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Government Investment and Fiscal Stimulus

Listed author(s):
  • Susan S. Yang
  • Todd B. Walker
  • Eric M. Leeper

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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Paper provided by International Monetary Fund in its series IMF Working Papers with number 10/229.

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Length: 30
Date of creation: 01 Oct 2010
Handle: RePEc:imf:imfwpa:10/229
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  1. Matthew Denes & Gauti B. Eggertsson, 2009. "A Bayesian approach to estimating tax and spending multipliers," Staff Reports 403, Federal Reserve Bank of New York.
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  3. Eric Leeper & Todd Walker & Susan Yang SHu-Chun, 2009. "Fiscal Foresight And Information Flows," Caepr Working Papers 2009-001, Center for Applied Economics and Policy Research, Economics Department, Indiana University Bloomington.
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  28. repec:cbo:report:215461 is not listed on IDEAS
  29. Eric Leeper & Todd B. Walker & Susan Shu-Chun Yang, 2009. "Government Investment And Fiscal Stimulus In The Short And Long Runs," Caepr Working Papers 2009-011, Center for Applied Economics and Policy Research, Economics Department, Indiana University Bloomington.
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