Measuring the Impact of Debt-Financed Public Investment
While debt-financed productive public investment raises a country s debt ratios in the short run, it can also generate higher growth, revenues, and exports, leading over time to lower debt ratios. This paper develops a framework to assess whether c...
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| Format: | Policy Research Working Paper |
| Language: | English en_US |
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World Bank, Washington, DC
2014
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| Online Access: | http://documents.worldbank.org/curated/en/2014/02/18895457/measuring-impact-debt-financed-public-investment http://hdl.handle.net/10986/17309 |
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okr-10986-17309 |
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oai_dc |
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Digital Repository |
| institution_category |
Foreign Institution |
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Digital Repositories |
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World Bank Open Knowledge Repository |
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World Bank |
| language |
English en_US |
| topic |
ACCESS TO FINANCING ACCOUNTING ADMINISTRATIVE CAPACITY AFFILIATED ORGANIZATIONS ARBITRAGE AVERAGE DEBT BALANCE SHEET BANK LENDING BANK LOAN BANK POLICY BANKS BENCHMARK BID BONDS BUDGET CONSTRAINT BUDGET SURPLUS BUDGETING CAPACITY BUILDING CAPITAL ACCUMULATION CAPITAL ASSETS CAPITAL BUDGETING CAPITAL FORMATION CAPITAL INVESTMENT CAPITAL INVESTMENTS CAPITAL MARKET CAPITAL OUTLAY CENTRALIZATION COMPETITIVE BIDDING CONSTANT RETURNS TO SCALE CORRUPTION CREDITORS CREDITS CREDITWORTHINESS DEBT DEBT BURDEN DEBT COMPOSITION DEBT FINANCING DEBT ISSUES DEBT LEVELS DEBT RATIOS DEBT RELIEF DEBT SERVICE DEBTS DEFAULT RISK DEFICITS DEPRECIATION DERIVATIVES DEVELOPING COUNTRIES DEVELOPING COUNTRY DEVELOPMENT BANK DEVELOPMENT CORPORATION DEVELOPMENT ECONOMICS DEVELOPMENT POLICY DISBURSEMENT DISCOUNT RATE DISCOUNTED VALUE DIVERSIFICATION DOMESTIC DEBT DYNAMIC ANALYSIS EARNINGS ECONOMIC ACTIVITY ECONOMIC DEVELOPMENT ECONOMIC EFFICIENCY ECONOMIC GROWTH ECONOMIC POLICY ECONOMIC RESEARCH ECONOMIC THEORY ECONOMIES OF SCALE ELASTICITY ELASTICITY OF SUBSTITUTION ELECTRICITY EQUALITY EQUILIBRIUM EUROBOND EXCLUSION EXOGENOUS VARIABLES EXPENDITURE EXPORTS EXPROPRIATION EXTERNAL COMMERCIAL BORROWING EXTERNAL DEBT EXTERNAL FINANCING EXTERNALITIES FINANCIAL ASSETS FINANCIAL CRISIS FINANCIAL FLOWS FINANCIAL MANAGEMENT FINANCIAL MARKETS FINANCIAL VIABILITY FISCAL DEFICIT FISCAL MANAGEMENT FISCAL PERFORMANCE FISCAL POLICY FISCAL SURPLUS FIXED ASSETS FIXED CAPITAL FIXED INVESTMENT FUNCTIONAL FORMS GDP GOVERNMENT BUDGET GOVERNMENT DEBT GOVERNMENT EXPENDITURE GOVERNMENT INDEBTEDNESS GOVERNMENT POLICY GOVERNMENT SPENDING GROSS DOMESTIC PRODUCT GROSS FIXED CAPITAL FORMATION GROWTH OPPORTUNITIES GROWTH POTENTIAL GROWTH RATE HEALTH SPENDING HIGH RISK BORROWERS HOUSEHOLD INCOME HOUSEHOLD WELFARE HOUSEHOLDS HUMAN CAPITAL INCOME TAX INCOME TAX RATE INCOME TAXES INCREASING RETURNS INEFFICIENCY INFORMATION ASYMMETRIES INFRASTRUCTURE INVESTMENT INFRASTRUCTURE INVESTMENTS INITIAL DEBT INTEREST PAYMENTS INTEREST