Government Investment and the European Stability and Growth Pact
Federal Reserve Bank of Chicago
University of Minnesota - Twin Cities - Department of Economics
Economic Perspectives, Vol. 31, No. 3, 2007
The authors analyze whether it makes sense to treat public investment spending differently from other government spending when applying the deficit constraints mandated within the single European currency area. Given the low rates of population growth, mobility, and mortality in European countries, they find that excluding public investment from the computation of the deficit ceiling has only moderate implications for the current generations' spending choices. They also show that excluding net investment yields better outcomes than excluding gross investment.
Number of Pages in PDF File: 11
Keywords: European Stability and Growth Pact, deficit, government investment, efficiency, budget rules, Ricardian equivalence, Allocative Efficiency, Cost-Benefit Analysis, Fiscal Policy, Public Goods; Infrastructures, Other Public Investment and Capital StockAccepted Paper Series
Date posted: September 11, 2007
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