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Author/Editor:
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Selim Elekdag ; Dirk Muir
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Publication Date:
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December 17, 2014
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Electronic Access:
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Free Full text
(PDF file size is 1,237KB).
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Disclaimer: This Working Paper should not be reported as representing the views of the IMF.
The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate
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Summary:
Given the backdrop of pressing infrastructure needs, this paper argues that higher German public investment would not only stimulate domestic demand in the near term and reduce the current account surplus, but would also raise output over the longer-run as well as generate beneficial regional spillovers. While time-to-build delays can weaken the impact of the stimulus in the short-run, the expansionary effects of higher public investment are substantially strengthened with an accommodative monetary policy stance—as is typical during periods of economic slack. The current low-interest rate environment presents a window of opportunity to finance higher public investment at historically favorable rates.
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Order a print copy
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Series:
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Working Paper No. 14/227
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Subject(s):
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Public investment | Germany | Euro Area | Demand | Economic growth | Capital productivity | Fiscal policy | Monetary policy | Econometric models
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