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On the Impact of Next Generation EU Funds: A Regional Synthetic Control Method Approach

Author

Listed:
  • Priscila Espinosa

    (Department of Applied Economics, Universitat de València, Spain)

  • Daniel Aparicio-Pérez

    (Department of Finance and Accounting, Universitat Jaume I, Castellón, Spain
    Department of Applied Economics, Universitat de València, Valencia, Spain)

  • Emili Tortosa-Ausina

    (IVIE, Valencia and IIDL and Department of Economics, Universitat Jaume I, Castellón, Spain)

Abstract

The European Union’s Next Generation EU (NGEU) program and its implementation through the Recovery and Resilience Facility (RRF) were conceived with the premise of promoting a coordinated fiscal response within the European Union to ad- dress the challenges arising from the COVID-19 crisis. The program provides Member States with access to grants and concessional loans aimed at supporting their recovery and resilience plans, which must incorporate coherent packages of reforms and investments. We evaluate the regional economic impact of the NGEU program in Spain, as one of the European countries most affected by the pandemic and, therefore, one of the program’s main beneficiaries. To do so, we employ counterfactual techniques, which are particularly useful when considering alternative scenarios, such as the existence or absence of NGEU funds. It is noteworthy that the use of counterfactual models involves an inherent conservatism that warrants caution in interpreting the results. According to our results, the economic impact led to an increase in GDP per capita during 2022, a perspective that is projected into 2023 and 2024, compared to a scenario without NGEU funds. This analysis, aligned with the principles of counterfactual models and their inherent conservatism, sheds light on the economic transformations attributable to the implementation of these exceptional measures.

Suggested Citation

  • Priscila Espinosa & Daniel Aparicio-Pérez & Emili Tortosa-Ausina, 2023. "On the Impact of Next Generation EU Funds: A Regional Synthetic Control Method Approach," Working Papers 2023/07, Economics Department, Universitat Jaume I, Castellón (Spain).
    • Handle: RePEc:jau:wpaper:2023/07
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    More about this item

    Keywords

    counterfactual; COVID-19; fiscal multipliers; Next Generation EU funds; regions; synthetic control method;
    All these keywords.

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • E27 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Forecasting and Simulation: Models and Applications
    • E60 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - General
    • H50 - Public Economics - - National Government Expenditures and Related Policies - - - General
    • R10 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - General

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