The Impact And Effectiveness Of Capital Investments In The American Recovery And Reinvestment Act Of 2009

Download or read book The Impact and Effectiveness of Capital Investments in the American Recovery and Reinvestment Act of 2009 written by Vincent Byaruhanga and published by . This book was released on 2014 with total page 138 pages. Available in PDF, EPUB and Kindle. Book excerpt: The purpose of this study is to find out the effect of government spending on capital investments in the American Recovery and Reinvestment Act (ARRA) of 2009 on GDP and employment growth. This research utilized US quarterly data from 2003 QI to 2013 QII. In the first part the research used variables from the Keynes economic model and utilized two-stage least square analysis to assess the effect of government spending on GDP. The results from the regression analysis indicate that an increase of one dollar in government spending increases GDP by 1.569 dollars. The researcher found that the general government spending multiplier was 1.9. The coefficient for government spending in the Recovery Act was 0.383, implying that for every one dollar in government spending, Recovery Act spending on capital investments contributed 0.383 dollars. In the second part, the researcher used the Solow (1956) growth model variables on quarterly data from the same period. The regression results show that for one standard deviation increase in government spending, GDP increases by 0.955 standard deviations. The unstandardized regression results show that a one dollar increase in government spending, increases GDP by 4.886 dollars. In the third part, the research used employment growth as a dependent variable regressed on ARRA jobs that were created and retained by government spending on capital investments specified by the Recovery Act. The results show that the regression coefficient for ARRA jobs was 2.742, which indicates that an increase in government spending on capital investments contributed 2.742 percentage points to employment growth. This was a significant contribution to employment growth.