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Fiscal Multipliers: Empirical Evidence for a Cost-Effective Allocation of Public Investment

Author

Listed:
  • Osmar Bolivar

    (Ministerio de Economía y Finanzas Públicas)

Abstract

This research provides empirical evidence on the multiplier effects of various types of public investment, offering insights to optimize the allocation of public investment resources from a cost-effectiveness perspective. The results indicate that the most cost-effective public investments are in sectors such as basic sanitation, hydrocarbons, urban planning, health, and agriculture. Furthermore, since public investment is predominantly focused on construction projects, the findings suggest prioritizing building construction (e.g., schools, hospitals) over civil works (e.g., roads, bridges), as the former demonstrates a higher multiplier effect. The analysis also identifies sectors where the multiplier effect of public investment is amplified by the target economic activity, highlighting health, education, and agriculture. Moreover, improving project design in sectors like food and miscellaneous manufacturing, hotels and restaurants, building construction, and certain services could enhance economic and employment impacts.

Suggested Citation

  • Osmar Bolivar, 2022. "Fiscal Multipliers: Empirical Evidence for a Cost-Effective Allocation of Public Investment," Cuadernos de Investigación Económica Boliviana, Ministerio de Economía y Finanzas Públicas de Bolivia, vol. 5(2), pages 1-28, December.
    • Handle: RePEc:efp:journl:v:5:y:2022:i:2:p:1-28
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    More about this item

    Keywords

    Fiscal multiplier; public investment; multiplier effect; BSVAR; input-output model;
    All these keywords.

    JEL classification:

    • C11 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Bayesian Analysis: General
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • H54 - Public Economics - - National Government Expenditures and Related Policies - - - Infrastructures

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