Government Spending Multipliers in Developing Countries : Evidence from Lending by Official Creditors

This paper uses a novel loan-level dataset covering lending by official creditors to developing country governments to construct an instrument for government spending. These loans typically finance multi-year spending projects, with disbursements linked to the stages of project implementation. The identification strategy exploits the long lags between approval and eventual disbursement of these loans to isolate a predetermined component of public spending associated with past loan approval decisions taken before the realization of contemporaneous shocks. In a large sample of 102 developing countries over the period 1970-2010, the one-year spending multiplier is reasonably-precisely estimated to be around 0.4.

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Bibliographic Details
Main Author: Kraay, Aart
Format: Journal Article biblioteca
Language:en_US
Published: American Economic Association 2014-10
Subjects:government spending multipliers, fiscal policy,
Online Access:http://hdl.handle.net/10986/16313
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