An analysis of investments and their drivers in Lithuania

Mariarosaria Comunale ()
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Mariarosaria Comunale: Bank of Lithuania
Authors registered in the RePEc Author Service: Valentin Jouvanceau

No 22, Bank of Lithuania Discussion Paper Series from Bank of Lithuania

Abstract: The article analyzes recent developments in investments in Lithuania using a broad set of possible drivers, including EU funds. We apply a Bayesian VAR setup with data from 1997Q1 to 2019Q4. We also examine and compare business vs. government investments and different types of investments, especially innovative investments. We find that total investments are basically driven by the data on business investments. The main outcomes are mostly in line with the literature, but we do see some crucial differences across types. Key results include: (1) a small role for lending rates as compared to other factors, largely limited to the global financial crisis; (2) the crucial role of demand-side variables, i.e. foreign demand or private consumption; (3) pro-cyclicality in government investments and a positive correlation with business investments; (4) the importance of uncertainty for some sectors, that positively drives only the more innovative/intangible investments; and (5) despite the fact that EU funds do feed investments, there is a crowding-out in the short run for business-related investments, while there is some positive contribution to public investments.

Keywords: : investment; uncertainty; EU funds; foreign demand; innovation (search for similar items in EconPapers)
JEL-codes: C32 D24 D61 E32 (search for similar items in EconPapers)
Pages: 34 pages
Date: 2020-10-21
New Economics Papers: this item is included in nep-mac and nep-tra
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