Government Investment and Fiscal Stimulus

Susan Yang, Todd Walker and Eric Leeper

No 2010/229, 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: WP; government investment; implementation delays; fiscal stimulus; DGSE Bayesian Estimation; output multiplier; depreciation rate; investment multiplier; wealth effect; consumption multiplier; government spending multiplier; present-value investment multiplier; government investment shock; government investment project; multiplier change; Public investment spending; Capital productivity; Fiscal consolidation; Government consumption (search for similar items in EconPapers)
Pages: 30
Date: 2010-10-01
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (262)

Downloads: (external link)
http://www.imf.org/external/pubs/cat/longres.aspx?sk=24274 (application/pdf)

Related works:
Journal Article: Government investment and fiscal stimulus (2010)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:imf:imfwpa:2010/229

Ordering information: This working paper can be ordered from
http://www.imf.org/external/pubs/pubs/ord_info.htm

Access Statistics for this paper

More papers in IMF Working Papers from International Monetary Fund International Monetary Fund, Washington, DC USA. Contact information at EDIRC.
Bibliographic data for series maintained by Akshay Modi ().