public investment

A model-based analysis of the effect of increased public investment

There is a strong case for boosting public investment in many countries based on identified country-specific structural weaknesses and the relatively low levels of such investment. This paper analyses the potential macroeconomic benefits of increased public investment using simulations on NiGEM. The results suggest that the supply-side benefits from raising potential output are likely to lead to more favourable macroeconomic outcomes than those from using many other standard fiscal instruments, although it takes many years for the full effect on potential output to accumulate.