Delivering public investment efficiently: If possible, avoid delays

Thomas Conefrey, Matija Lozej, Gerard O'Reilly and Graeme Walsh
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Thomas Conefrey: Central Bank of Ireland
Matija Lozej: Central Bank of Ireland
Gerard O'Reilly: Central Bank of Ireland
Graeme Walsh: Central Bank of Ireland

No 08/RT/26, Research Technical Papers from Central Bank of Ireland

Abstract: Public investment can be used to affect the economy over the business cycle, but also to boost its long-term potential. However, public investment is often subject to delays related to planning, construction, or both. We show that these delays can materially affect the usefulness of public investment for managing the economy. In particular in the case of a downturn, a delay in delivering an announced public investment can worsen the downturn if public investment is not delivered quickly. If public investment that has been planned during the recession is delayed so that it occurs when the recession is over, it risks overheating the economy. Delays in the delivery of public investment shift the benefits from higher public capital further into the future and reduce welfare. These findings hold in the standard model as well as in the model with search frictions, but with search frictions planning delays become less concerning, because the business cycle induced by the delay becomes smoother.

Keywords: Public investment; Fiscal policy; Monetary Union. (search for similar items in EconPapers)
JEL-codes: E24 E32 E43 E52 F45 (search for similar items in EconPapers)
Date: 2026-06
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