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Evolution And Determinants Of Public Investment In Europe

Author

Listed:
  • Valila, Timo

    () (European Investment Bank, Economic and Financial Studies)

  • Mehrotra, Aaron

    (European University Institute)

Abstract

We examine the evolution of public investment and public capital stocks in Europe during the past three decades. Against this background, we employ an array of econometric techniques to assess the macroeconomic determinants of public investment, with a special focus on its long-term trend. We find that public investment has been determined by national income, the stance of budgetary policies, and fiscal sustainability considerations. Neither the cost of financing nor the fiscal rules embodied in EMU have had a systemic impact on public investment. The significant downtrend that characterises the evolution of public investment, measured in relation to GDP, in non-cohesion countries is chiefly determined by drawn-out episodes of fiscal consolidation, unrelated to EMU.

Suggested Citation

  • Valila, Timo & Mehrotra, Aaron, 2005. "Evolution And Determinants Of Public Investment In Europe," Economic and Financial Reports 2005/1, European Investment Bank, Economics Department.
    • Handle: RePEc:ris:eibefr:2005_001
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Stewart, James, 2010. "The UK National Infrastructure Plan 2010," EIB Papers 6/2010, European Investment Bank, Economics Department.
    2. Francisco de Castro Fernández & José Manuel González Mínguez, 2008. "The composition of public finances and long-term growth: a macroeconomic approach," Occasional Papers 0809, Banco de España;Occasional Papers Homepage.
    3. Bitsch, Florian & Buchner, Axel & Kaserer, Christoph, 2010. "Risk, return and cash flow characteristics of infrastructure fund investments," EIB Papers 4/2010, European Investment Bank, Economics Department.
    4. Wagenvoort, Rien & de Nicola, Carlo & Kappeler, Andreas, 2010. "Infrastructure finance in Europe: Composition, evolution and crisis impact," EIB Papers 1/2010, European Investment Bank, Economics Department.
    5. Jörg Bibow, 2013. "Lost at Sea:The Euro Needs a Euro Treasury," FMG Special Papers sp227, Financial Markets Group.
    6. Ivan Tchakarov & Roland Straub, 2007. "Assessing the Impact of a Change in the Composition of Public Spending; A DSGE Approach," IMF Working Papers 07/168, International Monetary Fund.
    7. Fay, Marianne & Iimi, Atsushi & Perrissin-Fabert, Baptiste, 2010. "Financing greener and climate-resilient infrastructure in developing countries - challenges and opportunities," EIB Papers 7/2010, European Investment Bank, Economics Department.
    8. Peree, Eric & Valila, Timo, 2005. "Fiscal Rules And Public Investment," Economic and Financial Reports 2005/2, European Investment Bank, Economics Department.
    9. Jörg Bibow, 2013. "Lost at Sea: The Euro Needs a Euro Treasury," IMK Studies 35-2013, IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute.
    10. Helm, Dieter, 2010. "Infrastructure and infrastructure finance: The role of the government and the private sector in the current world," EIB Papers 5/2010, European Investment Bank, Economics Department.
    11. Dreger, Christian & Reimers, Hans-Eggert, 2016. "Does public investment stimulate private investment? Evidence for the euro area," Economic Modelling, Elsevier, vol. 58(C), pages 154-158.
    12. Dreger, Christian & Reimers, Hans-Eggert, 2014. "On the relationship between public and private investment in the euro area," Discussion Papers 344, European University Viadrina Frankfurt (Oder), Department of Business Administration and Economics.
    13. repec:agr:journl:v:4(605):y:2015:i:4(605):p:189-198 is not listed on IDEAS
    14. Estache, Antonio, 2010. "Infrastructure finance in developing countries: An overview," EIB Papers 8/2010, European Investment Bank, Economics Department.
    15. Agenor, Pierre-Richard & Moreno-Dodson, Blanca, 2006. "Public infrastructure and growth : new channels and policy implications," Policy Research Working Paper Series 4064, The World Bank.
    16. Eduardo Engel & Ronald Fischer & Alexander Galetovic, 2010. "The economics of infrastructure finance: Public-private partnerships versus public provision," Documentos de Trabajo 276, Centro de Economía Aplicada, Universidad de Chile.
    17. Castro, Vitor, 2011. "The impact of the European Union fiscal rules on economic growth," Journal of Macroeconomics, Elsevier, vol. 33(2), pages 313-326, June.
    18. Jef Vuchelen & Stijn Caekelbergh, 2010. "Explaining public investment in Western Europe," Applied Economics, Taylor & Francis Journals, vol. 42(14), pages 1783-1796.
    19. Jorg Bibow, 2013. "Lost at Sea: The Euro Needs a Euro Treasury," Economics Working Paper Archive wp_780, Levy Economics Institute.
    20. Straub, Roland & Tchakarov, Ivan, 2007. "Assessing the impact of a change in the composition of public spending: a DSGE approach," Working Paper Series 795, European Central Bank.
    21. Walid BENAYED & Foued Badr GABSI & Samia OMRANE BELGUITH, 2015. "Threshold Effect of Public Debt on Domestic Investment: Evidence from Selected African Countries," Theoretical and Applied Economics, Asociatia Generala a Economistilor din Romania - AGER, vol. 0(4(605), W), pages 189-198, Winter.
    22. Inderst, Georg, 2010. "Infrastructure as an asset class," EIB Papers 3/2010, European Investment Bank, Economics Department.

    More about this item

    Keywords

    Public investment; Public capital stocks; Budgetary policy;

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
    • H54 - Public Economics - - National Government Expenditures and Related Policies - - - Infrastructures

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