IMF Working Papers Volume 2010 Issue 229: Government Investment and Fiscal Stimulus (2010)

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Government Investment and Fiscal Stimulus

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Ms. Susan S. Yang

Ms. Susan S. Yang
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Todd B. Walker

Todd B. Walkernull

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Eric M. Leeper

Eric M. Leepernull

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Series:: IMF Working Papers

Volume/Issue:: Volume 2010: Issue 229

Publication Date:: 01 Oct 2010

DOI:: https://doi.org/10.5089/9781455208944.001

ISBN:: 9781455208944

ISSN:: 1018-5941

Pages:: 30

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

Legal-disclaimer:: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Series:: IMF Working Papers

Volume/Issue:: Volume 2010: Issue 229

Language:: English

Publication Date:: 01 Oct 2010

DOI:: https://doi.org/10.5089/9781455208944.001

ISBN:: 9781455208944

ISSN:: 1018-5941

Pages:: 30

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

Legal-disclaimer:: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

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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.

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IMF Working Papers

ISSN:: 1018-5941

Publisher:: International Monetary Fund

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