The Macroeconomic (and Distributional) Effects of Public Investment in Developing Economies
IMF Working Papers, October 20, 2017
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- The Macroeconomic (and Distributional) Effects of Public Investment in Developing Economies
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Bibliographic details
- Authors: Davide Furceri, Grace B Li
- Published: October 20, 2017
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781484320709.001
Summary and main finding
- The paper provides new empirical evidence of the macroeconomic effects of public investment in developing economies.
- Using public investment forecast errors to identify unanticipated changes in public investment, the paper finds that increased public investment raises output in the short and medium term.
- Average short-term fiscal multiplier: about 0.2.
- The paper finds that increases in public investment tend to lower income inequality.
Identification and methodology
- Identification strategy: use of public investment forecast errors to isolate unanticipated changes in public investment.
- Outcome focus: output responses in the short and medium term; distributional outcome measured as income inequality.
Heterogeneity of effects (conditions associated with larger effects)
- The paper finds some evidence that the effects of public investment are larger:
- (i) during periods of slack;
- (ii) in economies operating with fixed exchange rate regimes;
- (iii) in more closed economies;
- (iv) in countries with lower public debt;
- (v) in countries with higher investment efficiency.
Key statistics and publication metadata
- Pages: 39
- Volume: 2017
- Issue: 217
- Series: Working Paper No. 2017/217
- DOI: https://doi.org/10.5089/9781484320709.001
- Stock No: WPIEA2017217
- ISBN: 9781484320709
- ISSN: 1018-5941
- Authors: Davide Furceri, Grace B Li
- Publication date: October 20, 2017
IMF Working Paper — "The Macroeconomic (and Distributional) Effects of Public Investment in Developing Economies", Davide Furceri and Grace B Li, IMF Working Papers 2017, 217 (2017).