public capital in the 21st century as productive as ever abstractthe global financial crisis and the euro area sovereign debt crisis that followed induced a rapid deterioration in the fiscal positions of countries across the globe in the ensuing fiscal

productive government expenditures and long run growth the purpose of this paper is to review some of the recent developments in endogenous growth models specifically our focus is on the growth effects of productive government spending in dynamic general equilibrium models we use a simple overlapping generations model as our basic framework and illustrate the role of taxes and spending we then examine several related issues nonrivalry in publicly provided goods existence and uniqueness of competitive equilibrium endogenous public policy ways of financing public expenditures composition of publicly provided goods and services and private alternatives finally we review some empirical results related to output elasticity of public capital and educational expenditures

time to build consumption complementarity and fiscal stimulus abstract we show that time to build which creates a time gap between government spending and the accumulation of public goods is an important element that weakens the effectiveness of fiscal stimulus in the environment where private consumption and public goods are edgeworth complements adding time to build to the model delays the timing of utility enhancing effects of an increase in government expenditure leading households to shift consumption from today to the future the expansionary effect of government spending is hence dampened which contrasts existing studies with edgeworth complementarity between private and public consumption

is infrastructure capital productive a dynamic heterogeneous approach this paper offers an empirical evaluation of the output contribution of infrastructure drawing from a large data set on infrastructure stocks covering 88 countries and spanning the years 1960 2000 and using a panel time series approach the paper estimates a long run aggregate production function relating gdp to human capital physical capital and a synthetic measure of infrastructure given by the first principal component of infrastructure endowments in transport power and telecommunications tests of the cointegration rank allowing it to vary across countries reveal a common rank with a single cointegrating vector which is taken to represent the long run production function estimation of its parameters is performed using the pooled mean group estimator which allows for unrestricted short run parameter heterogeneity across countries while imposing the testable restriction of long run parameter homogeneity the long run elasticity of output with respect to the synthetic infrastructure index ranges between 0 07 and 0 10 the estimates are highly significant both statistically and economically and robust to alternative dynamic specifications and infrastructure measures there is little evidence of long run parameter heterogeneity across countries whether heterogeneity is unconditional or conditional on their level of development population size or infrastructure endowments

some fiscal calculus what is the impact of fiscal policy on the econ omy how large are the multipliers of govern ment spending and tax cuts this old question has recently received considerable attention in par ticular in the context of the american recovery and reinvestment act arra of 2009 i contribute to answering that question by calculating fiscal multipliers in a baseline neo classical growth model with endogenous labor supply and fiscal policy allowing for govern ment spending transfers government debt and distortionary taxes on labor and capital income the policy experiments are conducted holding transfers consumption taxes and capital income taxes fixed i e changes in taxation require changes in the distortionary labor tax the model is simple and fairly standard as an additional contribution i provide the model in an elegant and tractable form starting from a fairly general formulation and pointing out the key functional form properties for characterizing the dynamics the formulation of the model here or versions

the general equilibrium effects of fiscal policy estimates for the euro area abstract this paper describes a dynamic stochastic general equilibrium model featuring a fraction of non ricardian agents in order to estimate the effects of fiscal policy in the euro area the model takes into account distortionary taxation on labor and capital income and on consumption while expenditures are broken down into purchases of goods and services compensation of public employees and transfers to households a newly computed quarterly data set of fiscal variables is used our results point to the prevalence of mild keynesian effects of public expenditures in particular although innovations in fiscal policy variables tend to be rather persistent government purchases of goods and services and compensations for public employees have small and short lived expansionary effects on private consumption while innovations in transfers to households show a slightly more sizeable and lasting effect the effects are more significant on the revenue side decreases in labor income and consumption tax rates have sizeable effects on consumption and output while a reduction in capital income tax favors investment and output in the medium run finally our estimates suggest that fiscal policy variables contribute little to the cyclical variability of the main macro variables

quantifying tax effects under policy foresight abstract studies of tax effects make the conventional information assumption that changes in period t taxes become known at t legislative lags however imply that news arrives before tax changes take place under policy foreknowledge the conventional information structure is therefore misspecified simulations of a standard neoclassical growth model suggest that foresight of only one quarter can distort substantially the estimates of tax effects obtained under the no foresight assumption also it is crucial to model capital and labor taxes separately anticipated changes in these two tax policies have opposite effects on consumption investment labor and output before policy realization

