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. Invest...
| Main Author: | |
|---|---|
| Format: | Policy Research Working Paper |
| Language: | English en_US |
| Published: |
World Bank, Washington, DC
2014
|
| Subjects: | |
| Online Access: | http://documents.worldbank.org/curated/en/2014/05/19456271/fiscal-policy-instrument-investment-growth http://hdl.handle.net/10986/18348 |
| Summary: | 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. |
|---|