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The Implications Of Gross Fixed Capital And Unemployment Rate General Government Deficit. Empirical Study At The European Level

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  • Mihai Carp

    (Alexandru Ioan Cuza University of Iasi, Romania)

  • Andreea Vasiliu

    (Alexandru Ioan Cuza University of Iasi, Romania)

Abstract

In this paper we evaluate the influence of the modification of public investment level and unemployment rate on the general government deficit at the European Union level. We create a regression model that shows that a sustained and increased investment policy and the reduction of unemployment rate have a favorable effect on the objective of minimizing the budget deficit. In the last years European Union’s countries had to face a difficult problem concerning fiscal policy. They have to make public investments to stimulate economic growth and in the same time they have to meet the convergence criteria’s of public deficit. On the other hand, EU has to deal with a higher rate of unemployment. Through our model we try to see how European Union countries should implement their political strategies on unemployment and investment with the main objective of reducing the general government deficit.

Suggested Citation

  • Mihai Carp & Andreea Vasiliu, 2010. "The Implications Of Gross Fixed Capital And Unemployment Rate General Government Deficit. Empirical Study At The European Level," CES Working Papers, Centre for European Studies, Alexandru Ioan Cuza University, vol. 2(4), pages 61-72, December.
    • Handle: RePEc:jes:wpaper:y:2010:v:2:i:4:p:61-72
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    References listed on IDEAS

    as
    1. Alessandro Turrini, 2004. "Public investment and the EU fiscal framework," European Economy - Economic Papers 2008 - 2015 202, Directorate General Economic and Financial Affairs (DG ECFIN), European Commission.
    2. Castro, Vítor, 2007. "The Causes of Excessive Deficits in The European Union," The Warwick Economics Research Paper Series (TWERPS) 805, University of Warwick, Department of Economics.
    3. Perotti, Roberto & Kontopoulos, Yianos, 2002. "Fragmented fiscal policy," Journal of Public Economics, Elsevier, vol. 86(2), pages 191-222, November.
    4. Ali Bayar & Bram Smeets, 2009. "Government Deficits in the European Union: An Analysis of Entry and Exit Dynamics," CESifo Working Paper Series 2703, CESifo.
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