RATE INTEREST RATES INTERNATIONAL BANK INTERNATIONAL CAPITAL INTERNATIONAL CAPITAL MARKETS INVENTORIES INVESTING INVESTMENT DECISIONS INVESTMENT FINANCING INVESTMENT MANAGEMENT INVESTMENT PLANS INVESTMENT POLICIES INVESTMENT POLICY INVESTMENT PROJECTS INVESTMENT SPENDING INVESTMENT ASSET ISSUANCE JOB CREATION LABOR MARKET LENDING LIMITS LESS DEVELOPED COUNTRIES LIQUIDITY LOAN LOAN AGREEMENT LOAN AGREEMENTS LOW INTEREST RATES MACROECONOMICS MARGINAL PRODUCTIVITY MARKET INTEREST RATES MONETARY FUND MULTIPLIERS NATURAL RESOURCES NORMAL GOOD OPERATING COSTS OUTSIDE ASSISTANCE OUTSTANDING PUBLIC DEBT PHYSICAL CAPITAL POLITICAL ECONOMY POSITIVE EXTERNALITY PRIVATE CAPITAL PRIVATE CAPITAL STOCK PRIVATE INVESTMENT PRIVATE INVESTMENTS PRIVATE SAVINGS PRIVATE SECTOR PRODUCTION FUNCTION PRODUCTIVE CAPITAL PROVISION OF INFRASTRUCTURE PUBLIC PUBLIC ASSETS PUBLIC EXPENDITURE PUBLIC EXPENDITURES PUBLIC FINANCE PUBLIC FINANCES PUBLIC INFRASTRUCTURE PUBLIC INVESTMENT PUBLIC INVESTMENT IN INFRASTRUCTURE PUBLIC INVESTMENT PROGRAM PUBLIC INVESTMENTS PUBLIC POLICY PUBLIC SECTOR PUBLIC SECTOR WAGES PUBLIC SPENDING RATE OF RETURN RATES OF RETURN RATES OF RETURNS REAL GDP RECURRENT EXPENDITURES REMITTANCES RETURNS ROADS SAVINGS SHAREHOLDERS SOVEREIGN BOND STATIC ANALYSIS STOCKS TARIFF REVENUES TAX TAX EXEMPT TAX RATE TAX RATES TAXATION TOTAL FACTOR PRODUCTIVITY TRADING UTILITIES UTILITY FUNCTION VALUATION VALUE ADDED WEALTH |
| spellingShingle |
ACCESS TO FINANCING ACCOUNTING ADMINISTRATIVE CAPACITY AFFILIATED ORGANIZATIONS ARBITRAGE AVERAGE DEBT BALANCE SHEET BANK LENDING BANK LOAN BANK POLICY BANKS BENCHMARK BID BONDS BUDGET CONSTRAINT BUDGET SURPLUS BUDGETING CAPACITY BUILDING CAPITAL ACCUMULATION CAPITAL ASSETS CAPITAL BUDGETING CAPITAL FORMATION CAPITAL INVESTMENT CAPITAL INVESTMENTS CAPITAL MARKET CAPITAL OUTLAY CENTRALIZATION COMPETITIVE BIDDING CONSTANT RETURNS TO SCALE CORRUPTION CREDITORS CREDITS CREDITWORTHINESS DEBT DEBT BURDEN DEBT COMPOSITION DEBT FINANCING DEBT ISSUES DEBT LEVELS DEBT RATIOS DEBT RELIEF DEBT SERVICE DEBTS DEFAULT RISK DEFICITS DEPRECIATION DERIVATIVES DEVELOPING COUNTRIES DEVELOPING COUNTRY DEVELOPMENT BANK DEVELOPMENT CORPORATION DEVELOPMENT ECONOMICS DEVELOPMENT POLICY DISBURSEMENT DISCOUNT RATE DISCOUNTED VALUE DIVERSIFICATION DOMESTIC DEBT DYNAMIC ANALYSIS EARNINGS ECONOMIC ACTIVITY ECONOMIC DEVELOPMENT ECONOMIC EFFICIENCY ECONOMIC GROWTH ECONOMIC POLICY ECONOMIC RESEARCH ECONOMIC THEORY ECONOMIES OF SCALE ELASTICITY ELASTICITY OF SUBSTITUTION ELECTRICITY EQUALITY EQUILIBRIUM EUROBOND EXCLUSION EXOGENOUS VARIABLES EXPENDITURE EXPORTS EXPROPRIATION EXTERNAL COMMERCIAL BORROWING EXTERNAL DEBT EXTERNAL FINANCING EXTERNALITIES FINANCIAL ASSETS FINANCIAL CRISIS FINANCIAL FLOWS FINANCIAL MANAGEMENT FINANCIAL MARKETS FINANCIAL VIABILITY FISCAL DEFICIT FISCAL MANAGEMENT FISCAL PERFORMANCE FISCAL POLICY FISCAL SURPLUS FIXED ASSETS FIXED CAPITAL FIXED INVESTMENT FUNCTIONAL FORMS GDP GOVERNMENT BUDGET GOVERNMENT DEBT GOVERNMENT EXPENDITURE GOVERNMENT INDEBTEDNESS GOVERNMENT POLICY GOVERNMENT SPENDING GROSS DOMESTIC PRODUCT GROSS FIXED CAPITAL FORMATION GROWTH OPPORTUNITIES GROWTH POTENTIAL GROWTH RATE HEALTH SPENDING HIGH RISK BORROWERS HOUSEHOLD INCOME HOUSEHOLD WELFARE HOUSEHOLDS HUMAN CAPITAL