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Private Investment and Public Investment: Total Rates of Return and Global Balances in the OECD

Author

Listed:
  • António Afonso
  • José Alves
  • Sofia Monteiro

Abstract

We assess the relevance of macro rates of return on time-varying fiscal and external sustainability. First, we compute the total public and private macroeconomic rates of return for 16 OECD countries from 1980 to 2022. We find that there is a positive impact of higher investment returns on stimulating higher aggregate demand, therefore resulting in higher tax revenues, which in turn lead to greater fiscal sustainability and more external sustainability by lowering the need for foreign capital and imports of goods and services. Accordingly, we demonstrate that macroeconomic rates of return of both public and private investment positively contribute to fiscal sustainability and that public sector investment also displays the same positive effect on external sustainability.

Suggested Citation

  • António Afonso & José Alves & Sofia Monteiro, 2025. "Private Investment and Public Investment: Total Rates of Return and Global Balances in the OECD," CESifo Working Paper Series 11634, CESifo.
    • Handle: RePEc:ces:ceswps:_11634
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    More about this item

    Keywords

    macroeconomic rates of return; fiscal sustainability; external sustainability; time-varying; public investment; private investment;
    All these keywords.

    JEL classification:

    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
    • H54 - Public Economics - - National Government Expenditures and Related Policies - - - Infrastructures
    • H61 - Public Economics - - National Budget, Deficit, and Debt - - - Budget; Budget Systems

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