Public Investment Growth And Fiscal Constraints

Author : Massimo Florio
Publisher : Edward Elgar Publishing
Page : 329 pages
File Size : 41,8 Mb
Release : 2011-01-01
Category : Business & Economics
ISBN : 9781849804776

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Public Investment, Growth and Fiscal Constraints by Massimo Florio Pdf

This book makes a unique contribution in advancing understanding of the fiscal condition and growth potential of the New Member States of the European Union. It provides new data, policy evaluation, and offers national and regional perspectives. The core research questions are the effect of public investment in the context of macroeconomic disequilibrium and how it is possible to finance capital accumulation in the present and future conditions of mounting public sector debt. The contributors reveal that there is now a convincing case for public investment as an essential driver of convergence and growth in Europe. However, a new international and inter-generational fiscal pact to frame a more optimistic view of the role of government is needed. This book explores how public investment matters for growth, how fiscal conditions may support investment, and the role EU regional policy can have in terms of structural change and investment needs. Public Investment, Growth and Fiscal Constraints provides new data analyses on the EU New Member States in Central and Eastern Europe making it an essential tool for academics, students and practitioners interested in public finance and European Economics. The structural and public finance issues in these former transition economies raised in this book will also strongly appeal to policymakers, officials and consultants. The book is based on an independent research project of the University of Milan, supported by the European Investment Bank.

Author : Mr.Andrew Berg,Rafael Portillo,Mr.Edward F. Buffie,Ms.Catherine A. Pattillo,Luis-Felipe Zanna
Publisher : International Monetary Fund
Page : 114 pages
File Size : 47,5 Mb
Release : 2012-06-01
Category : Business & Economics
ISBN : 9781475577259

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Public Investment, Growth, and Debt Sustainability by Mr.Andrew Berg,Rafael Portillo,Mr.Edward F. Buffie,Ms.Catherine A. Pattillo,Luis-Felipe Zanna Pdf

We develop a model to study the macroeconomic effects of public investment surges in low-income countries, making explicit: (i) the investment-growth linkages; (ii) public external and domestic debt accumulation; (iii) the fiscal policy reactions necessary to ensure debt-sustainability; and (iv) the macroeconomic adjustment required to ensure internal and external balance. Well-executed high-yielding public investment programs can substantially raise output and consumption and be self-financing in the long run. However, even if the long run looks good, transition problems can be formidable when concessional financing does not cover the full cost of the investment program. Covering the resulting gap with tax increases or spending cuts requires sharp macroeconomic adjustments, crowding out private investment and consumption and delaying the growth benefits of public investment. Covering the gap with domestic borrowing market is not helpful either: higher domestic rates increase the financing challenge and private investment and consumption are still crowded out. Supplementing with external commercial borrowing, on the other hand, can smooth these difficult adjustments, reconciling the scaling up with feasibility constraints on increases in tax rates. But the strategy may be also risky. With poor execution, sluggish fiscal policy reactions, or persistent negative exogenous shocks, this strategy can easily lead to unsustainable public debt dynamics. Front-loaded investment programs and weak structural conditions (such as low returns to public capital and poor execution of investments) make the fiscal adjustment more challenging and the risks greater.

Author : International Monetary Fund. Fiscal Affairs Dept.
Publisher : International Monetary Fund
Page : 49 pages
File Size : 42,5 Mb
Release : 2005-01-04
Category : Business & Economics
ISBN : 9781498331630

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Public Investment and Fiscal Policy - Lessons From the Pilot Country Studies by International Monetary Fund. Fiscal Affairs Dept. Pdf

This paper reports on findings from eight pilot country studies on public investment that were carried out during the second half of 2004. The pilot country studies covered a diverse group of countries. Specifically, they included countries in Latin America (Brazil, Chile, Colombia, and Peru), Africa (Ethiopia and Ghana), the Middle East (Jordan), and Asia (India).

