How Large Is the Government Spending Multiplier? Evidence from World Bank Lending

This paper proposes a novel method of isolating fluctuations in public spending that are likely to be uncorrelated with contemporaneous macroeconomic shocks and can be used to estimate government spending multipliers. The approach relies on two fea...

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Main Author:	Kraay, Aart
Format:	Policy Research Working Paper
Language:	English
Published:	2012
Subjects:	ACCOUNTING BANK LENDING BANK LOANS BORROWING CHECKS CONSUMPTION EXPENDITURES CREDITORS CURRENCY UNITS DEBT DEBT RELIEF DEBTS DEVELOPING COUNTRIES DEVELOPING COUNTRY DISBURSEMENT DISBURSEMENTS DISCOUNT RATE DISCRETIONARY FISCAL POLICY ECONOMIC RECOVERY ECONOMIC SHOCKS EMERGING MARKET EMERGING MARKET ECONOMIES EMPLOYMENT EQUIPMENT EXPENDITURE EXPENDITURES FINANCES FINANCIAL CRISIS FINANCIAL SUPPORT FISCAL EXPANSIONS FISCAL POLICY FISCAL STIMULUS FUNGIBLE GOVERNMENT CONSUMPTION GOVERNMENT EXPENDITURES GOVERNMENT INVESTMENT GOVERNMENT SPENDING GRACE PERIOD GROWTH RATES HOLDING INSTITUTIONAL CAPACITY INSTRUMENT INTEREST RATES INTERNATIONAL BANK INTERNATIONAL DEVELOPMENT INVESTING INVESTMENT SPENDING LOAN LOCAL CURRENCY MACROECONOMIC CONDITIONS MACROECONOMIC CRISES MACROECONOMIC DATA MACROECONOMIC FLUCTUATIONS MACROECONOMIC STABILIZATION MACROECONOMICS MATURITIES MONETARY POLICY MULTILATERAL LENDERS NATURAL DISASTERS NEGATIVE SHOCKS POLITICAL ECONOMY PRESENT VALUE PRIVATE CAPITAL PRIVATE INVESTMENT PRIVATE SECTOR PRODUCTIVITY PUBLIC PUBLIC CAPITAL PUBLIC EXPENDITURE PUBLIC INFORMATION PUBLIC INVESTMENT PUBLIC INVESTMENT SPENDING PUBLIC POLICY PUBLIC SPENDING REPAYMENTS RETURN SAFETY NET STOCK RETURNS TAX TAX OBLIGATIONS TAX POLICY TAXATION TRANSPORT TREASURY TREASURY BILL TREASURY BILL RATES
Online Access:	http://www-wds.worldbank.org/external/default/main?menuPK=64187510&pagePK=64193027&piPK=64187937&theSitePK=523679&menuPK=64187510&searchMenuPK=64187283&siteName=WDS&entityID=000158349_20101213113514 http://hdl.handle.net/10986/3983

