Quantifying spillovers of coordinated investment stimulus in the EU

Abstract In response to the recession brought about by COVID-19 pandemic, EU-wide macroeconomic policy has launched an unprecedented coordinated fiscal expansion across EU (Next Generation or NGEU), financed issuing common debt. Given NGEU’s nature, it is essential take spillovers into consideration when assessing overall effects of this expansion. We quantify additional public investment for all Member States in a rich macro-model with trade structure. Our model suggests that, on average, GDP are around one-third larger explicitly accounting spillover from individual-country measures. For small open economies smaller NGEU allocations, account bulk impact. also key transmission channels.