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Is government consumption really crowding out investment? Evidence from the EU28

Author

Listed:
  • Juan Carlos Cuestas

    (Department of Economics, Universitat Jaume I, Castellón, Spain)

  • Mercedes Monfort

    (IEI and Department of Economics, Universitat Jaume I, Castellón, Spain)

  • Javier Ordóñez

    (IEI and Department of Economics, Universitat Jaume I, Castellón, Spain)

Abstract

In this paper we contribute to the literature on the crowding out effect that government consumption has had on investment in the EU28 over the past 25 years. Our results show that after the crisis, government consumption shocks have affected output, while this did not happen before the crisis. For the CEECs, the effect of positive government consumption shocks has been negative for investment, while in the EU15+2 there has been no crowding out effect and output has reacted significantly and positively to government consumption shocks.

Suggested Citation

  • Juan Carlos Cuestas & Mercedes Monfort & Javier Ordóñez, 2020. "Is government consumption really crowding out investment? Evidence from the EU28," Working Papers 2020/05, Economics Department, Universitat Jaume I, Castellón (Spain).
    • Handle: RePEc:jau:wpaper:2020/05
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    References listed on IDEAS

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    6. Juan Carlos Cuestas & Javier Ordóñez, 2018. "Fiscal consolidation in Europe: has it worked?," Applied Economics Letters, Taylor & Francis Journals, vol. 25(16), pages 1179-1182, September.
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    More about this item

    Keywords

    fiscal policy; crowding out; crisis; SVAR;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • F15 - International Economics - - Trade - - - Economic Integration

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