NextGenerationEU: A Renaissance of Public Investments in Europe?

How Governments use the EU Recovery and Resilience Funds | Thinking about Crypto Assets and Central Bank Digital Currency | The Whys of Investment Screening: A Trend to Inward Foreign Investment? | Effects of Policy Mix on European Regional Convergence | Planned Fiscal Consolidation and Under-Estimated Multipliers
EconPol Newsletter will be published every two months
EU Resilience Funds – Replacement or Investment?
Germany and Austria are using the EU’s Recovery and Resilience Funds primarily to finance already existing or planned projects rather than to invest in new ones. This is a key finding of a new EconPol Policy Brief. Francesco Corti, Daniel Gros, Tomas Ruiz, Alessandro Liscai, Tamas Kiss-Galfalvi, David Gstrein, Elena Herold, and Mathias Dolls shed light on the question of how national governments use the EU funds of the Recovery and Resilience Facility by considering the National Recovery Resilience Plans of Austria, Belgium, Germany, Spain, Italy, and Portugal in-depth.
Economic Impacts of Crypto Assets and Central Bank Digital Currencies
The EconPol Policy Report by Hernán D. Seoane shows possible impacts of the increased use of crypto assets in the absence of Central Bank Digital Currencies: If crypto crowds out cash, the government suffers a loss in the collection of seignoriage. On the other hand, if crypto crowds out deposits, there is a negative impact on the financing of corporate firms. Furthermore, the introduction of Central Bank Digital Currencies would have no effect on the transmission of monetary policy shocks.
The Rise of Investment Screening
A new EconPol Policy Report by Vera Z. Eichenauer, Michael Dorsch, and Feicheng Wang finds that countries with higher levels of technological development and a stricter regulatory environment are more likely to introduce screening mechanisms to control inward foreign direct investment. Over the last years, economic and security concerns have led to an expansion or tightening of foreign investment. However, contrary to popular perception, there is no evidence that higher Chinese inward investments are associated with the implementation of investment screening.
How Effective is the EU’s Cohesion and Regional Policy?
In the new EconPol Working Paper, Ignacio Sacristán López-Bravo, and Carlos San Juan Mesonada address the effectiveness of regional and cohesion policy designed through the European Structural and Investment Funds. The authors have found that a policy mix of fiscal restraint and monetary expansion would boost growth in all regions, but also slow down the convergence process of least developed regions.
Under-Estimated Fiscal Multipliers in times of Crises
In the latest Policy Report, Daniel Gros, Alessandro Liscai, and Farzaneh Shamsfakhr revisit an approach, pioneered by Blanchard and Leigh in 2013, purporting that fiscal multipliers are underestimated in times of crisis, specifically applied to the multipliers from austerity in the wake of the Great Financial Crisis. The EconPol report, however, using data from the European Commission, finds much weaker evidence of a systematic relationship between growth forecast errors and planned consolidation.
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