Public investment, time to build, and the zero lower bound

@inproceedings{Bouakez2013PublicIT,
  title={Public investment, time to build, and the zero lower bound},
  author={Hafedh Bouakez and M. Guillard and Jordan Roulleau-Pasdeloup},
  year={2013}
}
We study the effectiveness of public investment in stimulating an economy stuck in a liquidity trap. We do so in the context of a tractable new-Keynesian economy in which a fraction of government spending increases the stock of public capital subject to a time-to-build constraint. Public investment projects typically entail significant time-to-build delays, which often span several years from approval to completion. We show that this feature implies that the spending multiplier associated with… CONTINUE READING

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