Sectoral Investment in Input-Output Frameworks: A Note on Stamegna et al. (2024)

Abstract This note clarifies a number of methodological issues in the treatment of sectoral investment shocks in the article by Stamegna, M., C. Bonaiuti, P. Maranzano, and M. Pianta. 2024. “The Economic Impact of Arms Spending in Germany, Italy, and Spain.” Peace Economics, Peace Science and Public Policy 30 (4): 393–422. In particular, the distinction between purchasing and supplying industries is not consistently followed, leading to an inaccurate specification of the final-demand vector and of the associated import propensities. As a result, the estimated multipliers cannot be interpreted as multipliers of investment expenditure in the sectors considered. The note outlines the standard input–output conventions governing gross fixed capital formation and briefly indicates how a scenario-based approach would be required to analyse investment effects in a conceptually consistent manner.