper provides new empirical evidence of the macroeconomic effects of public investment in developing economies. Using public investment forecast errors to identify unanticipated changes in public investment, the paper finds that increased public investment raises output in the short and medium term, with an average short-term fiscal multiplier of about 0.2. We find some evidence that the effects are larger: (i) during periods of slack; (ii) in economies operating with fixed exchange rate regimes; (iii) in more closed economies; (iv) in countries with lower public debt; and (v) in countries with higher investment efficiency. Finally, we show that increases in public investment tend to lower income inequality.
Series:
Working Paper No. 2017/217
Subject:
Conventional peg Exchange rate arrangements Expenditure Fiscal multipliers Public investment spending
English
Publication Date:
October 20, 2017
ISBN/ISSN:
9781484320709/1018-5941
Stock No:
WPIEA2017217
Pages:
39
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