No. 613 - The macroeconomic impact of infrastructure investment: a review of channels

The paper proposes a review of the theoretical literature and of the quantitative and empirical evidence on the macroeconomic effects of public investment in infrastructure associated with the main underlying transmission channels. The analysis mainly reports the results relating to the US economy, but their value is more general and can provide useful policy indications for other advanced countries as well.

Public infrastructure investment has effects on economic activity, especially in the medium to long term; however, in the current circumstances of high slack and uncertainty and low interest rates, it can be very effective over shorter horizons too, from one to three years. Specifically, it is argued that strengthening health infrastructures, maintaining existing infrastructures and coordinating investment plans across countries would help accelerate economic recovery and increase individuals' welfare.