Macroeconomic effects of public investment in South-East Europe

Igor Masten and Ana Grdović Gnip ()

Journal of Policy Modeling, 2019, vol. 41, issue 6, 1179-1194

Abstract: This paper provides the first cross-country study of the macroeconomic effects of public investment in South-East Europe. For these countries, we construct a unique dataset of exogenous changes in public investment and use them with Jordá (2005) local projections method to estimate their dynamic effects on the main macroeconomic aggregates, the unemployment rate and debt-to-GDP ratio. Our results show significant multiplicative effects of public investment on GDP, delivered primarily through crowding in of private investment. Our analysis confirms that public investment can be seen as a catalyst of positive spillover effects to other sectors of the economy and thus contribute to productivity growth.

Keywords: Capital spending; Fiscal multiplier; Local projections; Transport infrastructure; South-East Europe (search for similar items in EconPapers)
JEL-codes: E61 E62 H62 (search for similar items in EconPapers)
Date: 2019
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Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jpolmo:v:41:y:2019:i:6:p:1179-1194

DOI: 10.1016/j.jpolmod.2019.05.005

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