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Public capital in the 21st century: As productive as ever?

Jasper De Jong, Marien Ferdinandusse () and Josip Funda

DNB Working Papers from Netherlands Central Bank, Research Department

Abstract: The global financial crisis and the euro area sovereign debt crisis that followed induced a rapid deterioration in the fiscal positions of countries across the globe. In the ensuing fiscal adjustment process, public investments were severely reduced in many countries. How harmful is this for growth perspectives? Our main objective is to find out whether the importance of public capital for long run output growth has changed in recent years. We also aim to provide information on the relevance of international spillovers of public capital. To these ends, we expand time series on public capital stocks for 20 OECD countries as constructed by Kamps (2006) and estimate country-specific recursive VARs. Results show that the effect of public capital shocks on economic growth has not increased in general, although results differ widely between countries. This suggests that the current level of public investments generally does not pose an immediate threat to potential output. Of course, this could change if low investment levels are sustained for a long time. We furthermore provide some tentative evidence of positive spillovers of public capital shocks between European countries.

Keywords: Public capital stock; economic growth; spillovers (search for similar items in EconPapers)
JEL-codes: E22 E62 H54 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-eec, nep-fdg, nep-mac and nep-pbe
Date: 2017-01
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3) Track citations by RSS feed

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Journal Article: Public capital in the 21st century: as productive as ever? (2018) Downloads
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Persistent link: https://EconPapers.repec.org/RePEc:dnb:dnbwpp:542

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