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
Dabrowski, Cara
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 - Wien : Wiener Institut für Internationale Wirtschaftsvergleiche (wiiw), 2025. - 21 S., 1 Table and 3 Figures, 30cm. - wiiw Policy Notes and Reports 99 . - wiiw Policy Notes and Reports 99 .
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.
Public investment
growth
unemployment
public debt
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
Sweden
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 - Wien : Wiener Institut für Internationale Wirtschaftsvergleiche (wiiw), 2025. - 21 S., 1 Table and 3 Figures, 30cm. - wiiw Policy Notes and Reports 99 . - wiiw Policy Notes and Reports 99 .
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.
Public investment
growth
unemployment
public debt
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
Sweden