On the macroeconomic impact of NGEU funds and its propagation through the production network

Alejandro Fernández-Cerezo, Enrique Moral-Benito and Javier Quintana

Economic Modelling, 2024, vol. 132, issue C

Abstract: We quantify the sectoral and aggregate effects of the Next Generation European Union program in the Spanish economy. We outline a dynamic model with production and investment networks that allows for different linkages among sectors and countries. Our model can accommodate different stimulus packages, such as public infrastructure investment, current public expenditure, or capital transfers to firms. Considering the amplification effects through the production network, the average impact on gross domestic product over a five-year horizon is estimated to be 1.75% per year, about 0.6% larger than the direct impact estimated without network interactions. Our model also identifies potential threats, such as the emergence of bottlenecks, inflationary pressures from public spending, or shortages of high-skilled workers in certain sectors, that could significantly reduce the program’s positive impact.

Keywords: Input–Output Models; Industrial Policy; Public Investment; Next Generation European Union (search for similar items in EconPapers)
JEL-codes: C67 E65 H54 L16 O25 O52 (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecmode:v:132:y:2024:i:c:s0264999324000257

DOI: 10.1016/j.econmod.2024.106669

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