On the Impact of Next Generation EU Funds: A Regional Synthetic Control Method Approach

Priscila Espinosa (), Daniel Aparicio-Pérez () and Emili Tortosa-Ausina
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Priscila Espinosa: Department of Applied Economics, Universitat de València, Spain
Daniel Aparicio-Pérez: Department of Finance and Accounting, Universitat Jaume I, Castellón, Spain

No 2023/07, Working Papers from Economics Department, Universitat Jaume I, Castellón (Spain)

Abstract: The European Union’s Next Generation EU (NGEU) program and its implementation through the Recovery and Resilience Facility (RRF) were conceived with the premise of promoting a coordinated fiscal response within the European Union to ad- dress the challenges arising from the COVID-19 crisis. The program provides Member States with access to grants and concessional loans aimed at supporting their recovery and resilience plans, which must incorporate coherent packages of reforms and investments. We evaluate the regional economic impact of the NGEU program in Spain, as one of the European countries most affected by the pandemic and, therefore, one of the program’s main beneficiaries. To do so, we employ counterfactual techniques, which are particularly useful when considering alternative scenarios, such as the existence or absence of NGEU funds. It is noteworthy that the use of counterfactual models involves an inherent conservatism that warrants caution in interpreting the results. According to our results, the economic impact led to an increase in GDP per capita during 2022, a perspective that is projected into 2023 and 2024, compared to a scenario without NGEU funds. This analysis, aligned with the principles of counterfactual models and their inherent conservatism, sheds light on the economic transformations attributable to the implementation of these exceptional measures.

Keywords: counterfactual; COVID-19; fiscal multipliers; Next Generation EU funds; regions; synthetic control method (search for similar items in EconPapers)
JEL-codes: C32 E27 E60 H50 R10 (search for similar items in EconPapers)
Pages: 45 pages
Date: 2023
New Economics Papers: this item is included in nep-eec and nep-eur
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