2012 Volume 68 Issue 5 Pages I_121-I_130
This paper sheds light on the effects of cumulative fiscal policies in the past. We propose a dynamic stochastic general equilibrium model with time-to-build technology for public capital and non-Ricardian household to evaluate the impact of public investment as a plan to revive the economy. We estimate the structural parameters of the model by using a Bayesian approach and analyze the impulse responses to transitory shocks of public investment. In our approach, the structural parameters are treated as timevarying and structural changes of parameters are detected naturally by using particle filter.
