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Gross Fixed Capital Formation in the Euro Area During the COVID-19 Pandemic

Author

Listed:
  • Mirko Licchetta

    (European Commission)

  • Eric Meyermans

    (European Commission)

Abstract

This paper examines the impact of the COVID-19 pandemic on gross fixed capital formation across the euro area. The empirical analysis suggests that the intensity of the lockdown measures to contain the spread of the virus and the country-specific structure of the economy along with other traditional drivers, in particular falling output, can explain a large part of the contraction. The bold policy response at the national and EU level mitigated the impact of COVID-19 and supported the recovery. The faster-than-expected rebound in economic activity suggests that the negative economic impact of the pandemic will be more contained than initially feared. However, uncertainty over future health developments remains high, especially given the risks of new more transmissible variants.

Suggested Citation

  • Mirko Licchetta & Eric Meyermans, 2022. "Gross Fixed Capital Formation in the Euro Area During the COVID-19 Pandemic," Intereconomics: Review of European Economic Policy, Springer;ZBW - Leibniz Information Centre for Economics;Centre for European Policy Studies (CEPS), vol. 57(4), pages 238-246, July.
    • Handle: RePEc:spr:intere:v:57:y:2022:i:4:d:10.1007_s10272-022-1058-1
    DOI: 10.1007/s10272-022-1058-1
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    References listed on IDEAS

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    1. Niermann, Lennart & Pitterle, Ingo A., 2021. "The COVID-19 crisis: what explains cross-country differences in the pandemic’s short-term economic impact?," MPRA Paper 107414, University Library of Munich, Germany.
    2. Gieseck, Arne & Rujin, Svetlana, 2020. "The impact of the recent spike in uncertainty on economic activity in the euro area," Economic Bulletin Boxes, European Central Bank, vol. 6.
    3. Helmersson, Tobias & Mingarelli, Luca & Mosk, Benjamin & Pietsch, Allegra & Ravanetti, Beatrice & Shakir, Tamarah & Wendelborn, Jonas, 2021. "Corporate zombification: post-pandemic risks in the euro area," Financial Stability Review, European Central Bank, vol. 1.
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    5. Mario Bellia & Ludovic Calès & Lorenzo Frattarolo & Daniel Monteiro & Marco Petracco Giudic, 2021. "COVID-19: the stabilising impact of EU bond issuance on sovereigns and banks," Quarterly Report on the Euro Area (QREA), Directorate General Economic and Financial Affairs (DG ECFIN), European Commission, vol. 20(3), pages 17-28, December.
    6. André Sapir, 2020. "Why has COVID-19 hit different European Union economies so differently?," Policy Contributions 38303, Bruegel.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    E22; E50; E60; H54;
    All these keywords.

    JEL classification:

    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • E50 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - General
    • E60 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - General
    • H54 - Public Economics - - National Government Expenditures and Related Policies - - - Infrastructures

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