{
    "document_id": 395,
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            "text": "5 Conclusion",
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            "text": "We analyse planning and construction delays in a small open economy in a monetary union. We do so in two models, one that features a standard labour market with sticky wages, and one with the addition of search frictions on the labour market (with sticky nominal wages), but is otherwise identical. The comparison is related to the literature on news shocks about the future productivity, where it has been shown that the modelling choice can have different outcomes during the period of anticipation of the future productivity increase. That literature focused on productivity, but when public capital is productive, a delay related to public investment is akin to a news shock about future productivity. The novelty of our paper is that we focus on a small open economy in a monetary union, whereas the literature has mostly looked at real models of closed economies."
        },
        {
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            "text": "We find that delays in public investment, either due to planning or due to time needed for construction, result in the benefits from higher public capital occurring later in the future. From the business cycles perspective, planning and construction delays cause fluctuations not only immediately upon announcement, but also in the future, which may complicate the management of business cycles. This is particularly the case for planning delays, where future fluctuations tend to be stronger."
        },
        {
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            "text": "A standard model does not generate a Pigou cycle (a simultaneous increase in output, consumption, investment and labour) during the planning delay, but a search model does so, especially if the labour market is sufficiently reactive to news about the future. From a policy perspective, the presence of a Pigou cycle is helpful, because macroeconomic variables move in the same direction before and after the higher productivity of more public capital in the future materialises."
        },
        {
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            "text": "Delays in construction (time-to-build) produce similar results qualitatively (but not quantitatively) across both classes of models. From the perspective of business cycle management, construction delays are less problematic in the sense that they lead to a predictable immediate stimulus of the economy."
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            "text": "30",
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