INCOME TAX INCOME TAX RATE INCOME TAXES INCREASING RETURNS INEFFICIENCY INFORMATION ASYMMETRIES INFRASTRUCTURE INVESTMENT INFRASTRUCTURE INVESTMENTS INITIAL DEBT INTEREST PAYMENTS INTEREST RATE INTEREST RATES INTERNATIONAL BANK INTERNATIONAL CAPITAL INTERNATIONAL CAPITAL MARKETS INVENTORIES INVESTING INVESTMENT DECISIONS INVESTMENT FINANCING INVESTMENT MANAGEMENT INVESTMENT PLANS INVESTMENT POLICIES INVESTMENT POLICY INVESTMENT PROJECTS INVESTMENT SPENDING INVESTMENT ASSET ISSUANCE JOB CREATION LABOR MARKET LENDING LIMITS LESS DEVELOPED COUNTRIES LIQUIDITY LOAN LOAN AGREEMENT LOAN AGREEMENTS LOW INTEREST RATES MACROECONOMICS MARGINAL PRODUCTIVITY MARKET INTEREST RATES MONETARY FUND MULTIPLIERS NATURAL RESOURCES NORMAL GOOD OPERATING COSTS OUTSIDE ASSISTANCE OUTSTANDING PUBLIC DEBT PHYSICAL CAPITAL POLITICAL ECONOMY POSITIVE EXTERNALITY PRIVATE CAPITAL PRIVATE CAPITAL STOCK PRIVATE INVESTMENT PRIVATE INVESTMENTS PRIVATE SAVINGS PRIVATE SECTOR PRODUCTION FUNCTION PRODUCTIVE CAPITAL PROVISION OF INFRASTRUCTURE PUBLIC PUBLIC ASSETS PUBLIC EXPENDITURE PUBLIC EXPENDITURES PUBLIC FINANCE PUBLIC FINANCES PUBLIC INFRASTRUCTURE PUBLIC INVESTMENT PUBLIC INVESTMENT IN INFRASTRUCTURE PUBLIC INVESTMENT PROGRAM PUBLIC INVESTMENTS PUBLIC POLICY PUBLIC SECTOR PUBLIC SECTOR WAGES PUBLIC SPENDING RATE OF RETURN RATES OF RETURN RATES OF RETURNS REAL GDP RECURRENT EXPENDITURES REMITTANCES RETURNS ROADS SAVINGS SHAREHOLDERS SOVEREIGN BOND STATIC ANALYSIS STOCKS TARIFF REVENUES TAX TAX EXEMPT TAX RATE TAX RATES TAXATION TOTAL FACTOR PRODUCTIVITY TRADING UTILITIES UTILITY FUNCTION VALUATION VALUE ADDED WEALTH Cavalcanti, Carlos B. Marrero, Gustavo A. Le, Tuan Minh Measuring the Impact of Debt-Financed Public Investment |
| relation |
Policy Research Working Paper;No. 6766 |
| description |
While debt-financed productive public
investment raises a country s debt ratios in the short run,
it can also generate higher growth, revenues, and exports,
leading over time to lower debt ratios. This paper develops
a framework to assess whether countries meet the conditions
for realizing the net benefits over the costs of public
investment debt financing. While it is possible to achieve
debt sustainability with an appropriate mix of concessional
and non-concessional financing, this is a necessary but not
sufficient condition. It is also important to ensure the
operational viability of public investment projects by
having in place adequate project management: (i) project
screening and appraisal, (ii) a clear connection between
capital and recurrent expenditures once the projects are
launched, and (iii) safeguards for appropriate project
implementation and facilities operations. To illustrate the
strength of these results, the paper carries out three
measurement exercises: (a) a simulation of the degree to
which the ratio of optimal public investment responds to
changes in key parameters related to project management in a
general equilibrium model; (b) application of the public
investment management (PIMa) index to benchmark a
country's public investment management capacity; and
(c) presentation of the results of the Investment, Savings,
and Macroeconomic Vulnerabilities tool aimed at tracking
country choices in public finance and the impact of public
