Skip navigation

Investment-led growth: a solution to the European crisis

Investment-led growth: a solution to the European crisis

Cozzi, Giovanni and Griffith-Jones, Stephany (2015) Investment-led growth: a solution to the European crisis. [Working Paper]

[img]
Preview
PDF
GPERC11_Cozzi_GriffithJonesF.pdf - Published Version
Available under License Creative Commons Attribution Non-commercial No Derivatives.

Download (409kB)

Abstract

A major plank for both recovery of the European economy and for its structural transformation is a significant increase in investment, particularly if linked to innovation. Higher investment can accelerate recovery in the short-term, by contributing to expand aggregate demand, but is as-or more important for increasing the future output and structural transformation. In this paper, we argue that for a significant increase in European Investment to occur, it is necessary to have a two pronged approach. One is to use regional and national development banks and national development banks to help catalyse investment. The other is to reduce the pace of fiscal consolidation, so that public investment does not continue to fall. Using the Cambridge Alphametric Model (CAM) we compare and contrast an austerity scenario, which project current austerity trends in Europe till 2025, with an ‘investment-focused’ scenario where investment rates are increases further in the context of an expansion in lending by both the European Investment Bank (EIB) and national development banks, and at the same time governments pursue more expansionary fiscal policies in order to stimulate investment and economic growth further. Our analysis gives a strong illustration of the positive role that development banks can and do play in helping economic recovery after crisis and in achieving structural transformation.

Item Type: Working Paper
Uncontrolled Keywords: development banks; investment; fiscal policies; innovation; structural transformation;
Subjects: H Social Sciences > H Social Sciences (General)
Faculty / Department / Research Group: Faculty of Business > Greenwich Political Economy Research Centre (GPERC)
Related URLs:
Last Modified: 19 Nov 2015 15:16
Selected for GREAT 2016: None
Selected for GREAT 2017: None
Selected for GREAT 2018: None
URI: http://gala.gre.ac.uk/id/eprint/14062

Actions (login required)

View Item View Item

Downloads

Downloads per month over past year

View more statistics