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Determinants of Public Investments in the EU Countries. Role and Importance of Fiscal Rules

Author

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  • Rafal Chmura

    (SGH Warsaw School of Economics)

Abstract

The goal of this study is to identify factors determining the size of public investment in the EU countries and to verify the hypothesis about the negative impact of fiscal rules on the public investment. Panel models estimated on the data from 1995 to 2019 confirmed the hypothesis. The increase in Fiscal Rules Index (which describes the strength and restrictiveness of fiscal rules in each country) by one standard deviation is associated with the decrease in public investment by almost 0.4% GDP. Moreover, the strongest negative impact on public investment has the existence of debt rules. Assuming that public investment is a desirable instrument of economic policy (e.g. supporting the recovery after a crisis or achieving long-term climate goals), obtained results are an empirical contribution to the current discussion on the reform of the fiscal framework in the EU, supporting addition to the fiscal rules investment clauses.

Suggested Citation

  • Rafal Chmura, 2023. "Determinants of Public Investments in the EU Countries. Role and Importance of Fiscal Rules," Czech Journal of Economics and Finance (Finance a uver), Charles University Prague, Faculty of Social Sciences, vol. 73(4), pages 351-374, December.
    • Handle: RePEc:fau:fauart:v:73:y:2023:i:4:p:351-374
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    File URL: https://journal.fsv.cuni.cz/mag/article/show/id/1524
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    More about this item

    Keywords

    public investment; fiscal rules; European Union;
    All these keywords.

    JEL classification:

    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • H50 - Public Economics - - National Government Expenditures and Related Policies - - - General
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models

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