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Public Investment Growth And Debt Sustainability
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Book Synopsis Public Investment, Growth, and Debt Sustainability by : Mr.Andrew Berg
Download or read book Public Investment, Growth, and Debt Sustainability written by Mr.Andrew Berg and published by International Monetary Fund. This book was released on 2012-06-01 with total page 114 pages. Available in PDF, EPUB and Kindle. Book excerpt: 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.
Book Synopsis Debt Sustainability, Public Investment, and Natural Resources in Developing Countries by : Mr.Giovanni Melina
Download or read book Debt Sustainability, Public Investment, and Natural Resources in Developing Countries written by Mr.Giovanni Melina and published by International Monetary Fund. This book was released on 2014-04-01 with total page 77 pages. Available in PDF, EPUB and Kindle. Book excerpt: 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.
Book Synopsis Macroeconomic Challenges of Structural Transformation by : Lacina Balma
Download or read book Macroeconomic Challenges of Structural Transformation written by Lacina Balma and published by International Monetary Fund. This book was released on 2015-07-20 with total page 38 pages. Available in PDF, EPUB and Kindle. Book excerpt: 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.
Book Synopsis Striking an Appropriate Balance Among Public Investment, Growth, and Debt Sustainability in Cape Verde by : Mr.Yibin Mu
Download or read book Striking an Appropriate Balance Among Public Investment, Growth, and Debt Sustainability in Cape Verde written by Mr.Yibin Mu and published by International Monetary Fund. This book was released on 2012-11-30 with total page 34 pages. Available in PDF, EPUB and Kindle. Book excerpt: Despite relatively fast economic growth over the past few years, Cape Verde’s public debt to GDP ratio has risenrapidly. Achieving an appropriate balance among public investment, growth, and debt sustainability has become a priority for the Cape Verdean authorities. The IMF-World Bank debt sustainability analysis (DSA) framework has helped the authorities monitor the risks of debt stress. However, the DSA has a number of limitations. This paper intends to complement the DSA by addressing aspects currently not covered by the DSA. The paper evaluates public investment scaling-up strategies in Cape Verde by customizing the Buffie and others (2012) model for Cape Verde and conducting various scenario and sensitivity analysis. The paper assesses Cape Verde’s public debt risks, taking into account the link between public investment and growth. The paper concludes that the size of scaling-up and aspects of the economic structure have significant impact on the outcome of the public investment. A very large surge in public investment may lead to a debt to GDP ratio that reaches dangerous levels based on the usual DSA criteria. A more moderate scaling-up of public investment may contribute better to stable and sustained growth over the medium and long run. In addition, it is critical that the authorities ensure the quality of public investment.
Book Synopsis Public Debt Sustainability in Developing Asia by : Benno Ferrarini
Download or read book Public Debt Sustainability in Developing Asia written by Benno Ferrarini and published by Routledge. This book was released on 2012 with total page 227 pages. Available in PDF, EPUB and Kindle. Book excerpt: Addressing the global financial crisis has required fiscal intervention on a substantial scale by governments around the world. The consequent buildup of public debt, in particular its sustainability, has moved to center stage in the policy debate. If the Asia and Pacific region is to continue to serve as an engine for global growth, its public debt must be sustainable. Public Debt Sustainability in Developing Asia addresses this issue for Asia and the Pacific as a whole as well as for three of the most dynamic economies in the region: the People’s Republic of China, India, and Viet Nam. The book begins with a discussion of the reasons for increased attention to debt-related issues. It also introduces fiscal indicators for the Asian Development. Bank’s developing member countries and economies. The sustainability of their debt is assessed through extant approaches and with the most up-to-date data sources. The book also surveys the existing literature on debt sustainability, outlining the main issues related to it, and discusses the key implications for the application of debt sustainability analysis in developing Asia. Also highlighted is the importance of conducting individual country studies in view of wide variations in definitions of public expenditure, revenues, contingent liabilities, government structures (e.g., federal), and the like, as well as the impact of debt on interest rates. The book further provides in-depth debt sustainability analyses for the People’s Republic of China, India, and Viet Nam. Public Debt Sustainability in Developing Asia offers a comprehensive analytical and empirical update on the sustainability of public debt in the region. It breaks new ground in examining characteristics that are crucial to understanding sustainability and offers richer policy analysis that should prove useful for policymakers, researchers, and graduate students.
Book Synopsis Public Investment Scaling-up and Debt Sustainability by : Ahmed El-Ashram
Download or read book Public Investment Scaling-up and Debt Sustainability written by Ahmed El-Ashram and published by International Monetary Fund. This book was released on 2017-06-15 with total page 31 pages. Available in PDF, EPUB and Kindle. Book excerpt: The question of how scaling up public investment could affect fiscal and debt sustainability is key for countries needing to fill infrastructure gaps and build resilience. This paper proposes a bottom-up approach to assess large public investments that are potentially self-financing and reflect their impact in macro-fiscal projections that underpin the IMF’s Debt Sustainability Analysis Framework. Using the case of energy sector investments in Caribbean countries, the paper shows how to avoid biases against good projects that pay off over long horizons and ensure that transformative investments are not sacrificed to myopic assessments of debt sustainability risks. The approach is applicable to any macro-critical investment for which user fees can cover financing costs and which has the potential to raise growth without crowding-out.