projects on private investments. |
| format |
Publications & Research :: Policy Research Working Paper |
| author |
Cavalcanti, Carlos B. Marrero, Gustavo A. Le, Tuan Minh |
| author_facet |
Cavalcanti, Carlos B. Marrero, Gustavo A. Le, Tuan Minh |
| author_sort |
Cavalcanti, Carlos B. |
| title |
Measuring the Impact of Debt-Financed Public Investment |
| title_short |
Measuring the Impact of Debt-Financed Public Investment |
| title_full |
Measuring the Impact of Debt-Financed Public Investment |
| title_fullStr |
Measuring the Impact of Debt-Financed Public Investment |
| title_full_unstemmed |
Measuring the Impact of Debt-Financed Public Investment |
| title_sort |
measuring the impact of debt-financed public investment |
| publisher |
World Bank, Washington, DC |
| publishDate |
2014 |
| url |
http://documents.worldbank.org/curated/en/2014/02/18895457/measuring-impact-debt-financed-public-investment http://hdl.handle.net/10986/17309 |
| _version_ |
1764436828015820800 |
| spelling |
okr-10986-173092021-04-23T14:03:37Z Measuring the Impact of Debt-Financed Public Investment Cavalcanti, Carlos B. Marrero, Gustavo A. Le, Tuan Minh ACCESS TO FINANCING ACCOUNTING ADMINISTRATIVE CAPACITY AFFILIATED ORGANIZATIONS ARBITRAGE AVERAGE DEBT BALANCE SHEET BANK LENDING BANK LOAN BANK POLICY BANKS BENCHMARK BID BONDS BUDGET CONSTRAINT BUDGET SURPLUS BUDGETING CAPACITY BUILDING CAPITAL ACCUMULATION CAPITAL ASSETS CAPITAL BUDGETING CAPITAL FORMATION CAPITAL INVESTMENT CAPITAL INVESTMENTS CAPITAL MARKET CAPITAL OUTLAY CENTRALIZATION COMPETITIVE BIDDING CONSTANT RETURNS TO SCALE CORRUPTION CREDITORS CREDITS CREDITWORTHINESS DEBT DEBT BURDEN DEBT COMPOSITION DEBT FINANCING DEBT ISSUES DEBT LEVELS DEBT RATIOS DEBT RELIEF DEBT SERVICE DEBTS DEFAULT RISK DEFICITS DEPRECIATION DERIVATIVES DEVELOPING COUNTRIES DEVELOPING COUNTRY DEVELOPMENT BANK DEVELOPMENT CORPORATION DEVELOPMENT ECONOMICS DEVELOPMENT POLICY DISBURSEMENT DISCOUNT RATE DISCOUNTED VALUE DIVERSIFICATION DOMESTIC DEBT DYNAMIC ANALYSIS EARNINGS ECONOMIC ACTIVITY ECONOMIC DEVELOPMENT ECONOMIC EFFICIENCY ECONOMIC GROWTH ECONOMIC POLICY ECONOMIC RESEARCH ECONOMIC THEORY ECONOMIES OF SCALE ELASTICITY ELASTICITY OF SUBSTITUTION ELECTRICITY EQUALITY EQUILIBRIUM EUROBOND EXCLUSION EXOGENOUS VARIABLES EXPENDITURE EXPORTS EXPROPRIATION EXTERNAL COMMERCIAL BORROWING EXTERNAL DEBT EXTERNAL FINANCING EXTERNALITIES FINANCIAL ASSETS FINANCIAL CRISIS FINANCIAL FLOWS FINANCIAL MANAGEMENT FINANCIAL MARKETS FINANCIAL VIABILITY FISCAL DEFICIT FISCAL MANAGEMENT FISCAL PERFORMANCE FISCAL POLICY FISCAL SURPLUS FIXED ASSETS FIXED CAPITAL FIXED INVESTMENT FUNCTIONAL FORMS GDP GOVERNMENT BUDGET GOVERNMENT DEBT GOVERNMENT EXPENDITURE GOVERNMENT INDEBTEDNESS GOVERNMENT POLICY GOVERNMENT SPENDING GROSS DOMESTIC PRODUCT GROSS FIXED CAPITAL FORMATION GROWTH OPPORTUNITIES GROWTH POTENTIAL GROWTH RATE HEALTH SPENDING HIGH RISK BORROWERS HOUSEHOLD INCOME HOUSEHOLD WELFARE HOUSEHOLDS HUMAN CAPITAL INCOME TAX INCOME TAX RATE INCOME TAXES INCREASING RETURNS INEFFICIENCY INFORMATION ASYMMETRIES INFRASTRUCTURE INVESTMENT INFRASTRUCTURE INVESTMENTS INITIAL DEBT INTEREST PAYMENTS INTEREST RATE INTEREST RATES INTERNATIONAL BANK INTERNATIONAL CAPITAL INTERNATIONAL CAPITAL MARKETS