Does the Growth Acceleration Program Accelerate Growth

In this paper, we introduce the required time lag for the public investment to be turned into public capital (time-to-build process) in the neoclassical growth model, as well as distortionary tax rates that are adjusted according to the level of public debt. The purpose is to quantitatively isolate the macroeconomic effects of the increase in public investment observed in PAC (Portuguese acronym for Growth Acceleration Program). Depending on the time lag associated to the time-to-build process and the fiscal adjustment policy,PAC could have led to a GDP decrease between 0.2% and 0.4% in up to four years.