Government Investment and Fiscal Stimulus
Electronic Access:
Free Download. Use the free Adobe Acrobat Reader to view this PDF file
Summary:
Effects of government investment are studied in an estimated neoclassical growth model. The analysis focuses on two dimensions that are critical for understanding government investment as a fiscal stimulus: implementation delays for building public capital and expected fiscal adjustments to deficit-financed spending. Implementation delays can produce small or even negative labor and output responses to increases in government investment in the short run. Anticipated fiscal adjustments matter both quantitatively and qualitatively for long-run growth effects. When public capital is insufficiently productive, distorting financing can make government investment contractionary at longer horizons.
Series:
Working Paper No. 2010/229
Subject:
Capital productivity Expenditure Fiscal consolidation Fiscal policy Government consumption National accounts Production Public investment spending
English
Publication Date:
October 1, 2010
ISBN/ISSN:
9781455208944/1018-5941
Stock No:
WPIEA2010229
Pages:
30
Please address any questions about this title to publications@imf.org