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The effect of public investment in Europe: a model-based assessment

Igor Vetlov, Marien Ferdinandusse (), Jasper De Jong and Josip Funda

No 2021, Working Paper Series from European Central Bank

Abstract: We consider the effect of an increase in public investments on output in Europe against the background of a sharp drop of public investments in a number of EU countries during the crisis and subsequent policy discussions on the need to stimulate public investments. We start with a brief overview of recent developments in public investments, including some methodological issues, and provide a literature overview of the effect of public investments on growth. On the basis of updated estimates of the public capital stock, we estimate the output response to a public capital impulse, using VAR models. In addition, using a structural model, we investigate the sensitivity of the macroeconomic impact of an increase in public investments to alternative assumptions about economic structures and policy implementations. JEL Classification: E32, E62, C30

Keywords: euro area; fiscal policy; general equilibrium modelling; public investment (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-eec and nep-mac
Date: 2017-02
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