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Governmentally amplified output volatility

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  • Funashima, Yoshito

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.

Suggested Citation

  • Funashima, Yoshito, 2015. "Governmentally amplified output volatility," MPRA Paper 65330, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:65330
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    References listed on IDEAS

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    More about this item

    Keywords

    Output volatility; Public investment; Resonance; Frequency;
    All these keywords.

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory

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