Book Synopsis Walking a Fine Line by : Ms.Malangu Kabedi-Mbuyi
Download or read book Walking a Fine Line written by Ms.Malangu Kabedi-Mbuyi and published by International Monetary Fund. This book was released on 2016-04-11 with total page 57 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper analyzes the macroeconomics of scaling up public investment in Burkina Faso under alternative financing options, including through foreign aid and a combination of tax adjustment and borrowing. Our findings are twofold: (1) raising official development assistance in line with the Gleneagles agreement provides scope for financing public investment at low cost and would have positive, but somewhat moderate, effects on aggregate output—the growth dividends in the nontradables sector would be partially offset by the Dutch disease in the tradables sector; and (2) the massive investment scaling-up contemplated under Burkina Faso’s “accelerated growth” strategy, while boosting medium- and long-term growth, would lead to unsustainable debt dynamics under a plausible tax adjustment and realistic concessional financing. A more gradual approach to closing Burkina Faso’s infrastructure gap is therefore desirable because it would take into account the needed time for the country to address its capacity constraints and to further improve investment efficiency.
Book Synopsis As You sow so Shall You Reap by : Michal Andrle
Download or read book As You sow so Shall You Reap written by Michal Andrle and published by International Monetary Fund. This book was released on 2012-05-01 with total page 67 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper presents an analysis of the public investment scaling-up strategy for Togo using a dynamic macroeconomic model that explicitly analyzes the links between public investment, economic growth, and debt sustainability. In the model, public capital is productive and complementary to private capital, generating positive medium and long-run effects to increases in public investment. The model application indicates that a very large increase in public investment would have positive macroeconomic effects in the long-run, but would require unrealistic increases in the tax burden to cover recurrent costs and ensure debt sustainability. More modest increases in public investment would require more feasible increases in the tax burden, particularly if the efficiency of tax collection is improved. The model simulations also emphasize the importance of improvements in the efficiency of public investment to reap welfare gains. However, even if the macroeconomic implications of public investment scaling-up can be favorable in the long-run under certain assumptions on rates of return and efficiency of investment, the transition period is challenging and exposes the country to increased risk of unsustainable debt dynamics. The model was also used to assess the growth projections underlying the standard Excel-based debt sustainability analysis for Togo.
Book Synopsis The Macroeconomic Effects of Public Investment by : Mr.Abdul Abiad
Download or read book The Macroeconomic Effects of Public Investment written by Mr.Abdul Abiad and published by International Monetary Fund. This book was released on 2015-05-04 with total page 26 pages. Available in PDF, EPUB and Kindle. Book excerpt: 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.
Book Synopsis Public Debt Sustainability by : Barry W. Poulson
Download or read book Public Debt Sustainability written by Barry W. Poulson and published by Rowman & Littlefield. This book was released on 2022-01-04 with total page 389 pages. Available in PDF, EPUB and Kindle. Book excerpt: As countries recover from the coronavirus pandemic, they are confronted with an even more challenging debt crisis. Xavier Debrun argues in the foreword that in deciding where we go from here that there is no longer a consensus regarding the optimum design and enforcement of fiscal rules. Rather we must address a series of questions and challenges to the conventional wisdom. This book provides an opportunity for scholars to explore these questions from an international perspective, with reference to European countries, and emerging nations as well as the United States.
Book Synopsis Natural Gas, Public Investment and Debt Sustainability in Mozambique by : Mr.Giovanni Melina
Download or read book Natural Gas, Public Investment and Debt Sustainability in Mozambique written by Mr.Giovanni Melina and published by International Monetary Fund. This book was released on 2013-12-23 with total page 37 pages. Available in PDF, EPUB and Kindle. Book excerpt: Mozambique has great potential in natural gas reserves and if liquefied/commercialized the sum of taxes and other fiscal revenue from natural gas will, at its peak, reach roughly one third of total fiscal revenue. Recent developments in the natural resource sector have triggered a fresh round of much needed infrastructure investment. This paper uses the DIGNAR model to simulate alternative public investment scaling-up plans in alternative LNG market scenarios. Results show that while a conservative approach, which simply awaits LNG revenues, would miss significant current growth opportunities, an aggressive approach would likely meet absorptive capacity constraints and imply a much bigger (and, in an adverse scenario, unsustainable) build-up of public debt. A gradual scaling up approach represents indeed a desirable path, as it allows anticipating some, though not all, of the LNG revenue and, even in an adverse scenario, keeping public debt at sustainable levels. Structural reforms affecting selection, governance and execution of public investment projects would significantly enhance the extent to which public capital is accumulated and impact non-resource growth and, ultimately, debt sustainability.
Book Synopsis Public Investment in a Developing Country Facing Resource Depletion by : Adrian Alter
Download or read book Public Investment in a Developing Country Facing Resource Depletion written by Adrian Alter and published by International Monetary Fund. This book was released on 2015-11-10 with total page 35 pages. Available in PDF, EPUB and Kindle. Book excerpt: 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.
