Determinants of Public Investments in the EU Countries. Role and Importance of Fiscal Rules.
Year: 2023 Volume: 73 Issue: 4 Pages: 351-374
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.
JEL classification: E62, H50, C23
Keywords: public investment, fiscal rules, European Union
DOI: https://doi.org/10.32065/CJEF.2023.04.02
RePEc: https://ideas.repec.org/a/fau/fauart/v73y2023i3p351-374.html
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