government investment and fiscal stimulus effects of government investment are studied in an estimated neoclassical growth model the analysis focuses on two dimensions that are critical for understanding government investment as a fiscal stimulus implementation delays for building public capital and expected fiscal adjustments to deficit financed spending implementation delays can produce small or even negative labor and output responses to increases in government investment in the short run anticipated fiscal adjustments matter both quantitatively and qualitatively for long run growth effects when public capital is insufficiently productive distorting financing can make government investment contractionary at longer horizons

when is the government transfer multiplier large transfers to individuals were a larger part of the 2009 u s stimulus package than government purchases using a two agent new keynesian model this paper shows analytically that the multiplier on targeted transfers to financially constrained households is i larger than the purchase multiplier if the zero lower bound zlb binds and ii is more sensitive to the degree of monetary accommodation of inflation targeted transfers provide the same boost to demand as purchases but lower aggregate supply relative to purchases as those receiving transfers want to work less when the aggregate demand curve inverts such as when the zero lower bound binds the extra inflation from lower supply boosts the multiplier this result also holds quantitatively in a medium scale version of the model

when showrooming increases retailer profit abstractshowrooming the phenomenon of consumers visiting a brick and mortar b m store to learn about products but then buying online to obtain lower prices is attracting increased attention both in business practice and in academic literature it is considered a major threat to the b m retailers and determining how to fight it seems to be the only consideration however the manufacturer s need for retail informational services has always been one of the essential reasons for retailers to exist and is a means for retailers to achieve profitability the popular arguments about the threat of showrooming ignore the strategic role of the manufacturer in the distribution channel this article analytically shows that when the manufacturer s decisions are considered i e when the manufacturer retailer contract is endogenous consumers ability to engage in showrooming may lead to increased rather than decreased profitability for b m retailer s thus retail efforts to restrict showrooming behavior m

on fiscal multipliers estimates from a medium scale dsge model this paper contributes to the debate on fiscal multipliers in the context of a structural model i estimate a micro founded dynamic stochastic general equilibrium model that features a rich fiscal policy block and a transmission mechanism for government spending shocks using bayesian techniques for us data

public sector capital and the productivity puzzle a number of studies have suggested a quantitatively important relationship between public sector capital accumulation and private sector productivity with the most compelling evidence derived from analyses of state level data estimates herein of production functions that use standard techniques to control for unobserved state specific characteristics however reveal essentially no role for public sector capital in affecting private sector productivity only estimates of state production functions that do not include such controls find substantial productivity impacts this result reconciles existing econometric estimates with the findings of hulten and schwab based on growth accounting techniques as such techniques effectively control for state specific effects region level estimates are essentially identical to those from state data suggesting no quantitatively important spillover effects across states copyright 1994 by mit press

what are the effects of fiscal policy shocks we propose and apply a new approach for analyzing the effects of fiscal policy using vector autoregressions specifically we use sign restrictions to identify a government revenue shock as well as a government spending shock while controlling for a generic business cycle shock and a monetary policy shock we explicitly allow for the possibility of announcement effects i e that a current fiscal policy shock changes fiscal policy variables in the future but not at present we construct the impulse responses to three linear combinations of these fiscal shocks corresponding to the three scenarios of deficit spending deficit financed tax cuts and a balanced budget spending expansion we apply the method to us quarterly data from 1955 to 2000 we find that deficit financed tax cuts work best among these three scenarios to improve gdp with a maximal present value multiplier of five dollars of total additional gdp per each dollar of the total cut in government revenue 5 years after the shock copyright 2009 john wiley sons ltd

optimal fiscal policy and different degrees of access to international capital markets abstract empirically the cyclical pattern of fiscal policy differs between developed and developing countries with in particular much greater pro cyclicality and volatility of public investment in developing countries in this paper i provide a theoretical explanation for the observed differences by analyzing optimal fiscal policy under different degrees of access to world capital markets if the supply of foreign capital is elastic as in a developed country then it is optimal to adjust to an adverse external shock by borrowing from abroad to finance public expenditure and cutting taxes to smooth private consumption if the supply of foreign capital is inelastic however as in a developing country the optimal adjustment policy is to reduce public investment by much more than public consumption and to raise consumption taxes

