The macroeconomic effects of public investment: Evidence from advanced economies

Davide Furceri, Petia Topalova (Imf), Davide Furceri (Imf And University Of Palermo), Abdul Abiad (Adb)

Research output: Contribution to journalArticlepeer-review

35 Citations (Scopus)

Abstract

This paper provides new evidence of the macroeconomic effects of public investment in advanced economies. Using public investment forecast errors to identify the causal effect of government investment as well as model simulations, the paper finds that increased public investment raises output, both in the short term and in the long term, crowds in private investment, and reduces unemployment. Several factors shape the macroeconomic effects of public investment. When there is economic slack and monetary accommodation, demand effects are stronger, and the public-debt-to-GDP ratio may actually decline. Public investment is also more effective in boosting output in countries with higher public investment efficiency and when it is financed by issuing debt.
Original languageEnglish
Pages (from-to)224-240
Number of pages17
JournalJournal of Macroeconomics
Volume50
Publication statusPublished - 2016

All Science Journal Classification (ASJC) codes

  • Economics and Econometrics

Fingerprint

Dive into the research topics of 'The macroeconomic effects of public investment: Evidence from advanced economies'. Together they form a unique fingerprint.

Cite this