Governmentally amplified output volatility

Yoshito Funashima

MPRA Paper from University Library of Munich, Germany

Abstract: Predominant government behavior is decomposed by frequency into several periodic components: updating cycles of infrastructure, Kuznets cycles, fiscal policy over business cycles, and election cycles. Little is known, however, about the theoretical impact of such cyclical behavior in public finance on output fluctuations. Based on a standard neoclassical growth model, this study intends to examine the frequency at which public investment cycles are relevant to output fluctuations. We find an inverted U-shaped relationship between output volatility and length of cycle in public investment. Moreover, with a numerical setting, we show that periodic behavior in public investment at low frequencies—such as updating cycles of infrastructure and Kuznets cycles—can cause aggravated output resonance.

Keywords: Output volatility; Public investment; Resonance; Frequency (search for similar items in EconPapers)
JEL-codes: E32 E62 (search for similar items in EconPapers)
Date: 2015-06
New Economics Papers: this item is included in nep-fdg and nep-mac
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:65330

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