Public Investment over the Fiscal Cycle
The growth dividends to developing countries of shifting public spending composition towards public investment during fiscal cycles.
Abstract
In chapter 6 titled 鈥淧ublic Investment over the Fiscal Cycle,鈥� the authors investigate the growth dividends to developing countries of shifting public spending composition towards public investment during fiscal cycles. Using general equilibrium and empirical models, the study shows that protecting investment spending during consolidations 鈥� although contractionary in the short-term 鈥� boosts medium- to long-term growth. The growth benefits are particularly large when the initial public investment ratio is low. Increasing the share of public investment in total government spending from 10 to 20 percent raises medium-term growth by 0.5 percentage points. These results hold both during good times (when consolidations are observed) and bad times (when consolidations are warranted).
This work is part of the 鈥楳acroeconomics in Low-income countries鈥� programme
Citation
Kass-Hanna, T. (2020). 鈥淐hapter 6 Public Investment over the Fiscal Cycle鈥�. In Well Spent. USA: International Monetary Fund. Retrieved Aug 9, 2022, from https://www.elibrary.imf.org/view/book/9781513511818/ch006.xml