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This paper estimates the impact of public investment on regional economic growth and convergence at the NUTS 3 level in Greece. Using a new database of public expenditure per region for the period 1978-2007, it proposes a model which captures not just the impact of public investment in Greek prefectures, but also the spillover effects related to the existence of externalities from neighbouring regions. The results point to a positive long-run impact of public investment per capita on regional economic growth - but not on convergence - which also generates considerable spillover effects. However, the returns vary according to different types of public investment, with education and infrastructure spillovers having the highest impact. In general, public investment externalities seem to be more relevant for regional growth than direct public investment in each region. Finally, the impact of different types of public investment in Greece is mediated by politics and political factors, but the effect of politics disappears once we control for political-period-specific spatial-invariant variables. Resumen Este artículo estima el impacto de la inversión pública en el crecimiento económico regional y la convergencia a nivel NUTS 3 en Grecia. Haciendo uso de una nueva base de datos de gasto público por región para el periodo 1978-2007, se propone un modelo que identifica no solamente el impacto de la inversión pública en las prefecturas griegas, sino también los efectos de spillover relacionados con la existencia de externalidades procedentes de regiones vecinas. Los resultados apuntan a un impacto positivo a largo plazo de la inversión pública per cápita en el crecimiento económico regional - pero no en la convergencia - el cual genera unos efectos de spillover considerables. Sin embargo, los retornos varían de acuerdo con los diferentes tipos de inversión pública, siendo la educación y los spillovers de infraestructura los de mayor impacto. En general, las externalidades de inversión pública parecen tener una mayor relevancia para el crecimiento regional que la inversión pública directa en cada región. Para terminar, el impacto de los diferentes tipos de inversión pública en Grecia se ve influido por sus políticas y otros factores políticos, pero el efecto de las políticas desaparece una vez que se controlan las variables espacialmente-invariantes de tipo político ligadas a un periodo específico. [ABSTRACT FROM AUTHOR]

ABSTRACT This paper employs Hong's (2001) causality-in-mean and causality-in-variance tests to investigate the spillovers between business confidence and stock returns for the four economically distressed Southern European countries, namely Greece, Italy, Spain, and Portugal. The sample uses monthly data and covers the period from January 1988 to December 2010. Our causality-in-mean results indicate that there is feedback relationship between stock returns and business confidence in Portugal. The direction of causality-in-mean runs from business confidence to stock returns in Italy, but it is in the reverse direction in the case of Spain. Nevertheless, there is still evidence of a contemporaneous interaction between business confidence and stock returns in both Italy and Spain. On the other hand, causality-in-variance indicate the presence of volatility spillovers from business confidence to stock returns in Portugal, while a causal relationship is found in the current month in the case of Italy. Business confidence causes stock returns only in the mean in Greece. These results indicate that the stock market and business confidence relationship has its own idiosyncratic properties and that the stock market reactions to the current macroeconomic environment and expectations about the future developments might evolve differently in each country. Copyright © 2012 John Wiley & Sons, Ltd. [ABSTRACT FROM AUTHOR]