id	okr-10986-3983
recordtype	oai_dc
spelling	okr-10986-39832021-04-23T14:02:14Z How Large Is the Government Spending Multiplier? Evidence from World Bank Lending Kraay, Aart ACCOUNTING BANK LENDING BANK LOANS BORROWING CHECKS CONSUMPTION EXPENDITURES CREDITORS CURRENCY UNITS DEBT DEBT RELIEF DEBTS DEVELOPING COUNTRIES DEVELOPING COUNTRY DISBURSEMENT DISBURSEMENTS DISCOUNT RATE DISCRETIONARY FISCAL POLICY ECONOMIC RECOVERY ECONOMIC SHOCKS EMERGING MARKET EMERGING MARKET ECONOMIES EMPLOYMENT EQUIPMENT EXPENDITURE EXPENDITURES FINANCES FINANCIAL CRISIS FINANCIAL SUPPORT FISCAL EXPANSIONS FISCAL POLICY FISCAL STIMULUS FUNGIBLE GOVERNMENT CONSUMPTION GOVERNMENT EXPENDITURES GOVERNMENT INVESTMENT GOVERNMENT SPENDING GRACE PERIOD GROWTH RATES HOLDING INSTITUTIONAL CAPACITY INSTRUMENT INTEREST RATES INTERNATIONAL BANK INTERNATIONAL DEVELOPMENT INVESTING INVESTMENT SPENDING LOAN LOCAL CURRENCY MACROECONOMIC CONDITIONS MACROECONOMIC CRISES MACROECONOMIC DATA MACROECONOMIC FLUCTUATIONS MACROECONOMIC STABILIZATION MACROECONOMICS MATURITIES MONETARY POLICY MULTILATERAL LENDERS NATURAL DISASTERS NEGATIVE SHOCKS POLITICAL ECONOMY PRESENT VALUE PRIVATE CAPITAL PRIVATE INVESTMENT PRIVATE SECTOR PRODUCTIVITY PUBLIC PUBLIC CAPITAL PUBLIC EXPENDITURE PUBLIC INFORMATION PUBLIC INVESTMENT PUBLIC INVESTMENT SPENDING PUBLIC POLICY PUBLIC SPENDING REPAYMENTS RETURN SAFETY NET STOCK RETURNS TAX TAX OBLIGATIONS TAX POLICY TAXATION TRANSPORT TREASURY TREASURY BILL TREASURY BILL RATES This paper proposes a novel method of isolating fluctuations in public spending that are likely to be uncorrelated with contemporaneous macroeconomic shocks and can be used to estimate government spending multipliers. The approach relies on two features unique to many low-income countries: (1) borrowing from the World Bank finances a substantial fraction of public spending, and (2) actual spending on World Bank-financed projects is typically spread out over several years following the original approval of the project. These two features imply that fluctuations in spending on World Bank projects in a given year are in large part determined by fluctuations in project approval decisions made in previous years, and so are unlikely to be correlated with shocks to output in the current year. World Bank project-level disbursement data are used to isolate the component of public spending associated with project approvals from previous years, which in turn can be used to estimate government spending multipliers, in a sample of 29 aid-dependent low-income countries. The estimated multipliers are small, reasonably precisely estimated, and rarely significantly different from zero. 2012-03-19T18:43:20Z 2012-03-19T18:43:20Z 2010-12-01 http://www-wds.worldbank.org/external/default/main?menuPK=64187510&pagePK=64193027&piPK=64187937&theSitePK=523679&menuPK=64187510&searchMenuPK=64187283&siteName=WDS&entityID=000158349_20101213113514 http://hdl.handle.net/10986/3983 English Policy Research working paper ; no. WPS 5500 CC BY 3.0 IGO http://creativecommons.org/licenses/by/3.0/igo/ World Bank Publications & Research :: Policy Research Working Paper The World Region The World Region
repository_type	Digital Repository
institution_category	Foreign Institution
institution	Digital Repositories
building	World Bank Open Knowledge Repository
collection	World Bank
language	English
topic	ACCOUNTING BANK LENDING BANK LOANS BORROWING CHECKS CONSUMPTION EXPENDITURES CREDITORS CURRENCY UNITS DEBT DEBT RELIEF DEBTS DEVELOPING COUNTRIES DEVELOPING COUNTRY DISBURSEMENT DISBURSEMENTS DISCOUNT RATE DISCRETIONARY FISCAL POLICY ECONOMIC RECOVERY ECONOMIC SHOCKS EMERGING MARKET EMERGING MARKET ECONOMIES EMPLOYMENT EQUIPMENT EXPENDITURE EXPENDITURES FINANCES FINANCIAL CRISIS FINANCIAL SUPPORT FISCAL EXPANSIONS FISCAL POLICY FISCAL STIMULUS FUNGIBLE GOVERNMENT CONSUMPTION GOVERNMENT EXPENDITURES GOVERNMENT INVESTMENT GOVERNMENT SPENDING GRACE PERIOD GROWTH RATES HOLDING INSTITUTIONAL CAPACITY INSTRUMENT INTEREST RATES INTERNATIONAL BANK INTERNATIONAL DEVELOPMENT INVESTING INVESTMENT SPENDING LOAN LOCAL CURRENCY MACROECONOMIC CONDITIONS MACROECONOMIC CRISES MACROECONOMIC DATA MACROECONOMIC FLUCTUATIONS MACROECONOMIC STABILIZATION MACROECONOMICS MATURITIES MONETARY POLICY MULTILATERAL LENDERS NATURAL DISASTERS NEGATIVE SHOCKS POLITICAL ECONOMY PRESENT VALUE PRIVATE CAPITAL PRIVATE INVESTMENT PRIVATE SECTOR PRODUCTIVITY PUBLIC PUBLIC CAPITAL PUBLIC EXPENDITURE PUBLIC INFORMATION PUBLIC INVESTMENT PUBLIC INVESTMENT SPENDING PUBLIC POLICY PUBLIC SPENDING REPAYMENTS RETURN SAFETY NET STOCK RETURNS TAX TAX OBLIGATIONS TAX POLICY TAXATION TRANSPORT TREASURY TREASURY BILL TREASURY BILL RATES
