Public Investment Multiplier during Boom and Decline of International Prices
DOI:
https://doi.org/10.35319/lajed.202033416Keywords:
Public Investment, Fiscal Multipliers, Local ProjectionsAbstract
The purpose of this research is to measure the fiscal multiplier of public investment and its changes in times of boom and bust in external prices. The method of Local Projections with Instrumental Variables based on Ramey and Zubairy (2018) is used for the first time in the case of Bolivian economy. The results present a cumulative public investment multiplier of 0.72 up to quarter 12. Likewise, the multiplier is 0.19 at quarter 12 and 0.97 at quarter 7 for boom and bust periods, respectively. It is concluded that the multiplier is positive and less than unity, however, when the economy experiences good (bad) export prices, the multiplier effect of public investment is less (greater), which suggests a decrease (increase) in the efficiency in government capital spending.
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