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Title: Infrastructure investment news and business cycles in Japan: Evidence from the VAR with an external instrument Authors:  Etsuro Shioji - Hitotsubashi (Japan) [presenting]
Abstract: The Trump Administration's push for a massive infrastructure spending has renewed interest in the macroeconomic effects of public investment. Past efforts to estimate these effects have been marred by the ``fiscal foresight problem'': as most fiscal actions are announced well before their implementation, the traditional identification scheme which relies on the timing and the amount of actual spending could be misleading. The difficulty by utilizing the VAR with an external instrument is overcome. My instrument is an indicator of the private sector's expectations about future policies; it utilizes cross sectional variations across individual construction firms' stock returns, on the days that important news about policies arrive. Results indicate that an anticipated public investment shock has a significantly positive effect on GDP of Japan.