Private Equity - Spice for European Economies

Abstract

Private equity has become a substantial force in the European financial system. This paper describes some of the recent developments and looks at the structural relationship between private equity investments and economic growth. The econometric analysis of a set of panel data from 20 European countries for the period between 1994 and 2004 suggests a positive relation. According to this analysis, an increase in private equity investments of 0.1% of GDP is associated with an increase in real economic growth of between 0.2 pp (buyouts)and 0.8 pp (early-stage investments) — other things being equal.

Keywords: Private Equity, Venture Capital, Economic Growth

JEL Classification: G24, O52