Template-type: ReDIF-Paper 1.0
Author-Name: Gustavo A. Marrero
Author-Email: gustavom@ccee.ucm.es
Author-Person: pma419 
Author-Workplace-Name: Departamento de Economía Cuantitativa, Universidad Complutense de Madrid
Title: Coordinating short- and long-run public investment rules 
Abstract: Modelling the accumulation rule evolving public investment is an issue of utmost interest 
	among economists and politicians. The present paper extends the Barro (1990) model of productive 
	government expenditure by considering a time-adapted rule for the public investment/output ratio. 
	The rule allows a particular target on the public investment ratio to be achievable in 	the long-run. 
	Additionally, throughout the transition, the government may adjust its period-by-period public 
	investment/output ratio in response to the current productivity of public capital relative to its 
	long-run level. The degree of this response depends on a short-run policy instrument, which is 
	decided by the fiscal authority simultaneously to the long-run target ratio. That way, the government 
	problem could be interpreted as a coordination problem between short- and long-term policies. 
	In comparison with a constant-ratio rule, and under alternative taxing scenarios, important welfare 
	improvements are found when coordinating the short- and the long-run policy instruments in an optimal way.
Classification-JEL: E0, E6, O4.
Keywords: Public investment rule, policy coordination, transitional dynamics, Endogenous growth
Length: pages 29
Creation-Date: 2001
X-File-Ref: http://america.sim.ucm.es/repec/ucm/ref/doicae0109.txt
File-URL: https://eprints.ucm.es/id/eprint/6793/1/0109.pdf
File-Format: Application/pdf
Handle: RePEc:ucm:doicae:0109