Achieving geoeconomic goals by boosting the economy without raising the public debt ratio? New evidence on the effects of public investment in the European Union
By: Dabrowski, Cara.
Contributor(s): Heimberger, Philipp.
Material type:
BookSeries: wiiw Policy Notes and Reports: 99Publisher: Wien : Wiener Institut für Internationale Wirtschaftsvergleiche (wiiw), 2025Description: 21 S., 1 Table and 3 Figures, 30cm.Subject(s): Public investment | growth | unemployment | public debtCountries covered: European Union | Austria | Belgium | Bulgaria | Croatia | Cyprus | Czechia | Denmark | Estonia | Finland | France | Germany | Greece | Hungary | Ireland | Italy | Latvia | Lithuania | Luxembourg | Malta | Netherlands | Poland | Romania | Slovakia | Slovenia | Spain | Swedenwiiw Research Areas: Macroeconomic Analysis and PolicyClassification: E32 | D84 | F02 | Q41 | Q43 | Q48 Online resources: Click here to access online Summary: Public investment can support geoeconomic policy goals by strengthening economic resilience through the creation of public assets and by fostering domestic sources of economic growth. This paper presents new evidence on how public investment affects output, unemployment, private investment and public debt in the 27 EU member countries. Using forecast errors based on archival data to identify public investment shocks, we find that expansionary shocks (a) have favourable effects on output and unemployment in the short to medium run; (b) do not crowd out private investment; and (c) do not jeopardise public debt sustainability. Even though fiscal consolidation pressures linked to EU fiscal rules are high, promoting public investment may be critical – not only for economic development, but also to advance geostrategic goals in energy, infrastructure and resilience.
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| Paper | WIIW Library | 99 (Browse shelf(Opens below)) | Available | 1000010007398 |
Public investment can support geoeconomic policy goals by strengthening economic resilience through the creation of public assets and by fostering domestic sources of economic growth. This paper presents new evidence on how public investment affects output, unemployment, private investment and public debt in the 27 EU member countries. Using forecast errors based on archival data to identify public investment shocks, we find that expansionary shocks (a) have favourable effects on output and unemployment in the short to medium run; (b) do not crowd out private investment; and (c) do not jeopardise public debt sustainability. Even though fiscal consolidation pressures linked to EU fiscal rules are high, promoting public investment may be critical – not only for economic development, but also to advance geostrategic goals in energy, infrastructure and resilience.