spellingShingle	ACCOUNTING BANK LENDING BANK LOANS BORROWING CHECKS CONSUMPTION EXPENDITURES CREDITORS CURRENCY UNITS DEBT DEBT RELIEF DEBTS DEVELOPING COUNTRIES DEVELOPING COUNTRY DISBURSEMENT DISBURSEMENTS DISCOUNT RATE DISCRETIONARY FISCAL POLICY ECONOMIC RECOVERY ECONOMIC SHOCKS EMERGING MARKET EMERGING MARKET ECONOMIES EMPLOYMENT EQUIPMENT EXPENDITURE EXPENDITURES FINANCES FINANCIAL CRISIS FINANCIAL SUPPORT FISCAL EXPANSIONS FISCAL POLICY FISCAL STIMULUS FUNGIBLE GOVERNMENT CONSUMPTION GOVERNMENT EXPENDITURES GOVERNMENT INVESTMENT GOVERNMENT SPENDING GRACE PERIOD GROWTH RATES HOLDING INSTITUTIONAL CAPACITY INSTRUMENT INTEREST RATES INTERNATIONAL BANK INTERNATIONAL DEVELOPMENT INVESTING INVESTMENT SPENDING LOAN LOCAL CURRENCY MACROECONOMIC CONDITIONS MACROECONOMIC CRISES MACROECONOMIC DATA MACROECONOMIC FLUCTUATIONS MACROECONOMIC STABILIZATION MACROECONOMICS MATURITIES MONETARY POLICY MULTILATERAL LENDERS NATURAL DISASTERS NEGATIVE SHOCKS POLITICAL ECONOMY PRESENT VALUE PRIVATE CAPITAL PRIVATE INVESTMENT PRIVATE SECTOR PRODUCTIVITY PUBLIC PUBLIC CAPITAL PUBLIC EXPENDITURE PUBLIC INFORMATION PUBLIC INVESTMENT PUBLIC INVESTMENT SPENDING PUBLIC POLICY PUBLIC SPENDING REPAYMENTS RETURN SAFETY NET STOCK RETURNS TAX TAX OBLIGATIONS TAX POLICY TAXATION TRANSPORT TREASURY TREASURY BILL TREASURY BILL RATES Kraay, Aart How Large Is the Government Spending Multiplier? Evidence from World Bank Lending
geographic_facet	The World Region The World Region
relation	Policy Research working paper ; no. WPS 5500
description	This paper proposes a novel method of isolating fluctuations in public spending that are likely to be uncorrelated with contemporaneous macroeconomic shocks and can be used to estimate government spending multipliers. The approach relies on two features unique to many low-income countries: (1) borrowing from the World Bank finances a substantial fraction of public spending, and (2) actual spending on World Bank-financed projects is typically spread out over several years following the original approval of the project. These two features imply that fluctuations in spending on World Bank projects in a given year are in large part determined by fluctuations in project approval decisions made in previous years, and so are unlikely to be correlated with shocks to output in the current year. World Bank project-level disbursement data are used to isolate the component of public spending associated with project approvals from previous years, which in turn can be used to estimate government spending multipliers, in a sample of 29 aid-dependent low-income countries. The estimated multipliers are small, reasonably precisely estimated, and rarely significantly different from zero.
format	Publications & Research :: Policy Research Working Paper
author	Kraay, Aart
author_facet	Kraay, Aart
author_sort	Kraay, Aart
title	How Large Is the Government Spending Multiplier? Evidence from World Bank Lending
title_short	How Large Is the Government Spending Multiplier? Evidence from World Bank Lending
title_full	How Large Is the Government Spending Multiplier? Evidence from World Bank Lending
title_fullStr	How Large Is the Government Spending Multiplier? Evidence from World Bank Lending
title_full_unstemmed	How Large Is the Government Spending Multiplier? Evidence from World Bank Lending
title_sort	how large is the government spending multiplier? evidence from world bank lending
publishDate	2012
url	http://www-wds.worldbank.org/external/default/main?menuPK=64187510&pagePK=64193027&piPK=64187937&theSitePK=523679&menuPK=64187510&searchMenuPK=64187283&siteName=WDS&entityID=000158349_20101213113514 http://hdl.handle.net/10986/3983
_version_	1764389338986053632

How Large Is the Government Spending Multiplier? Evidence from World Bank Lending

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