Author : Jack M. Mintz,Michael Smart
Publisher : World Bank Publications
Page : 32 pages
File Size : 48,6 Mb
Release : 2006
Category : Capital budget
ISBN : 8210379456XXX

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Incentives for Public Investment Under Fiscal Rules by Jack M. Mintz,Michael Smart Pdf

The authors explore the relationship between fiscal rules and capital budgeting. The current budgetary approach to limit deficits to a fixed portion of GDP or to balance budgets could undermine incentives to invest in public capital with long-run returns since politicians concerned about electoral prospects would favor expenditures providing immediate benefits to their voters. An alternative budgetary approach is to separate capital from current revenues and expenditures and relax fiscal constraints by allowing governments to finance capital expenditures with debt, as suggested by the golden rule approach to capital funding. But the effect of capital budgeting would be to provide opportunities to politicians to escape the fiscal rule constraints by shifting current expenditures into capital accounts that are difficult to measure properly, thereby leading to increased borrowing. As an alternative, the authors propose a modified golden rule limiting debt finance to a proportion of the government's investment in self-liquidating assets.

Author : Luis Serven
Publisher : World Bank Publications
Page : 36 pages
File Size : 45,6 Mb
Release : 2016
Category : Electronic
ISBN : 8210379456XXX

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Fiscal Rules, Public Investment, and Growth by Luis Serven Pdf

Solvency is an intertemporal concept, relating to the present value of revenues and expenditures, and encompassing both assets and liabilities. But the standard practice among policy makers, financial market participants and international financial institutions is to assess the strength of the fiscal accounts solely on the basis of the cash deficit. Short-term cash flows matter, but a preponderant focus on them can encourage governments to invest too little, especially during episodes of fiscal tightening. This has potentially adverse consequences for growth and, paradoxically, even for fiscal solvency itself. The paper offers an overview of the links between fiscal targets, public investment, and public sector solvency. After reviewing the international experience with public investment under fiscal adjustment, the paper lays out an analytical framework to illustrate the consequences of using the public deficit as a guide to solvency. The paper then discusses some alternatives to conventional cash deficit rules and their implications for investment and fiscal solvency.

Author : Mr. Abdul Abiad,Davide Furceri,Petia Topalova
Publisher : International Monetary Fund
Page : 26 pages
File Size : 54,5 Mb
Release : 2015-05-04
Category : Business & Economics
ISBN : 9781484361559

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The Macroeconomic Effects of Public Investment by Mr. Abdul Abiad,Davide Furceri,Petia Topalova Pdf

This paper provides new evidence of the macroeconomic effects of public investment in advanced economies. Using public investment forecast errors to identify the causal effect of government investment in a sample of 17 OECD economies since 1985 and model simulations, the paper finds that increased public investment raises output, both in the short term and in the long term, crowds in private investment, and reduces unemployment. Several factors shape the macroeconomic effects of public investment. When there is economic slack and monetary accommodation, demand effects are stronger, and the public-debt-to-GDP ratio may actually decline. Public investment is also more effective in boosting output in countries with higher public investment efficiency and when it is financed by issuing debt.

Author : Mr.Andrew M. Warner
Publisher : International Monetary Fund
Page : 76 pages
File Size : 43,7 Mb
Release : 2014-08-11
Category : Business & Economics
ISBN : 9781498378277

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Public Investment as an Engine of Growth by Mr.Andrew M. Warner Pdf

This paper looks at the empirical record whether big infrastructure and public capital drives have succeeded in accelerating economic growth in low-income countries. It looks at big long-lasting drives in public capital spending, as these were arguably clear and exogenous policy decisions. On average the evidence shows only a weak positive association between investment spending and growth and only in the same year, as lagged impacts are not significant. Furthermore, there is little evidence of long term positive impacts. Some individual countries may be exceptions to this general result, as for example Ethiopia in recent years, as high public investment has coincided with high GDP growth, but it is probably too early to draw definitive conclusions. The fact that the positive association is largely instantaneous argues for the importance of either reverse causality, as capital spending tends to be cut in slumps and increased in booms, or Keynesian demand effects, as spending boosts output in the short run. It argues against the importance of long term productivity effects, as these are triggered by the completed investments (which take several years) and not by the mere spending on the investments. In fact a slump in growth rather than a boom has followed many public capital drives of the past. Case studies indicate that public investment drives tend eventually to be financed by borrowing and have been plagued by poor analytics at the time investment projects were chosen, incentive problems and interest-group-infested investment choices. These observations suggest that the current public investment drives will be more likely to succeed if governments do not behave as in the past, and instead take analytical issues seriously and safeguard their decision process against interests that distort public investment decisions.

