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Discussion Paper Details

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Title: Public Investment and Endogenous Growth in a Small Open Economy

Author(s): George Alogoskoufis and Sarantis C Kalyvitis

Publication Date: September 1996

Keyword(s): Adjustment Costs, Endogenous Growth and Public Private Capital

Programme Area(s): International Macroeconomics

Abstract: This paper examines the effects of three alternative rules for public investment on output growth in a model with private and public capital. The rules considered are: (i) a fixed ratio of public capital to output; (ii) a fixed growth rate for public capital; and (iii) a fixed ratio of public investment to output. We find that all these rules are closely associated with the growth rate of output and generate endogenous growth. A permanent change in the policy rule implies a new long-run growth rate of output, but the economy will only gradually approach the new steady state due to adjustment costs in private capital accumulation.

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Bibliographic Reference

Alogoskoufis, G and Kalyvitis, S. 1996. 'Public Investment and Endogenous Growth in a Small Open Economy'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=1479