Fiscal Policy as an Instrument of Investment and Growth

This paper investigates the role of fiscal guarantees in promoting infrastructure investment. Infrastructure is a critical driver of economic growth, but infrastructure entails significant up-front costs that yield benefits after a time lag. Investors hesitate to put their money down on private infrastructure ventures because of the long lag and governments do not give guarantees for reasons of fiscal prudence. The paper argues that governments and large investment guarantee agencies can in many situations give suitably-calibrated guarantees to private projects by exploiting the fact that a guarantee on one project can reduce the risk of another one failing. The paper works out the architecture of such guarantees, which can be fiscally prudent and yet boost investment, especially in infrastructure, and thereby promote growth.

Bibliographic Details

Main Author:	Basu, Kaushik
Language:	English en_US
Published:	World Bank, Washington, DC 2014-05
Subjects:	ADVERSE SELECTION, BANK POLICY, BANKRUPT, BANKRUPTCY, BINDING CONSTRAINT, BOOST TO GROWTH, BORROWING, CAPITAL FORMATION, CONTRACT ENFORCEMENT, CREDIT DEFAULT, CREDIT MARKET, DEBT, DEBT CRISIS, DEBT RATIOS, DEFICITS, DELIVERY OF GOODS, DEPENDENT, DEVELOPMENT BANKS, DISBURSEMENT, EARNINGS, ECONOMETRICS, ECONOMIC DEVELOPMENT, ECONOMIC GROWTH, ECONOMIC POLICY, ECONOMIC RECESSION, ECONOMIC TRANSACTIONS, ECONOMICS, EMERGING ECONOMIES, EMERGING MARKET, EMERGING MARKET ECONOMIES, EMERGING MARKETS, ENTREPRENEUR, ENTREPRENEURS, EXPENDITURE, FINANCIAL INSTITUTIONS, FINANCIAL SECTOR, FINANCIAL SECTOR REFORMS, FISCAL DEFICITS, FISCAL EXPENDITURE, FISCAL POLICIES, FISCAL POLICY, FISCAL SUPPORT, FOREIGN BANKS, FOREIGN CAPITAL, FOREIGN DIRECT INVESTMENT, GLOBALIZATION, GOOD GOVERNANCE, GOVERNANCE SYSTEM, GOVERNMENT FINANCE, GOVERNMENT GUARANTEES, GOVERNMENT INVESTMENT, GROWTH RATE, GUARANTEE AGENCIES, GUARANTEE AGENCY, INCOME, INFLATION, INFRASTRUCTURE INVESTMENT, INFRASTRUCTURE PROJECT, INFRASTRUCTURE PROJECTS, INSTRUMENT, INSURANCE, INSURANCE SERVICE, INTEREST RATE, INTERNATIONAL BANK, INTERNATIONAL INVESTOR, INTERNATIONAL LENDING, INTERNATIONAL STANDARD, INVESTING, INVESTMENT CLIMATE, INVESTMENT PROJECTS, INVESTMENT RATE, JOINT LIABILITY, JUDICIAL DECISIONS, JUDICIARY, LABOR FORCE, LEGAL JURISDICTION, LENDER, LIMITED LIABILITY, LIQUIDITY, LOAN, LONG-TERM INVESTMENT, LOW-INCOME COUNTRIES, MONETARY POLICY, MORTGAGES, MULTILATERAL FINANCIAL INSTITUTIONS, NOMINAL INTEREST RATE, OPPORTUNITY COST, POLITICAL ECONOMY, PRIVATE ENTREPRENEUR, PRIVATE INFRASTRUCTURE, PRIVATE INVESTMENT, PRIVATE INVESTOR, PRIVATE INVESTORS, PROBABILITY OF DEFAULT, PUBLIC INVESTMENT, PUBLIC-PRIVATE PARTNERSHIP, PUBLIC-PRIVATE PARTNERSHIPS, RAPID GROWTH, RECESSION, REGULATORY REGIME, RETURN, RETURNS, RISK OF DEFAULT, SELF-FINANCE, SOVEREIGN DEBT, START-UP, STATE GUARANTEE, STATE GUARANTEES, TREASURY, TREATY, WORLD DEVELOPMENT INDICATORS,
Online Access:	http://documents.worldbank.org/curated/en/2014/05/19456271/fiscal-policy-instrument-investment-growth https://hdl.handle.net/10986/18348
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