Fiscal policy and public debt: Government investment is most effective to promote sustainability

Giovanna Ciaffi, Matteo Deleidi, Lorenzo Di Domenico

Risultato della ricerca: Contributo in rivistaArticolo in rivista

Abstract

This paper aims to quantify the effects of government expenditure and its components, i.e. government consumption and investment, on output and public debt sustainability. The Local Projections approach is applied to a dataset of 14 OECD countries considered for the 1981–2017 period. Fiscal policy shocks have been identified using the Blanchard and Perotti strategy and the narrative approach based on fiscal consolidation episodes. Multipliers of total government spending are above the unit and government investment multipliers are higher than consumption ones. Although all fiscal policy shocks reduce the public debt-to-GDP ratio, government investment is the most effective tool for promoting public debt sustainability.
Lingua originaleEnglish
pagine (da-a)1-24
Numero di pagine24
RivistaJournal of Policy Modeling
DOI
Stato di pubblicazionePubblicato - 2023

Keywords

  • Multipliers
  • Public debt
  • Public investments

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