Naslov (eng)

Increasing public investment can be an effective policy in bad times : Evidence from emerging EU economies

Autor

Arsić, Milojko
Petrović, Pavle
Nojković, Aleksandra

Opis (eng)

A B S T R A C T: Using Local projections and a Panel Structural Vector Auto-Regressive model, we evaluate the effectiveness of fiscal policy in the Central and East European EU economies. We find that an increase in public investment has a strong positive effect on output, employment, wages and consumption during periods of economic downturn. Deficit-financed public investment does not increase the debt-to-GDP ratio and is essentially self-financed. In contrast, an increase in public consumption has little impact on economic activity and increases the debt-to-GDP ratio. The observed short term effects concur with a neo-Keynesian pattern suggesting that increase in public investment boosts the demand for labor in the private sector, leading to higher real wages and higher con- sumption. In the medium term, an increase in public investment enhances private investment thus generating supply side effect. We conclude that public investment can be an important policy instrument for combatting recessions and stimulating long-run growth, since monetary policy has run out of steam.

Opis (eng)

Financial support from the Ministry of Education, Science and Technological Development of the Republic of Serbia [Pavle Petrovic - grant 179005, Milojko Arsic - grant 179005, and Aleksandra Nojkovic - grants 179005 and 179065]

Jezik

engleski

Datum

2021

Licenca

© All rights reserved

Predmet

Keywords: Fiscal multipliers, Public investment, Stabilisation policy, Keynesian vs. neoclassical view of fiscal policy, Emerging EU economies

Deo kolekcije (1)

o:28218

Ekonomski fakultet