Book Synopsis Public Debt, Sustainability and Economic Growth by : Alfred Greiner
Download or read book Public Debt, Sustainability and Economic Growth written by Alfred Greiner and published by Springer. This book was released on 2014-10-14 with total page 284 pages. Available in PDF, EPUB and Kindle. Book excerpt: Public debt has become a severe problem for a great many economies. While the effects of tax policies on the allocation of resources are readily derived, the mechanisms that make public deficits and debt influence the economy are not so easily understood. This book elaborates on the effects of public debt starting from the intertemporal budget constraint of the government. It is shown under which conditions a government can stick to the intertemporal budget constraint and then, demonstrated how public debt affects the growth process and welfare in market economies. The effects are derived for models with complete labor markets as well as taking into account labor market imperfections. The focus in this book is on fiscal policy issues, but it also deals with monetary policy aspects. The theoretical analysis is complemented with empirical time series analyses on debt sustainability and with panel studies dealing with the relationship between public debt and economic growth.
Book Synopsis Public Debt in Developing Countries by : Indermit Singh Gill
Download or read book Public Debt in Developing Countries written by Indermit Singh Gill and published by World Bank Publications. This book was released on 2005 with total page 43 pages. Available in PDF, EPUB and Kindle. Book excerpt: "Over the past 25 years, significant levels of public debt and external finance are more likely to have enhanced macroeconomic vulnerability than economic growth in developing countries. This applies not just to countries with a history of high inflation and past default, but also to those in East Asia, with a long tradition of prudent macroeconomic policies and rapid growth. The authors examine why with the help of a conceptual framework drawn from the growth, capital flows, and crisis literature for developing countries with access to the international capital markets (market access countries or MACs). They find that, while the chances of another generalized debt crisis have receded since the turbulence of the late 1990s, sovereign debt is indeed constraining growth in MACs, especially those with debt sustainability problems ... " -- Cover verso.
Book Synopsis Debt Sustainability Analyses for Low-Income Countries: An Assessment of Projection Performance by : Mr.Henry Mooney
Download or read book Debt Sustainability Analyses for Low-Income Countries: An Assessment of Projection Performance written by Mr.Henry Mooney and published by International Monetary Fund. This book was released on 2017-10-30 with total page 48 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper develops new error assessment methods to evaluate the performance of debt sustainability analyses (DSAs) for low-income countries (LICs) from 2005-2015. We find some evidence of a bias towards optimism for public and external debt projections, which was most appreciable for LICs with the highest incomes, prospects for market access, and at ‘moderate’ risk of debt distress. This was often driven by overly-ambitious fiscal and/or growth forecasts, and projected ‘residuals’. When we control for unanticipated shocks, we find that biases remain evident, driven in part by optimism regarding government fiscal reaction functions and expected growth dividends from investment.
Book Synopsis Public Debt and Growth by : Jaejoon Woo
Download or read book Public Debt and Growth written by Jaejoon Woo and published by International Monetary Fund. This book was released on 2010-07-01 with total page 48 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper explores the impact of high public debt on long-run economic growth. The analysis, based on a panel of advanced and emerging economies over almost four decades, takes into account a broad range of determinants of growth as well as various estimation issues including reverse causality and endogeneity. In addition, threshold effects, nonlinearities, and differences between advanced and emerging market economies are examined. The empirical results suggest an inverse relationship between initial debt and subsequent growth, controlling for other determinants of growth: on average, a 10 percentage point increase in the initial debt-to-GDP ratio is associated with a slowdown in annual real per capita GDP growth of around 0.2 percentage points per year, with the impact being somewhat smaller in advanced economies. There is some evidence of nonlinearity with higher levels of initial debt having a proportionately larger negative effect on subsequent growth. Analysis of the components of growth suggests that the adverse effect largely reflects a slowdown in labor productivity growth mainly due to reduced investment and slower growth of capital stock.
Book Synopsis Collect More, Spend Better by : Mr.Manuk Ghazanchyan
Download or read book Collect More, Spend Better written by Mr.Manuk Ghazanchyan and published by International Monetary Fund. This book was released on 2017-01-24 with total page 36 pages. Available in PDF, EPUB and Kindle. Book excerpt: We use a dynamic small open economy model to explore the macroeconomic impact of alternative public investment scaling-up scenarios, analyzing how improving the efficiency of capital spending and of tax revenue collection affect growth and debt sustainability for three fast-growing Southeast Asian economies: Cambodia, Sri Lanka, and Vietnam. We show that a gradual public investment profile is more favorable than front-loading capital spending because we assume governments are able to gradually learn how to invest more efficiently, accelerating public capital accumulation and therefore growth. We discuss the pros and cons of alternative financing options and identify the financing mix that generates the best macroeconomic outcome. Sometimes overlooked, improving the efficiency of revenue collection over time may ease the burden of fiscal adjustment, achieving higher GDP growth with substantially lower debt-to-GDP ratios, and will help policymakers efficiently meet the challenge of addressing large infrastructure gaps while maintaining debt sustainability.
