The optimal composition of public spending in a deep recession

Bouakez, Hafedh; Guillard, Michel; Roulleau-Pasdeloup, Jordan

doi:10.1016/j.jmoneco.2019.03.006

Cited by 24 publications

(18 citation statements)

References 45 publications

Supporting

Mentioning

Contrasting

Unclassified

Order By: Relevance

“…When he estimates his model separately over zero lower bound periods and normal periods, he finds evidence of a slightly higher multiplier for government investment than government consumption during zero lower bound periods. Recall that Bouakez et al (2017Bouakez et al ( , 2019 showed that at the ZLB, the NK model predicted a flipping of the ranking of multipliers, with gov-ernment investment multipliers higher at the ZLB. Boehm's point estimates qualitatively support this prediction.…”

Section: Aggregate Evidencementioning

confidence: 99%

The Macroeconomic Consequences of Infrastructure Investment

Ramey

2020

View full text Add to dashboard Cite

Can greater investment in infrastructure raise U.S. long-run output? Are infrastructure projects a good short-run stimulus to the economy? This paper uses insights from the macroeconomics literature to address these questions. I begin by analyzing the effects of government investment in both a stylized neoclassical model and a medium-scale New Keynesian model, highlighting the economic mechanisms that govern the strength of the short-run and long-run impacts. The analysis confirms earlier findings that the implementation delays inherent in infrastructure projects reduce short-run multipliers in most cases. In contrast, long-run multipliers can be sizable when government capital is productive. Moreover, these multipliers are greater if the economy starts from a point below the socially optimal amount of public capital. Turning to empirical estimation, I use the theoretical model to explain the econometric challenges to estimating the elasticity of output to public infrastructure. Using both artificial data generated by simulations of the model and extensions of existing empirical work, I demonstrate how both general equilibrium effects and optimal choice of public capital are likely to impart upward biases to output elasticity estimates. Finally, I review and extend some empirical estimates of the short-run effects, focusing on infrastructure spending in the ARRA.

show abstract

Section: Aggregate Evidencementioning

confidence: 99%

The Macroeconomic Consequences of Infrastructure Investment

Ramey

2020

View full text Add to dashboard Cite

show abstract

“…The theoretical and empirical efforts and literature have dedicated a significant amount of work to evaluate these problems and issues, and Divino, Maciel, and Sosa (2020) for instance completely evaluated the exclusive influences of government spending and policies on the overall economic development and productivity of the country. In a pioneering effort, Bouakez, Guillard, and Roulleau-Pasdeloup (2016) also suggested a model evaluate the direct connection between the composition of public expenditure (PE) and economic development. This all indicates that much of the efforts have been completed in the past few years regarding government spending and its impacts on the overall economic situation of the country (Facchini & Seghezza, 2018).…”

Section: Introductionmentioning

confidence: 99%

Government Size, the Composition of Public Spending and Economic Growth in Netherland

Nartea

Hernandez

2020

Journal of Accounting, Business and Finance Research

View full text Add to dashboard Cite

The performance of the fiscal policy is influenced significantly by the relationships and associations among the governmental size, the composition public and private spending and the economic growth of a country. The primary goal of this research study is to evaluate the impact of these factors and to evaluate the significance of these factors in the economic growth of the Netherlands. The economy of Netherlands is characterized as the 17th largest in the world and it presents stable and sustainable growth. In this altercation the researcher aimed to evaluate the significance of the governmental spending and size. For this purpose, the researcher used the data from 2004-2014 from the 12 provinces of Netherlands. The data was subjected to a unit root analysis so that the stationarity properties of the panel data can be evaluated. The unit root test results showed that the variables were stationary at I(0). In order to abstain from the endogeneity issues that can be present in such types of datasets the researcher used level and per capita variables as a robustness evaluation. The empirical framework was based upon the Cobb-Douglas production function and used the modern CES substitution elasticities to compute as the inputs of private capital and government spending in the production function. The nonlinear leastsquares regression estimation method was used to evaluate the impact of the variables upon one another. The results indicate that the public investments and current governmental disbursements are conjoined in order to account for the inflexibility of the communal budget. Moreover, the governmental spending was found to be greater than 85 percent indicating that the provincial sectors are focused upon the stimulation of the economy.

show abstract

“…Optimal fiscal policy is analyzed by e.g. Eggertsson and Woodford (2006), Eggertsson (2006), Schmidt (2013), Nakata (2016, Bilbiie et al (2018) and Bouakez et al (2016), among others.…”

Section: Introductionmentioning

confidence: 99%

Expectations-Driven Liquidity Traps: Implications for Monetary and Fiscal Policy

Nakata

Schmidt

2019

FEDS

View full text Add to dashboard Cite

We study optimal monetary and fiscal policy in a New Keynesian model where occasional declines in agents' confidence give rise to persistent liquidity trap episodes. There is no straightforward recipe for enhancing welfare in this economy. Raising the inflation target or appointing an inflation-conservative central banker mitigates the inflation shortfall away from the lower bound but exacerbates deflationary pressures at the lower bound. Using government spending as an additional policy instrument worsens allocations at and away from the lower bound. However, appointing a policymaker who is sufficiently less concerned with government spending stabilization than society eliminates expectations-driven liquidity traps.

show abstract

The optimal composition of public spending in a deep recession

Cited by 24 publications

References 45 publications

The Macroeconomic Consequences of Infrastructure Investment

The Macroeconomic Consequences of Infrastructure Investment

Government Size, the Composition of Public Spending and Economic Growth in Netherland

Expectations-Driven Liquidity Traps: Implications for Monetary and Fiscal Policy

Contact Info

Product

Resources

About