Government investment and fiscal stimulus

Eric Leeper, Todd B Walker, Shu-Chun Susan Yang

Research output: Contribution to journalArticleResearchpeer-review

106 Citations (Scopus)

Abstract

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.
Original languageEnglish
Pages (from-to)1000 - 1012
Number of pages13
JournalJournal of Monetary Economics
Volume57
Issue number8
DOIs
Publication statusPublished - 2010
Externally publishedYes

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