A market‐financed and growth‐enhancing investment plan for the euro area. (17th June 2020)

• Record Type: Journal Article
• Authors: Della Posta, Pompeo; Marelli, Enrico; Signorelli, Marcello
• Is Part Of: Metroeconomica. Volume 71:Number 3(2020)
• Page Start: 604
• Page End: 632
• Publication Date: 2020-06-17
• Subjects: Fiscal policy -- GDP growth -- Investment plan -- Public debt sustainability -- Public debt‐to‐GDP stability; Economics -- Periodicals; 330
• DOI: 10.1111/meca.12294
• Languages: English
• ISSNs: 0026-1386

Abstract

Abstract: In this paper, we analyze the problem of public debt‐to‐GDP stability in the Eurozone. We suggest that a feasible solution might be the realization of a market‐financed, growth‐enhancing investment program, which would be particularly welcome because of the positive short‐ and long‐term repercussions it would have on GDP growth and the stabilizing effects on interest rates. Some simulations allow us to quantify these effects. The consequences of the COVID‐19 pandemic further reinforce our policy implications in terms of public debt sustainability.