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Macroeconomic effects of public investment in South-East Europe

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  • Masten, Igor
  • Grdović Gnip, Ana

Abstract

This paper provides the first cross-country study of the macroeconomic effects of public investment in South-East Europe. For these countries, we construct a unique dataset of exogenous changes in public investment and use them with Jordá (2005) local projections method to estimate their dynamic effects on the main macroeconomic aggregates, the unemployment rate and debt-to-GDP ratio. Our results show significant multiplicative effects of public investment on GDP, delivered primarily through crowding in of private investment. Our analysis confirms that public investment can be seen as a catalyst of positive spillover effects to other sectors of the economy and thus contribute to productivity growth.

Suggested Citation

  • Masten, Igor & Grdović Gnip, Ana, 2019. "Macroeconomic effects of public investment in South-East Europe," Journal of Policy Modeling, Elsevier, vol. 41(6), pages 1179-1194.
    • Handle: RePEc:eee:jpolmo:v:41:y:2019:i:6:p:1179-1194
    DOI: 10.1016/j.jpolmod.2019.05.005
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    3. Andreea Ocolișanu & Gabriela Dobrotă & Dan Dobrotă, 2022. "The Effects of Public Investment on Sustainable Economic Growth: Empirical Evidence from Emerging Countries in Central and Eastern Europe," Sustainability, MDPI, vol. 14(14), pages 1-25, July.
    4. Luis Fernando Mejía & Martha Elena Delgado, 2020. "Impacto macroeconómico y social de la inversión en infraestructura en Colombia, 2021-2030," Informes de Investigación 18275, Fedesarrollo.

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    More about this item

    Keywords

    Capital spending; Fiscal multiplier; Local projections; Transport infrastructure; South-East Europe;
    All these keywords.

    JEL classification:

    • E61 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Policy Objectives; Policy Designs and Consistency; Policy Coordination
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • H62 - Public Economics - - National Budget, Deficit, and Debt - - - Deficit; Surplus

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