The Fiscal Multiplier of Public Investment: The Role of Corporate Balance Sheet
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Summary:
This paper explores whether public investment crowds out or crowds in private investment. To this aim, we build a database of about half a million firms from 49 countries. We find that the effect of public investment on corporate investment depends both on leverage and financial constraints. Public investment boosts private investment for firms with low leverage. However, for firms with high leverage, private investment does not react to an increase in public investment, in line with theory (Myers 1977). We also find that the effect of public investment on corporate investment is much weaker for firms that are financially constrained.
Series:
Working Paper No. 2020/199
Subject:
Corporate investment Expenditure Financial statements National accounts Private investment Public financial management (PFM) Public investment and public-private partnerships (PPP) Public investment spending
Frequency:
regular
English
Publication Date:
September 25, 2020
ISBN/ISSN:
9781513557694/1018-5941
Stock No:
WPIEA2020199
Pages:
31
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