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Government Investment and Fiscal Stimulus

Shu-Chun Yang (), Todd Walker and Eric Leeper ()

No 10/229, IMF Working Papers from International Monetary Fund

Abstract: 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.

Keywords: Capital; Economic models; Public investment; Infrastructure; Fiscal stimulus; Fiscal policy; government investment, implementation delays, DGSE Bayesian Estimation, government spending, fiscal adjustments, tax rates, (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-fdg and nep-mac
Date: 2010-10-01
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Related works:
Journal Article: Government investment and fiscal stimulus (2010) Downloads
Working Paper: Government Investment and Fiscal Stimulus in the Short and Long Runs (2009) Downloads
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