Abstract
The economic slowdown after the 2007/8 global financial crises brought to the fore the questions of fiscal policy effectiveness: how and to what extent fiscal policy can be used as countercyclical macroeconomic policy. The effectiveness of fiscal policy is not independent of the composition and quality of public expenditures and their short- versus long-term effects. While governments typically resort to expansionary fiscal policy to alleviate the output gap, public infrastructure expenditures trigger positive long-term effects on productivity in addition to simple short-term effects on the output gap. Fiscal sustainability, which became another major issue during the financial crises, renders the allocation between current and infrastructure expenditures even more critical. Thus, the composition of public expenditures is especially important for countries that have inadequate or outdated public infrastructure stock and/or for those that have low saving rates.
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Yülek, M.A., Göksal, K., Yağmur, M.H. (2017). Long-Term Effects of Fiscal Policy: Public Infrastructure Investment and Sustained Growth. In: Yülek, M. (eds) Industrial Policy and Sustainable Growth. Sustainable Development . Springer, Singapore. https://doi.org/10.1007/978-981-10-3964-5_27-1
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