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Das Public Kapital: How much would higher German public investment help Germany and the euro area?

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  • Elekdag, Selim
  • Muir, Dirk
  • Wu, Yiqun

Abstract

Given the backdrop of pressing infrastructure needs, this paper argues that higher German public investment would not only stimulate domestic demand in the near term, but would also raise output over the longer-run as well as generate beneficial regional spillovers. Although time-to-build delays can weaken the impact of the stimulus in the short-run, the expansionary effects of higher public investment are substantially strengthened by an accommodative monetary policy stance. The current low-interest rate environment presents a window of opportunity to finance higher public investment at historically favorable rates.

Suggested Citation

  • Elekdag, Selim & Muir, Dirk & Wu, Yiqun, 2022. "Das Public Kapital: How much would higher German public investment help Germany and the euro area?," Journal of Policy Modeling, Elsevier, vol. 44(2), pages 223-251.
    • Handle: RePEc:eee:jpolmo:v:44:y:2022:i:2:p:223-251
    DOI: 10.1016/j.jpolmod.2020.02.002
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    Cited by:

    1. Finocchiaro Castro, Massimo & Guccio, Calogero & Rizzo, Ilde, 2023. "“One-size-fits-all” public works contract does it better? An assessment of infrastructure provision in Italy," Journal of Policy Modeling, Elsevier, vol. 45(5), pages 994-1014.
    2. Massimo Finocchiaro Castroa & Calogero Guccio & Ilde Rizzo, 2023. "How 'one-size-fits-all' public works contract does it better? An assessment of infrastructure provision in Italy," Papers 2304.10776, arXiv.org.

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    More about this item

    Keywords

    Fiscal policy; Monetary policy accommodation; Germany; Euro area; Fiscal multipliers;
    All these keywords.

    JEL classification:

    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
    • F42 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - International Policy Coordination and Transmission

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