Author : Kenneth J. Arrow,Mordecai Kruz
Publisher : Routledge
Page : 254 pages
File Size : 50,5 Mb
Release : 2013-10-18
Category : Business & Economics
ISBN : 9781135988890

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Public Investment, the Rate of Return, and Optimal Fiscal Policy by Kenneth J. Arrow,Mordecai Kruz Pdf

This book, co-authored by the Nobel-prized economist, Kenneth Arrow, considers public expenditures in the context of modern growth theory. It analyzes optimal growth with public capital. A theory of 'controllability' is developed and injected into public economics and growth models. Originally published in 1970

Author : Adrian Alter,Matteo Ghilardi,Ms.Dalia Hakura
Publisher : International Monetary Fund
Page : 35 pages
File Size : 40,8 Mb
Release : 2015-11-10
Category : Business & Economics
ISBN : 9781513530253

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Public Investment in a Developing Country Facing Resource Depletion by Adrian Alter,Matteo Ghilardi,Ms.Dalia Hakura Pdf

This paper analyzes the tradeoffs between savings, debt and public investment in the Republic of Congo, a developing country with looming oil exhaustibility concerns. Our results highlight the risks to fiscal and capital sustainability of oil exporting countries from large scaling-up in public investment and oil price volatility in view of a projected decline in the oil revenue to GDP ratio. However, structural reforms that improve the efficiency of public investment can allow for a relatively faster buildup of sustainable public capital and sustain higher non-oil growth without adversely affecting the debt ratio or savings. Moreover, we show that even if a government pursues prudent fiscal policy that preserves resource wealth and debt sustainability in the face of exhaustible and volatile resource revenues, low public investment quality in the form of a misallocation of resources can hinder attainment of sustainable public capital and positive non-oil growth.

Author : Massimo Florio
Publisher : Edward Elgar Publishing
Page : 329 pages
File Size : 47,9 Mb
Release : 2011-01-01
Category : Business & Economics
ISBN : 184980477X

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Public Investment, Growth and Fiscal Constraints by Massimo Florio Pdf

This book makes a unique contribution in advancing understanding of the fiscal condition and growth potential of the New Member States of the European Union. It provides new data, policy evaluation, and offers national and regional perspectives. The core research questions are the effect of public investment in the context of macroeconomic disequilibrium and how it is possible to finance capital accumulation in the present and future conditions of mounting public sector debt. The contributors reveal that there is now a convincing case for public investment as an essential driver of convergence and growth in Europe. However, a new international and inter-generational fiscal pact to frame a more optimistic view of the role of government is needed. This book explores how public investment matters for growth, how fiscal conditions may support investment, and the role EU regional policy can have in terms of structural change and investment needs. Public Investment, Growth and Fiscal Constraints provides new data analyses on the EU New Member States in Central and Eastern Europe making it an essential tool for academics, students and practitioners interested in public finance and European Economics. The structural and public finance issues in these former transition economies raised in this book will also strongly appeal to policymakers, officials and consultants. The book is based on an independent research project of the University of Milan, supported by the European Investment Bank.

Author : Mr.Giovanni Melina,Ms.Susan S. Yang,Luis-Felipe Zanna
Publisher : International Monetary Fund
Page : 77 pages
File Size : 51,8 Mb
Release : 2014-04-01
Category : Business & Economics
ISBN : 9781475521078

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Debt Sustainability, Public Investment, and Natural Resources in Developing Countries by Mr.Giovanni Melina,Ms.Susan S. Yang,Luis-Felipe Zanna Pdf

This paper presents the DIGNAR (Debt, Investment, Growth, and Natural Resources) model, which can be used to analyze the debt sustainability and macroeconomic effects of public investment plans in resource-abundant developing countries. DIGNAR is a dynamic, stochastic model of a small open economy. It has two types of households, including poor households with no access to financial markets, and features traded and nontraded sectors as well as a natural resource sector. Public capital enters production technologies, while public investment is subject to inefficiencies and absorptive capacity constraints. The government has access to different types of debt (concessional, domestic and external commercial) and a resource fund, which can be used to finance public investment plans. The resource fund can also serve as a buffer to absorb fiscal balances for given projections of resource revenues and public investment plans. When the fund is drawn down to its minimal value, a combination of external and domestic borrowing can be used to cover the fiscal gap in the short to medium run. Fiscal adjustments through tax rates and government non-capital expenditures—which may be constrained by ceilings and floors, respectively—are then triggered to maintain debt sustainability. The paper illustrates how the model can be particularly useful to assess debt sustainability in countries that borrow against future resource revenues to scale up public investment.