dutch disease real effective exchange rate misalignments and their effect on gdp growth in eu abstract in this article we study the impact of real effective exchange rate misalignments based on determinants including different types of foreign capital inflows on gdp growth in the eu for this analysis we use a panel of 27 eu countries for the period 1994 2012 with annual frequency core countries have been only slightly undervalued from the crisis onwards while the periphery was overvalued however the gap for the periphery has reduced in the last two years as regards the new member states these were overvalued for the entire time span the results seem to be generally driven by the inflows of bank loans the misalignments are associated with lower long run growth the exchange rate volatilities are not robust in affecting gdp growth while spillovers and global factors seem to matter in all the specifications both in the short and long run

fiscal policy in general equilibrium this paper studies four classic fiscal policy experiments within a quantitatively restricted neoclassical model the authors main findings are as follows 1 permanent changes in government purchases can lead to short run and long run output multipliers that exceed one 2 permanent changes in government purchases induce larger effects than temporary changes 3 the financing decision is quantitatively more important than the resource cost of changes in government purchases and 4 public investment has dramatic effects on private output and investment these findings stem from important dynamic interactions of capital and labor absent in earlier equilibrium analyses of fiscal policy copyright 1993 by american economic association

fiscal policy shocks and stock prices in the united states this paper uses a range of structural vars to show that the response of us stock prices to fiscal shocks changed in 1980 over the period 1955 1980 an expansionary spending or revenue shock was associated with modestly higher stock prices after 1980 along with a decline in the fiscal multiplier the response of stock prices to the same shock became negative and larger in magnitude we use an estimated dsge model to show that this change is consistent with a switch from an economy characterised by active fiscal policy and passive monetary policy to one where fiscal policy was passive and the central bank acted aggressively in response to inflationary shocks

can public spending boost private consumption this paper analyses the effects on private consumption from an increase in productive and unproductive public spending a new keynesian model incorporating price and wage rigidities monetary policy and various fiscal rules is developed and estimated using bayesian techniques to capture the key cyclical characteristics of the us economy we find that price and wage rigidities along with a positive shock to the part of public spending that is productive are suficient to boost private consumption moreover we show that this initial positive reaction of private consumption is adequate to create a positive present value consumption multiplier for more than five years finally we show that our main results remain robust to changes in the monetary rule and the various methods of deficit financing

the effects of public spending externalities abstract we conduct a positive analysis on the effects of externalities produced by government spending to this effect we estimate using u s data an rbc model with two salient features first we allow government consumption to directly affect the marginal utility of consumption second we allow public capital to shift the productivity of private factors we provide an identification analysis that supports the strategy adopted for estimating the parameters governing these two channels on one hand private and government consumption are robustly estimated to be substitute goods because of substitutability labor supply reacts little to a government consumption shock so the estimated output multiplier is much lower than in models with separabilities on the other hand our results point towards public investment being unproductive

the third oil price surge what s different this time the period from 2003 to 2008 was marked by an oil price increase comparable to the two oil price crises in the 1970s this paper looks in detail at the situation of the oil price crises 30 years ago and compares them along various aspects on the demand and supply side with the recent price increase to identify similarities and differences while both oil price crises in 1973 and 1979 1980 were ultimately caused by supply actions of members of the organisation of petroleum exporting countries opec all three oil price crises were preceded by high demand growth other aspects that favoured a high oil price in all three cases were low investments in new oil fields as a consequence low spare capacity and a weak us dollar in addition the recent oil price surge has been characterised by a high global refinery utilisation and refineries that did not adapt fast enough to the rising demand for lighter oil products moreover broader geopolitical uncertainties combined with risks associated with the oil trade helped push the oil price into a triple digit zone speculation played only a limited and temporary role in accelerating price movements during the recent price increase

new keynesian versus old keynesian government spending multipliers renewed interest in fiscal policy has increased the use of quantitative models to evaluate policy because of modelling uncertainty it is essential that policy evaluations be robust to alternative assumptions we find that models currently being used in practice to evaluate fiscal policy stimulus proposals are not robust government spending multipliers in an alternative empirically estimated and widely cited new keynesian model are much smaller than in these old keynesian models the estimated stimulus is extremely small with gdp and employment effects only one sixth as large and with private sector employment impacts likely to be even smaller we investigate the sensitivity of our findings with regard to the response of monetary policy the zero bound on nominal interest rates and the inclusion of an empirically relevant degree of rule of thumb behaviour in the new keynesian model in addition we relate our findings using estimated structural macroeconomic models to the recent literature using reduced form regression techniques