External action, internal gains

: how EIB investments outside the EU affect the EU's markets and economy

Abstract

As the European Union increasingly positions itself as a global actor through development finance, the European Investment Bank’s external role has expanded. This shift raises questions about whether this strategy positively impacts the Union and how it aligns with its mission of supporting the internal market’s development. The analysis combines event studies – examining financial market reactions of European stocks and European Investment Bank bonds – with a Propensity Score Matching staggered Difference-in-Differences approach that evaluates trade and investment flow changes between the Union and the non-European Union countries supported by the bank. The results suggest that European firms responded positively, whereas the bank’s bond investors exhibited some caution, possibly reflecting concerns over the increased risk associated with a global mandate. On the macroeconomic side, there are indications of positive trends in exports and outward foreign direct investment flows to the European Union, as well as imports from the Union. However, the lack of statistical significance limits the confirmation of measurable effects. These findings challenge the idea that the bank might support Aid for Trade outcomes. This research contributes to the literature on development finance, European Union foreign policy and the effects in donor regions. Overall, this study provides valuable insight into how the European Union reacts to changes in the European Investment Bank's external strategy and suggests that the bank's external operations may serve geopolitical objectives more than direct economic gains to the European Union.

Date of Award	30 Jun 2025
Original language	English
Awarding Institution	Universidade Católica Portuguesa
Supervisor	Carla Soares (Supervisor)