Author : Banque européenne d'investissement
Publisher : Unknown
Page : 159 pages
File Size : 54,6 Mb
Release : 2008
Category : Infrastructure (Economics)
ISBN : 928610751X

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Infrastructure investment, growth and cohesion : Public investment: Composition, growth effects and fiscal constraints by Banque européenne d'investissement Pdf

Author : Lacina Balma,Mthuli Ncube
Publisher : International Monetary Fund
Page : 38 pages
File Size : 43,7 Mb
Release : 2015-07-20
Category : Business & Economics
ISBN : 9781513599038

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Macroeconomic Challenges of Structural Transformation by Lacina Balma,Mthuli Ncube Pdf

This paper analyzes the link between public investment, economic growth and debt sustainability in Sierra Leone using an inter-temporal macroeconomic model. In the model, public capital improves the productive capacity of private capital, generating positive medium and long term effects to increases in public investment. The model application indicates that a large increase in public investment would have positive macroeconomic effects in the medium term. However, since there is no free lunch, rigidities in tax adjustment would entail unrealistic and unachievable adjustment in the current spending to cover recurrent costs and ensure debt sustainability. A more ambitious increase in public investment would entail more fiscal adjustment, particularly if external commercial loans are secured to complement the adjustment. The model simulations also emphasize the importance of improvements in the structural economic conditions to reap growth dividends. In addition, even if the macroeconomic implications of public investment scaling-up can be favorable in the long term under changes in certain structural conditions, downside risks such as terms of trade shifts and Ebola-induced productivity shortfall expose the country to increased risk of unsustainable debt dynamics. This underscores the need to remove bottlenecks to growth and maintain prudent borrowing policies.

Author : Mr.Ivan Tchakarov,Mr.Roland Straub
Publisher : International Monetary Fund
Page : 49 pages
File Size : 55,9 Mb
Release : 2007-07-01
Category : Business & Economics
ISBN : 9781451867329

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Assessing the Impact of a Change in the Composition of Public Spending by Mr.Ivan Tchakarov,Mr.Roland Straub Pdf

Despite intense calls for safeguarding public investment in Europe, public investment expenditure, when measured in relation to GDP, has steadily fallen in the last three decades, evoking fears that economic activity may be correspondingly negatively affected. At the same time, however, public consumption in the EU-12 countries has trended up. In this paper, we provide a macroeconomic assessment of the observed change in the composition of public spending in the euro area in a medium-scale two-country dynamic stochastic general equilibrium (DSGE) model. First, we identify the channels through which both temporary and permanent public investment shocks generate larger fiscal multipliers than exogenous increases in public consumption. Second, we quantify the negative impact of a change in fiscal stance, characterized by a permanent rise in public consumption and a permanent fall in public investment, keeping the overall level of public spending constant. The key message of the paper is that calls for reversing the observed trend in the composition of public spending are well justified.

Author : Mr.Andrew Berg,Rafael Portillo,Ms.Susan S. Yang,Luis-Felipe Zanna
Publisher : International Monetary Fund
Page : 48 pages
File Size : 51,6 Mb
Release : 2012-11-15
Category : Business & Economics
ISBN : 9781475549829

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Public Investment in Resource-Abundant Developing Countries by Mr.Andrew Berg,Rafael Portillo,Ms.Susan S. Yang,Luis-Felipe Zanna Pdf

Natural resource revenues provide a valuable source to finance public investment in developing countries, which frequently face borrowing constraints and tax revenue mobilization problems. This paper develops a dynamic stochastic small open economy model to analyze the macroeconomic effects of investing natural resource revenues, making explicit the role of pervasive features in these countries including public investment inefficiency, absorptive capacity constraints, Dutch disease, and financing needs to sustain capital. Revenue exhaustibility raises medium-term issues of how to sustain capital built during a windfall, while revenue volatility raises short-term concerns about macroeconomic instability. Using the model, country applications show how combining public investment with a resource fund---a sustainable investing approach---can help address the macroeconomic problems associated with both exhaustibility and volatility. The applications also demonstrate how the model can be used to determine the appropriate magnitude of the investment scaling-up (accounting for the financing needs to sustain capital) and the adequate size of a stabilization fund (buffer).