Private Investment and Public Investment: Total Rates of Return and Global Balances in the OECD

Antonio Afonso, José Alves and Sofia Monteiro

No 11634, CESifo Working Paper Series from CESifo

Abstract: We assess the relevance of macro rates of return on time-varying fiscal and external sustainability. First, we compute the total public and private macroeconomic rates of return for 16 OECD countries from 1980 to 2022. We find that there is a positive impact of higher investment returns on stimulating higher aggregate demand, therefore resulting in higher tax revenues, which in turn lead to greater fiscal sustainability and more external sustainability by lowering the need for foreign capital and imports of goods and services. Accordingly, we demonstrate that macroeconomic rates of return of both public and private investment positively contribute to fiscal sustainability and that public sector investment also displays the same positive effect on external sustainability.

Keywords: macroeconomic rates of return; fiscal sustainability; external sustainability; time-varying; public investment; private investment (search for similar items in EconPapers)
JEL-codes: E22 F41 H54 H61 (search for similar items in EconPapers)
Date: 2025
New Economics Papers: this item is included in nep-opm
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Working Paper: Private investment and public investment: total rates of return and global balances in the OECD (2025)
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Persistent link: https://EconPapers.repec.org/RePEc:ces:ceswps:_11634

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