Is government consumption really crowding out investment? Evidence from the EU28

Juan Cuestas, Mercedes Monfort () and Javier Ordóñez
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Mercedes Monfort: IEI and Department of Economics, Universitat Jaume I, Castellón, Spain

No 2020/05, Working Papers from Economics Department, Universitat Jaume I, Castellón (Spain)

Abstract: In this paper we contribute to the literature on the crowding out effect that government consumption has had on investment in the EU28 over the past 25 years. Our results show that after the crisis, government consumption shocks have affected output, while this did not happen before the crisis. For the CEECs, the effect of positive government consumption shocks has been negative for investment, while in the EU15+2 there has been no crowding out effect and output has reacted significantly and positively to government consumption shocks.

Keywords: fiscal policy; crowding out; crisis; SVAR (search for similar items in EconPapers)
JEL-codes: C22 F15 (search for similar items in EconPapers)
Pages: 14 pages
Date: 2020
New Economics Papers: this item is included in nep-eec
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:jau:wpaper:2020/05

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