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Delivering public investment efficiently: If possible, avoid delays

Author

Listed:
  • Conefrey, Thomas

    (Central Bank of Ireland)

  • Lozej, Matija

    (Central Bank of Ireland)

  • O'Reilly, Gerard

    (Central Bank of Ireland)

  • Walsh, Graeme

    (Central Bank of Ireland)

Abstract

Public investment can be used to affect the economy over the business cycle, but also to boost its long-term potential. However, public investment is often subject to delays related to planning, construction, or both. We show that these delays can materially affect the usefulness of public investment for managing the economy. In particular in the case of a downturn, a delay in delivering an announced public investment can worsen the downturn if public investment is not delivered quickly. If public investment that has been planned during the recession is delayed so that it occurs when the recession is over, it risks overheating the economy. Delays in the delivery of public investment shift the benefits from higher public capital further into the future and reduce welfare. These findings hold in the standard model as well as in the model with search frictions, but with search frictions planning delays become less concerning, because the business cycle induced by the delay becomes smoother.

Suggested Citation

  • Conefrey, Thomas & Lozej, Matija & O'Reilly, Gerard & Walsh, Graeme, 2026. "Delivering public investment efficiently: If possible, avoid delays," Research Technical Papers 08/RT/26, Central Bank of Ireland.
    • Handle: RePEc:cbi:wpaper:08/rt/26
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    Keywords

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    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • F45 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Macroeconomic Issues of Monetary Unions

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