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Fiscal Rules And Public Investment

Author

Listed:
  • Eric Peree

    (European Investment Bank, Economic and Financial Studies)

  • Timo Valila

    (European Investment Bank, Economic and Financial Studies)

Abstract

This paper examines the link between fiscal rules and public investment both normatively and empirically. We first review the arguments for and against including public investment spending in a fiscal deficit rule. We then seek to assess the determinants of public investment, with a special focus on the role of the fiscal rules embodied in EMU. We conclude that there are practical difficulties precluding the introduction of a "golden rule" and that there is virtually no evidence that EMU would have affected public investment. Therefore, the focus on safeguarding the level of public investment is somewhat misplaced; instead, one should focus on safeguarding its productivity.

Suggested Citation

  • Eric Peree & Timo Valila, 2005. "Fiscal Rules And Public Investment," Economic and Financial Reports 2005/2, European Investment Bank, Economics Department.
    • Handle: RePEc:ris:eibefr:2005_002
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    References listed on IDEAS

    as
    1. Timo Valila & Aaron Mehrotra, 2005. "Evolution And Determinants Of Public Investment In Europe," Economic and Financial Reports 2005/1, European Investment Bank, Economics Department.
    2. Aschauer, David Alan, 1989. "Is public expenditure productive?," Journal of Monetary Economics, Elsevier, vol. 23(2), pages 177-200, March.
    3. Blanchard, Olivier & Giavazzi, Francesco, 2004. "Improving the SGP Through a Proper Accounting of Public Investment," CEPR Discussion Papers 4220, C.E.P.R. Discussion Papers.
    4. Jan-Egbert Sturm & Gerard H. Kuper & Jakob Haan, 1998. "Modelling Government Investment and Economic Growth on a Macro Level: A Review," Palgrave Macmillan Books, in: Steven Brakman & Hans Ees & Simon K. Kuipers (ed.), Market Behaviour and Macroeconomic Modelling, chapter 14, pages 359-406, Palgrave Macmillan.
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    Cited by:

    1. Pierre Richard Agénor & Devrim Yilmaz, 2006. "The Tyranny of Rules: Fiscal Discipline, Productive Spending, and Growth," Economics Discussion Paper Series 0616, Economics, The University of Manchester.
    2. European Fiscal Board (EFB), 2019. "Assessment of EU fiscal rules with a focus on the six and two-pack legislation," Reports 2019, European Fiscal Board.
    3. Cezara Vinturis, 2023. "How do fiscal rules shape governments' spending behavior?," Economic Inquiry, Western Economic Association International, vol. 61(2), pages 322-341, April.
    4. P R Agénor & D Yilmaz, 2006. "The Tyranny of Rules: Fiscal Discipline, Productive Spending, and Growth," Centre for Growth and Business Cycle Research Discussion Paper Series 73, Economics, The University of Manchester.

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    More about this item

    Keywords

    Fiscal rules; public investment; fiscal deficit; European Monetary Union;
    All these keywords.

    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; Modern Monetary Theory
    • E65 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Studies of Particular Policy Episodes
    • H54 - Public Economics - - National Government Expenditures and Related Policies - - - Infrastructures

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