EVOLUTION AND DETERMINANTS OF PUBLIC INVESTMENT IN EUROPE

Timo Valila and Aaron Mehrotra

No 2005/1, Economic and Financial Reports from European Investment Bank, Economics Department

Abstract: We examine the evolution of public investment and public capital stocks in Europe during the past three decades. Against this background, we employ an array of econometric techniques to assess the macroeconomic determinants of public investment, with a special focus on its long-term trend. We find that public investment has been determined by national income, the stance of budgetary policies, and fiscal sustainability considerations. Neither the cost of financing nor the fiscal rules embodied in EMU have had a systemic impact on public investment. The significant downtrend that characterises the evolution of public investment, measured in relation to GDP, in non-cohesion countries is chiefly determined by drawn-out episodes of fiscal consolidation, unrelated to EMU.

Keywords: Public investment; Public capital stocks; Budgetary policy (search for similar items in EconPapers)
JEL-codes: C23 E62 H54 (search for similar items in EconPapers)
Pages: 37 pages
Date: 2005-01-31
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (27)

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