Is the Public Investment Multiplier Higher in Developing Countries? An Empirical Exploration / Alejandro Izquierdo, Ruy Lama, Juan Medina, Jorge Puig, Daniel Riera-Crichton, Carlos Végh Gramont, Guillermo Javier Vuletin.

Format:

Book

Government document

Author/Creator:

Izquierdo, Alejandro.

Contributor:

Lama, Ruy.

Medina, Juan.

Puig, Jorge.

Riera-Crichton, Daniel.

Vuletin, Guillermo Javier.

Végh Gramont, Carlos.

Series:

IMF Working Papers; Working Paper ; No. 2019/289

IMF Working Papers

Language:

English

Physical Description:

1 online resource (47 pages)

Other Title:

Is the Public Investment Multiplier Higher in Developing Countries?

Place of Publication:

Washington, D.C. : International Monetary Fund, 2019.

Summary:

Over the last decade, empirical studies analyzing macroeconomic conditions that may affect the size of government spending multipliers have flourished. Yet, in spite of their obvious public policy importance, little is known about public investment multipliers. In particular, the clear theoretical implication that public investment multipliers should be higher (lower) the lower (higher) is the initial stock of public capital has not, to the best of our knowledge, been tested. This paper tackles this empirical challenge and finds robust evidence in favor of the above hypothesis: countries with a low initial stock of public capital (as a proportion of GDP) have significantly higher public investment multipliers than countries with a high initial stock of public capital. This key finding seems robust to the sample (European countries, U.S. states, and Argentine provinces) and to the identification method (Blanchard-Perotti, forecast errors, and instrumental variables). Our results thus suggest that public investment in developing countries would carry high returns.

Notes:

Description based on print version record.

ISBN:

9781513525105

1513525107