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On the macroeconomic impact of NGEU funds and its propagation through the production network

Author

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  • Fernández-Cerezo, Alejandro
  • Moral-Benito, Enrique
  • Quintana, Javier

Abstract

We quantify the sectoral and aggregate effects of the Next Generation European Union program in the Spanish economy. We outline a dynamic model with production and investment networks that allows for different linkages among sectors and countries. Our model can accommodate different stimulus packages, such as public infrastructure investment, current public expenditure, or capital transfers to firms. Considering the amplification effects through the production network, the average impact on gross domestic product over a five-year horizon is estimated to be 1.75% per year, about 0.6% larger than the direct impact estimated without network interactions. Our model also identifies potential threats, such as the emergence of bottlenecks, inflationary pressures from public spending, or shortages of high-skilled workers in certain sectors, that could significantly reduce the program’s positive impact.

Suggested Citation

  • Fernández-Cerezo, Alejandro & Moral-Benito, Enrique & Quintana, Javier, 2024. "On the macroeconomic impact of NGEU funds and its propagation through the production network," Economic Modelling, Elsevier, vol. 132(C).
    • Handle: RePEc:eee:ecmode:v:132:y:2024:i:c:s0264999324000257
    DOI: 10.1016/j.econmod.2024.106669
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    References listed on IDEAS

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    More about this item

    Keywords

    Input–Output Models; Industrial Policy; Public Investment; Next Generation European Union;
    All these keywords.

    JEL classification:

    • C67 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Input-Output Models
    • O25 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy - - - Industrial Policy
    • L16 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Industrial Organization and Macroeconomics; Macroeconomic Industrial Structure
    • H54 - Public Economics - - National Government Expenditures and Related Policies - - - Infrastructures
    • E65 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Studies of Particular Policy Episodes
    • O52 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Europe

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