On the implementation delays, marginal costs and price dynamics: A theoretical note with implications for the Philippines

It has been known that longer implementation delays in public investments result in sluggish accumulation of public capital. In models in which public capital determines firm productivity, the longer the duration of implementation delays, thehigher the marginal costs which, in a New Keynesian econom...

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Main Authors: Dacuycuy, Lawrence B., Sauler, Mariel Monica R., Lim, Dickson A.
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Published: Animo Repository 2019
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Online Access:https://animorepository.dlsu.edu.ph/faculty_research/5760
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Institution: De La Salle University
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spelling oai:animorepository.dlsu.edu.ph:faculty_research-67402022-11-11T04:19:52Z On the implementation delays, marginal costs and price dynamics: A theoretical note with implications for the Philippines Dacuycuy, Lawrence B. Sauler, Mariel Monica R. Lim, Dickson A. It has been known that longer implementation delays in public investments result in sluggish accumulation of public capital. In models in which public capital determines firm productivity, the longer the duration of implementation delays, thehigher the marginal costs which, in a New Keynesian economy means higher price markups. Consequently, higher mark-ups may increase the inflation rate, leading to an appropriate monetary policy response. Using a dynamic stochastic general equilibrium (DSGE) model, this theoretical note focuses on the relationships among government investments, firm pricingpolicy, and monetary policy. It addresses some aspects of public investment, and through simulations, characterizes how its effects are propagated throughout the macroeconomy. Using different scenarios pertaining to the duration of implementation delays, we employed stochastic simulations to determine how authorized budget shocks affect output, public investment,interest rates, wages, and prices. Of particular interest is the impact of implementation delays on the firm’s marginal costs and pricing dynamics. We found that implementation delays and sudden disbursement stops do condition the dynamic impact of authorized budget shocks. Moreover, we noted that disbursement performance matters for output growth and efficient fiscal response. The model shows how public capital, when included in firms’ production functions, may act as a double-edged sword. Given a reinvigorated push for infrastructure spending, this note is expected to generate and discuss important policy implications for the Philippines. 2019-01-01T08:00:00Z text https://animorepository.dlsu.edu.ph/faculty_research/5760 Faculty Research Work Animo Repository Public investments—Philippines Philippines—Economic conditions Economics Macroeconomics
institution De La Salle University
building De La Salle University Library
continent Asia
country Philippines
Philippines
content_provider De La Salle University Library
collection DLSU Institutional Repository
topic Public investments—Philippines
Philippines—Economic conditions
Economics
Macroeconomics
spellingShingle Public investments—Philippines
Philippines—Economic conditions
Economics
Macroeconomics
Dacuycuy, Lawrence B.
Sauler, Mariel Monica R.
Lim, Dickson A.
On the implementation delays, marginal costs and price dynamics: A theoretical note with implications for the Philippines
description It has been known that longer implementation delays in public investments result in sluggish accumulation of public capital. In models in which public capital determines firm productivity, the longer the duration of implementation delays, thehigher the marginal costs which, in a New Keynesian economy means higher price markups. Consequently, higher mark-ups may increase the inflation rate, leading to an appropriate monetary policy response. Using a dynamic stochastic general equilibrium (DSGE) model, this theoretical note focuses on the relationships among government investments, firm pricingpolicy, and monetary policy. It addresses some aspects of public investment, and through simulations, characterizes how its effects are propagated throughout the macroeconomy. Using different scenarios pertaining to the duration of implementation delays, we employed stochastic simulations to determine how authorized budget shocks affect output, public investment,interest rates, wages, and prices. Of particular interest is the impact of implementation delays on the firm’s marginal costs and pricing dynamics. We found that implementation delays and sudden disbursement stops do condition the dynamic impact of authorized budget shocks. Moreover, we noted that disbursement performance matters for output growth and efficient fiscal response. The model shows how public capital, when included in firms’ production functions, may act as a double-edged sword. Given a reinvigorated push for infrastructure spending, this note is expected to generate and discuss important policy implications for the Philippines.
format text
author Dacuycuy, Lawrence B.
Sauler, Mariel Monica R.
Lim, Dickson A.
author_facet Dacuycuy, Lawrence B.
Sauler, Mariel Monica R.
Lim, Dickson A.
author_sort Dacuycuy, Lawrence B.
title On the implementation delays, marginal costs and price dynamics: A theoretical note with implications for the Philippines
title_short On the implementation delays, marginal costs and price dynamics: A theoretical note with implications for the Philippines
title_full On the implementation delays, marginal costs and price dynamics: A theoretical note with implications for the Philippines
title_fullStr On the implementation delays, marginal costs and price dynamics: A theoretical note with implications for the Philippines
title_full_unstemmed On the implementation delays, marginal costs and price dynamics: A theoretical note with implications for the Philippines
title_sort on the implementation delays, marginal costs and price dynamics: a theoretical note with implications for the philippines
publisher Animo Repository
publishDate 2019
url https://animorepository.dlsu.edu.ph/faculty_research/5760
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