Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/333513 
Year of Publication: 
2025
Series/Report no.: 
Policy Notes and Reports No. 99
Publisher: 
The Vienna Institute for International Economic Studies (wiiw), Vienna
Abstract: 
Public investment can support geoeconomic policy goals by strengthening economic resilience through the creation of public assets and by fostering domestic sources of economic growth. This paper presents new evidence on how public investment affects output, unemployment, private investment and public debt in the 27 EU member countries. Using forecast errors based on archival data to identify public investment shocks, we find that expansionary shocks (a) have favourable effects on output and unemployment in the short to medium run; (b) do not crowd out private investment; and (c) do not jeopardise public debt sustainability. Even though fiscal consolidation pressures linked to EU fiscal rules are high, promoting public investment may be critical - not only for economic development, but also to advance geostrategic goals in energy, infrastructure and resilience.
Subjects: 
Public investment
growth
unemployment
public debt
JEL: 
E32
D84
F02
Q41
Q43
Q48
Document Type: 
Research Report

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