6533b85cfe1ef96bd12bcaeb
RESEARCH PRODUCT
The macroeconomic effects of public investment: Evidence from advanced economies
Abdul AbiadDavide FurceriPetia Topalovasubject
MacroeconomicsEconomics and EconometricsInvestment strategymedia_common.quotation_subjectGross private domestic investmentPublic policyMonetary economicsForeign direct investmentGrowthDebtSupply and demandDebtReturn on investment0502 economics and businessEconomics050207 economicsOpen-ended investment companyInvestment performancePublic investmentGeneral Environmental Sciencemedia_common050208 finance05 social sciencesEconometric models;Developed countries;Public investment;Infrastructure;OECD;Fiscal policy;Time series;Growth Debt investment private investment capital Demand and Supply Energy and the Macroeconomy Government Policy Debt.Investment (macroeconomics)Fiscal policyEconometric modelUnemploymentGeneral Earth and Planetary SciencesUmbrella fundPublic financeFiscal policydescription
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 in a sample of 17 OECD economies since 1985 and 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.
| year | journal | country | edition | language |
|---|---|---|---|---|
| 2015-01-01 |