Title: The Short-run Effects of EU Funds in Spain using a CGE model: the relevance of Macro-closures
Authors: ALVAREZ MARTINEZ MARIA TERESAPOLO CLEMENTE
Citation: JOURNAL OF ECONOMIC STRUCTURES vol. 6 p. 21
Publisher: SPRINGER
Publication Year: 2017
JRC N°: JRC107889
ISSN: 2193-2409
URI: https://journalofeconomicstructures.springeropen.com/articles/10.1186/s40008-017-0077-8
http://publications.jrc.ec.europa.eu/repository/handle/JRC107889
DOI: 10.1186/s40008-017-0077-8
Type: Articles in periodicals and books
Abstract: This paper evaluates the impact of the Structural and Cohesion funds received by Spain in the period 2007-2013. The analysis is performed with a detailed Computable General Equilibrium (CGE) model calibrated with a SAM for Spain in 2005 elaborated by the authors, which contains high detailed information on capital goods and tax rates. The aim of the paper is to quantify the short run effects of the EU funds in the Spanish economy, which can help economic recovery. Additionally, it is evaluated to what extent these short run effects may be over or underestimated due to the closure rule used in this kind of models (neoclassical or Keynesian). The closure determines the endogenous variables in the market clearance conditions and they affect the results of shocks in final demand. The conclusions show that neoclassical closure, used in previous CGE studies done for Spain, underestimates the impact they have on employment and GDP and captures a fictitious shock in private investment. It this case, employment and real GDP does not almost change while under Keynesian rule they increase in 1.2 and 0.68 percent, respectively. These results invalidate some of the estimates derived from previous studies and suggest that the best option to quantify the likely positive short run effects of raising public investment are only captured through Keynesian closure.
JRC Directorate:Growth and Innovation

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