Wirtschaftsdienst (Sep 2021)

Growth and Debt Effects of a Credit-Financed Public Investment Offensive

  • Sebastian Dullien,
  • Ekaterina Jürgens,
  • Christoph Paetz,
  • Sebastian Watzka

DOI
https://doi.org/10.1007/s10273-021-3003-5
Journal volume & issue
Vol. 101, no. 9
pp. 700 – 705

Abstract

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Abstract Simulations of a deficit-financed public investment programme in Germany amounting to €460 billion over ten years in the macroeconomic model NiGEM show that it will finance itself in 30 years at most, even under conservative model assumptions. In the basic version of the model, GDP is 3 % to 4 % above the baseline in the long run. Additionally, private investment is stimulated and rises by 4 % to 5 % above the baseline. These effects are amplified when an increase in the productivity of the private capital stock due to improved public infrastructure is taken into account.