American Economic Journal: Macroeconomics
no. 4, October 2014
I use a novel loan-level dataset covering lending by official creditors
to developing country governments to construct an instrument for
government spending. Loans from official creditors typically finance
multiyear public 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.
"Government Spending Multipliers in Developing Countries: Evidence from Lending by Official Creditors."
American Economic Journal: Macroeconomics,
International Lending and Debt Problems
National Government Expenditures and Related Policies: General
Fiscal and Monetary Policy in Development