Das Public Kapital: How Much Would Higher German Public Investment Help Germany and the Euro Area?

December 17, 2014

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Format: Chicago

Selim A Elekdag, and Dirk V Muir. Das Public Kapital: How Much Would Higher German Public Investment Help Germany and the Euro Area?, (USA: International Monetary Fund, 2014) accessed December 21, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

Given the backdrop of pressing infrastructure needs, this paper argues that higher German public investment would not only stimulate domestic demand in the near term and reduce the current account surplus, but would also raise output over the longer-run as well as generate beneficial regional spillovers. While time-to-build delays can weaken the impact of the stimulus in the short-run, the expansionary effects of higher public investment are substantially strengthened with an accommodative monetary policy stance—as is typical during periods of economic slack. The current low-interest rate environment presents a window of opportunity to finance higher public investment at historically favorable rates.

Subject: Accommodative monetary policy, Expenditure, Financial sector policy and analysis, Fiscal policy, Fiscal stimulus, Foreign exchange, Monetary policy, Public investment spending, Real effective exchange rates, Spillovers

Keywords: Accommodative monetary policy, Accommodative monetary policy stance, Aggregate supply, Asia and Pacific, Closed economy, Credit crunch, Crowding in, Debt-financed increase, Euro area, Euro area growth, Europe, Exchange rate, Fiscal policy, Fiscal stimulus, Germany, Global, Government investment, Implications of government investment, Investment expenditure, Monetary policy accommodation, Monetary policy channel, Output gap, Public investment, Public investment spending, Real effective exchange rates, Role of government investment, Spillovers, Subdued investment, Time-to-build delays, WP

Publication Details

Pages:

45
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2014/227
Stock No:

WPIEA2014227
ISBN:

9781498329934
ISSN:

1018-5941

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