The challenge of increasing public investment without jeopardising compliance with the strict budgetary discipline that has been imposed in Spain is discussed. The relationship between investment in transport infrastructure and economic development is explored. It is concluded that public investment , particularly in infrastructure, is a major instrument of economic policy. This challenges the validity of models based on aggregate supply and predicates a return to Keynesian-type economic models founded on measures based on aggregate demand and the use of the public deficit as a means of expanding the economy. Advances in both econometrics and the processing of statistical information make it easier to develop more sophisticated multiple-equation models, designed to provide a more accurate representation of reality. In the case of Spain, multivariable, vector-autoregressive modes are used to estimate the short-, medium- and long-term effects of investment in infrastructure in different scenarios and with dynamic links between all variables, which are treated as endogenous variables; a structural macroeconomic model is also used, which simultaneously takes account of the effects of supply and demand and thereby makes it possible to assess the total effects of the 2000-2010 Infrastructure Plan currently in force. The simulations run confirmed the existence of a strong correlation between public investment in infrastructure and productivity, as well as the fact that the crowding-in effect of private investment by public investment, due to the increase in productivity, is higher than the crowding-out effect generated by the increase in aggregate demand. This proves that the net impact of public investment on private investment is positive. For the covering abstract for this conference see ITRD E128114.
Abstract