Current Account Targeting Hypothesis versus Twin Deficit Hypothesis: The EMU Experience of Portugal

Antonio Afonso and José Coelho

No 68, EconPol Working Paper from ifo Institute - Leibniz Institute for Economic Research at the University of Munich

Abstract: The paper attempts to recover empirical evidence related to the European Structural and Investment Funds (ESIF) to promote growth for the management of the Recovery & Resilience Facility (RRF). We analyse the impact of the EU Cohesion Policy on regional development over the period 1986-2018, using dynamic panel data models. In doing so, we use a neoclassical Solow growth model, extending the current literature in at least three ways. First, we make use of a new dataset, which contains highly detailed data on regional commitments and payments of Structural Funds; secondly, we address the endogeneity via a difference GMM estimator; finally, we control for the spatial interdependence among regions via a Spatial Durbin model. We find that the Cohesion Policy fosters regional growth both in the short and long run, regardless of the Objective considered. The role of the business cycle in the speed of regional convergence is quantified. The funds’ effectiveness is hindered during the crisis, especially in the least developed regions, partly due to lower absorptive rates. Furthermore, human capital and quality of government are crucial growth determinants necessary for improving the performance of the Structural Funds. Finally, we discuss if the combination of ESIF & RRF funds will be appropriate for accelerating the post-pandemic recovery versus the financial recession recovery.

Date: 2021
New Economics Papers: this item is included in nep-eec
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://www.ifo.de/DocDL/EconPol_Working_Paper_68_Twin-Deficits.pdf (application/pdf)

Related works:
Working Paper: Current Account Targeting Hypothesis versus Twin Deficit Hypothesis: the EMU experience of Portugal (2021)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ces:econwp:_68

Access Statistics for this paper

More papers in EconPol Working Paper from ifo Institute - Leibniz Institute for Economic Research at the University of Munich Contact information at EDIRC.
Bibliographic data for series maintained by Klaus Wohlrabe ().