The Fiscal Multiplier of European Structural Investment Funds: Aggregate and Sectoral Effects with an Application to Slovenia

April 30, 2021

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Luigi Durand, and Raphael A Espinoza. The Fiscal Multiplier of European Structural Investment Funds: Aggregate and Sectoral Effects with an Application to Slovenia, (USA: International Monetary Fund, 2021) accessed December 23, 2024

Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary

In this paper, we estimate the aggregate and sectoral fiscal multipliers of EU Structural Investment (ESI) Funds and of public investment at the EU level. We complement these results with a specific application to the case of Slovenia. We first analyze aggregate data and find large and significant multipliers and strong crowding-in of private investment. Our main findings show that positive shocks to ESI Funds are followed by an increase in output that ranges from 1.2 percent on impact, to 1.8 percent after 1 year, and by an increase in private investment between 0.7 and 0.8 percent of GDP. We address country heterogeneity by dividing countries according to key characteristics that have been known to affect multipliers. In particular, we find higher multipliers in a group of CEE countries that are important recipients of European funds and are characterized by fixed exchange rate regimes and sound public investment governance (e.g. Croatia and Slovenia). We also complement the aggregate analysis by estimating the effect of different types of public investment and the effect of public investment on different sectors of the economy.

Subject: Economic sectors, Employment, Expenditure, Labor, Manufacturing, National accounts, Private investment, Public employment, Public investment spending

Keywords: Aggregate analysis, Aggregate multiplier, Eastern Europe, Employment, Impact multiplier, Manufacturing, Private investment, Public employment, Public investment, Public investment spending, Sectoral multiplier

Publication Details

Pages:

53
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2021/118
Stock No:

WPIEA2021118
ISBN:

9781513573762
ISSN:

1018-5941

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