## Can Government Demand Stimulate Private Investment? Evidence from U.S. Federal Procurement

_IMF Working Papers, March 10, 2016_

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## Bibliographic details
- Authors: Shafik Hebous, Tom Zimmermann
- Published: March 10, 2016
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781513578729.001

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### Summary of study and methods
- Study combines federal procurement contracts in the United States with key financial firm-level information in a novel panel dataset.
- Objective: study the effects of federal purchases on firms’ capital investment.
- Publication details provided: IMF Working Papers, Working Paper No. 2016/060, Issue 060, Volume 2016, Pages: 33, DOI: https://doi.org/10.5089/9781513578729.001, ISBN: 9781513578729, ISSN: 1018-5941.
- Authors and date: Shafik Hebous, Tom Zimmermann; March 10, 2016.

### Main quantitative findings
- 1 dollar of federal spending increases firms’ capital investment by 7 to 11 cents.
- The reported effect is an average that masks heterogeneity across firms.

### Heterogeneity and channels
- Effects are stronger for firms that face financing constraints and are close to 0 for unconstrained firms.
- Findings are consistent with the financial accelerator model: the effect of government purchases works through easing firms’ access to external borrowing.

### Industry-level analysis
- Industry-level analysis suggests that the increase in investment at the firm level translates into an industry-wide effect.
- No evidence of crowding-out of capital investment of other firms in the same industry is reported in the summary.

### Keywords and subjects emphasized
- Subject: Capital spending, Credit ratings, Currencies, Expenditure, Money, National accounts, Private investment.
- Keywords include: awarded firm-quarter contract, book value, capital investment, Capital spending, constrained firm, Credit ratings, Currencies, external borrowing, Federal Procurement, Financing Constraints, firm FE, firm level, firm size, firm-quarter level, Investment, investment response, Private investment, Spending Multipliers, stock market information, WP.

*Can Government Demand Stimulate Private Investment? Evidence from U.S. Federal Procurement — Shafik Hebous, Tom Zimmermann; March 10, 2016.*

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_Source: https://www.imf.org/en/publications/wp/issues/2016/12/31/can-government-demand-stimulate-private-investment-evidence-from-u-s-43784_