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http://ssrn.com/abstract=1456359
 
 

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Government Investment and Fiscal Stimulus in The Short and Long Runs


Eric M. Leeper


Indiana University at Bloomington - Department of Economics; National Bureau of Economic Research (NBER); Monash University, Department of Economics

Shu-Chun S. Yang


CAEPR

Todd B. Walker


Indiana University Bloomington - Department of Economics

June 19, 2009

CAEPR Working Paper No. 011-2009

Abstract:     
This paper contributes to the debate about fiscal multipliers by studying the impacts of government investment in conventional neoclassical growth models. The analysis focuses on two dimensions of fiscal policy that are critical for understanding the effects of government investment: implementation delays associated with building public capital projects and expected future fiscal adjustments to debt-financed spending. Implementation delays can produce small or even negative labor and output responses in the short run; anticipated fiscal financing adjustments matter both quantitatively and qualitatively for long-run growth effects. Taken together, these two dimensions have important implications for the short-run and long-run impacts of fiscal stimulus in the form of higher government infrastructure investment. The analysis is conducted in several models with features relevant for studying government spending, including utility-yielding government consumption, time-to-build for private investment, and government production.

Number of Pages in PDF File: 36

Keywords: infrastructure, fiscal financing, fiscal multipliers

JEL Classification: E62, H54, H63

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Date posted: August 18, 2009  

Suggested Citation

Leeper, Eric M. and Yang, Shu-Chun S. and Walker, Todd B., Government Investment and Fiscal Stimulus in The Short and Long Runs (June 19, 2009). CAEPR Working Paper No. 011-2009. Available at SSRN: http://ssrn.com/abstract=1456359 or http://dx.doi.org/10.2139/ssrn.1456359

Contact Information

Eric Michael Leeper (Contact Author)
Indiana University at Bloomington - Department of Economics ( email )
304 Wylie Hall
Bloomington, IN 47405-6620
United States
812-855-9157 (Phone)
812-855-3736 (Fax)

National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
Monash University, Department of Economics ( email )
Wellington Road
Clayton, Victoria 3168
Australia
Shu-Chun S. Yang
CAEPR ( email )
Wylie Hall
Bloomington, IN 47405-6620
United States

Todd B. Walker
Indiana University Bloomington - Department of Economics ( email )
Wylie Hall
Bloomington, IN 47405-6620
United States

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