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The medium-term effects of investment stimulus

Author

Listed:
  • Rubén Domínguez-Díaz

    (Banco de España)

  • Samuel Hurtado

    (Banco de España)

  • Carolina Menéndez

    (Banco de España)

Abstract

This paper presents an endogenous growth general equilibrium model (EGGEM) of firm dynamics and innovative investment for the Spanish economy that allows the medium-term effects of economic policies and shocks to be better understood. The model is calibrated using both aggregate and firm-level data. It is then used to assess the medium-term macroeconomic consequences of the different components of the Next Generation EU (NGEU) programme, including public investment, private capital transfers and innovative investment transfers. According to our baseline simulation, the NGEU funds significantly foster economic activity by raising aggregate productivity, private investment and employment. As a result, annual GDP growth is increased by 0.17 percentage points on average over the period of NGEU disbursement. Among the different policy instruments considered, we find that innovation transfers have the largest impact on aggregate output, only matched by increases in the stock of public capital if it is highly efficient.

Suggested Citation

  • Rubén Domínguez-Díaz & Samuel Hurtado & Carolina Menéndez, 2024. "The medium-term effects of investment stimulus," Working Papers 2402, Banco de España.
    • Handle: RePEc:bde:wpaper:2402
    DOI: https://doi.org/10.53479/35913
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    References listed on IDEAS

    as
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    JEL classification:

    • O38 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Government Policy
    • O52 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Europe
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General
    • 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

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