INVENTORIES INVESTING INVESTMENT DECISIONS INVESTMENT FINANCING INVESTMENT MANAGEMENT INVESTMENT PLANS INVESTMENT POLICIES INVESTMENT POLICY INVESTMENT PROJECTS INVESTMENT SPENDING INVESTMENT ASSET ISSUANCE JOB CREATION LABOR MARKET LENDING LIMITS LESS DEVELOPED COUNTRIES LIQUIDITY LOAN LOAN AGREEMENT LOAN AGREEMENTS LOW INTEREST RATES MACROECONOMICS MARGINAL PRODUCTIVITY MARKET INTEREST RATES MONETARY FUND MULTIPLIERS NATURAL RESOURCES NORMAL GOOD OPERATING COSTS OUTSIDE ASSISTANCE OUTSTANDING PUBLIC DEBT PHYSICAL CAPITAL POLITICAL ECONOMY POSITIVE EXTERNALITY PRIVATE CAPITAL PRIVATE CAPITAL STOCK PRIVATE INVESTMENT PRIVATE INVESTMENTS PRIVATE SAVINGS PRIVATE SECTOR PRODUCTION FUNCTION PRODUCTIVE CAPITAL PROVISION OF INFRASTRUCTURE PUBLIC PUBLIC ASSETS PUBLIC EXPENDITURE PUBLIC EXPENDITURES PUBLIC FINANCE PUBLIC FINANCES PUBLIC INFRASTRUCTURE PUBLIC INVESTMENT PUBLIC INVESTMENT IN INFRASTRUCTURE PUBLIC INVESTMENT PROGRAM PUBLIC INVESTMENTS PUBLIC POLICY PUBLIC SECTOR PUBLIC SECTOR WAGES PUBLIC SPENDING RATE OF RETURN RATES OF RETURN RATES OF RETURNS REAL GDP RECURRENT EXPENDITURES REMITTANCES RETURNS ROADS SAVINGS SHAREHOLDERS SOVEREIGN BOND STATIC ANALYSIS STOCKS TARIFF REVENUES TAX TAX EXEMPT TAX RATE TAX RATES TAXATION TOTAL FACTOR PRODUCTIVITY TRADING UTILITIES UTILITY FUNCTION VALUATION VALUE ADDED WEALTH While debt-financed productive public investment raises a country s debt ratios in the short run, it can also generate higher growth, revenues, and exports, leading over time to lower debt ratios. This paper develops a framework to assess whether countries meet the conditions for realizing the net benefits over the costs of public investment debt financing. While it is possible to achieve debt sustainability with an appropriate mix of concessional and non-concessional financing, this is a necessary but not sufficient condition. It is also important to ensure the operational viability of public investment projects by having in place adequate project management: (i) project screening and appraisal, (ii) a clear connection between capital and recurrent expenditures once the projects are launched, and (iii) safeguards for appropriate project implementation and facilities operations. To illustrate the strength of these results, the paper carries out three measurement exercises: (a) a simulation of the degree to which the ratio of optimal public investment responds to changes in key parameters related to project management in a general equilibrium model; (b) application of the public investment management (PIMa) index to benchmark a country's public investment management capacity; and (c) presentation of the results of the Investment, Savings, and Macroeconomic Vulnerabilities tool aimed at tracking country choices in public finance and the impact of public projects on private investments. 2014-03-18T20:15:36Z 2014-03-18T20:15:36Z 2014-02 http://documents.worldbank.org/curated/en/2014/02/18895457/measuring-impact-debt-financed-public-investment http://hdl.handle.net/10986/17309 English en_US Policy Research Working Paper;No. 6766 CC BY 3.0 IGO http://creativecommons.org/licenses/by/3.0/igo/ World Bank, Washington, DC Publications & Research :: Policy Research Working Paper Publications & Research |