Does Public Debt Produce a Crowding out Effect for Public Investment in the EU?

Picarelli, Mattia Osvaldo; Vanlaer, Willem; Marneffe, Wim

doi:10.2139/ssrn.3376471

Cited by 26 publications

(26 citation statements)

References 42 publications

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“…The researchers Picarelli, Vanlaer, and Marneffe (2019), have proven that investment investment in public debt contributes to economic growth and neutralizes the negative effects of debt obligations. The above-mentioned benefits of public investment are also reflected in the "Europe 2020" (European Commission, 2010), the 10-year strategy proposed by the European Commission for the promotion of the economy of the EU as it promotes "public funding for R&D", investment in education and training at all levels and key investments in infrastructure in the cross-border area, energy sector, construction of transport networks, environmentalization of the economy (Picarelli, Vanlaer, & Marneffe, 2019).…”

Section: Discussionmentioning

confidence: 99%

“…According to this fiscal rule, a state deficit is permissible if accompanied by an increase in assets so that the position of the net assets of the state does not deteriorate. At the same time, the expenses for debt servicing should be covered by current receipts, and in case of debt investment, the country is allowed to have debt (Kellermann, 2007;Picarelli, Vanlaer, & Marneffe, 2019).…”

Section: Literature Reviewmentioning

confidence: 99%

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Economic growth: macroeconomic effects of Public Borrowings at the global level

Buryk

Bashtannyk

Ragimov

2019

Problems and Perspectives in Management

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The study examines the peculiarities of the impact of public debt on the economic growth of states. The aim of the study was to analyze and identify the determinants of the impact of government borrowing on economic growth. The following research methods have been applied: analysis and synthesis of data and theoretical work, comparative analysis, statistical, correlation, cluster and discriminant analysis. According to the results of the survey, it is established that the growth of government borrowing can have both a negative and a positive effect on the economy, provided that it implements as the share of government debt to GDP, does not exceed 60% and is implemented in the form of financial investments (golden rule of public finance). The state’s deficit is allowed provided that state assets grow; current income from investment fully covers current expenses. The results of clusterization allowed to allocate 3 groups of states: states that demonstrated the economic downturn; states characterized by slow economic growth; states that were characterized by high level of economic growth. The first group of states (the countries with economic downturn) observed a negative high level of government debt and GDP. The results showed the low level of domestic borrowing development in low and middle income countries, which in developed countries allows governments to finance the investment projects on the basis of local loans (municipal bonds, infrastructure bonds, mainly medium and long-term), increase the debt burden in terms of economic recession.

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Section: Discussionmentioning

confidence: 99%

Section: Literature Reviewmentioning

confidence: 99%

Economic growth: macroeconomic effects of Public Borrowings at the global level

Buryk

Bashtannyk

Ragimov

2019

Problems and Perspectives in Management

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show abstract

“…There is also evidence from the EU that high levels of public debt and borrowing are associated with reduced public investment. Picarelli, Vanlaer and Marneffe (2019) find that each 10% increase in public debt reduces public investment by 0.3%, with the effect driven by high-debt countries, suggesting that impacts are increasing with debt levels.…”

Section: 'Crowding Out' Of Investmentmentioning

confidence: 91%

Fiscal consolidation after COVID-19: issues and policy options in sub-Saharan Africa

Nair¹,

Prinz²,

Phillips³

et al. 2021

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“…In addition, the existence of a high public debt slows down the realization of private investments, especially in the field of industry (Huang et al, 2018), while reduces public investments too (Picarelli et al, 2019).…”

Section: Public Debt and Growthmentioning

confidence: 99%

Fiscal Policy, Growth and Competitiveness in Emu: Evidence From Portugal and Greece

Psychalis¹,

Gournas²,

Grigorakou³

et al. 2020

IJEFI

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This paper aims at examining whether reforms in EU economic and fiscal governance between the period starting from 2010 and ending on 2018 have increased the Gross Domestic Product growth rate in Greece and Portugal. Reforms occurred, such as "Six Pack," "Two Pack," the "Fiscal Compact," and the "Euro Plus Pact," have focused on fiscal consolidation and competitiveness improvement; in other words, during the aforementioned time period, EMU concentrated on the improvement of internal as well as external imbalances. Moreover, the present paper assesses the international competitiveness through the prism of two main indicators: Unit Labour Cost and Current Account Balance. It seems that the literature is not crystal clear on the relationship between debt and the fiscal policy on the one side, competitiveness and growth from the other side. The findings of the paper may be of great assistance to policy makers on growth, competitiveness and fiscal policy, as they highlight the relationship between economic stability, entrepreneurship and growth. The herein below presented results demonstrate that there is, indeed, a strong relationship between fiscal consolidation and growth, while the relationship between public debt, Unit Labour Cost, Current Account Balance and growth remains blurred.

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Does Public Debt Produce a Crowding out Effect for Public Investment in the EU?

Cited by 26 publications

References 42 publications

Economic growth: macroeconomic effects of Public Borrowings at the global level

Economic growth: macroeconomic effects of Public Borrowings at the global level

Fiscal consolidation after COVID-19: issues and policy options in sub-Saharan Africa

Fiscal Policy, Growth and Competitiveness in Emu: Evidence From Portugal and Greece

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