Walking up the Down Escalator : Public Investment and Fiscal Stability

When growth-promoting spending is cut so much that the present value of future government revenues falls by more than the immediate improvement in the cash deficit, fiscal adjustment becomes like walking up the down escalator. Although short-term cash flows matter, too tight a focus on them encourag...

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Main Authors:	Easterly, William, Irwin, Timothy, Servén, Luis
Format:	Journal Article
Published:	World Bank 2012
Subjects:	accounting budgeting cash flows debt expenditure expenditures fiscal deficit fiscal policy government revenues infrastructure investment international bank investment spending macroeconomic stability macroeconomic stabilization market reforms political economy private investment public finances public investment solvency
Online Access:	http://hdl.handle.net/10986/4414

id	okr-10986-4414
recordtype	oai_dc
spelling	okr-10986-44142021-04-23T14:02:17Z Walking up the Down Escalator : Public Investment and Fiscal Stability Easterly, William Irwin, Timothy Servén, Luis accounting budgeting cash flows debt expenditure expenditures fiscal deficit fiscal policy government revenues infrastructure investment international bank investment spending macroeconomic stability macroeconomic stabilization market reforms political economy private investment public finances public investment solvency When growth-promoting spending is cut so much that the present value of future government revenues falls by more than the immediate improvement in the cash deficit, fiscal adjustment becomes like walking up the down escalator. Although short-term cash flows matter, too tight a focus on them encourages governments to invest too little. Cash-flow targets also encourage governments to shift investment spending off budget by seeking private investment in public projects, irrespective of its real fiscal or economic benefits. To deal with this problem, some observers have suggested excluding certain investments (such as those undertaken by public enterprises deemed commercial or financed by multilaterals) from cash-flow targets. These stopgap remedies may help protect some investments, but they do not provide a satisfactory solution to the underlying problem. Governments can more effectively reduce the biases created by the focus on short-term cash flows by developing indicators of the long-term fiscal effects of their decisions, including accounting and economic measures of net worth, and, where appropriate, including such measures in fiscal targets or even fiscal rules. 2012-03-30T07:12:33Z 2012-03-30T07:12:33Z 2008-03-01 Journal Article World Bank Research Observer 1564-6971 http://hdl.handle.net/10986/4414 CC BY-NC-ND 3.0 IGO World Bank World Bank Journal Article Latin America & Caribbean Brazil Chile Colombia
repository_type	Digital Repository
institution_category	Foreign Institution
institution	Digital Repositories
building	World Bank Open Knowledge Repository
collection	World Bank
topic	accounting budgeting cash flows debt expenditure expenditures fiscal deficit fiscal policy government revenues infrastructure investment international bank investment spending macroeconomic stability macroeconomic stabilization market reforms political economy private investment public finances public investment solvency
spellingShingle	accounting budgeting cash flows debt expenditure expenditures fiscal deficit fiscal policy government revenues infrastructure investment international bank investment spending macroeconomic stability macroeconomic stabilization market reforms political economy private investment public finances public investment solvency Easterly, William Irwin, Timothy Servén, Luis Walking up the Down Escalator : Public Investment and Fiscal Stability
geographic_facet	Latin America & Caribbean Brazil Chile Colombia
description	When growth-promoting spending is cut so much that the present value of future government revenues falls by more than the immediate improvement in the cash deficit, fiscal adjustment becomes like walking up the down escalator. Although short-term cash flows matter, too tight a focus on them encourages governments to invest too little. Cash-flow targets also encourage governments to shift investment spending off budget by seeking private investment in public projects, irrespective of its real fiscal or economic benefits. To deal with this problem, some observers have suggested excluding certain investments (such as those undertaken by public enterprises deemed commercial or financed by multilaterals) from cash-flow targets. These stopgap remedies may help protect some investments, but they do not provide a satisfactory solution to the underlying problem. Governments can more effectively reduce the biases created by the focus on short-term cash flows by developing indicators of the long-term fiscal effects of their decisions, including accounting and economic measures of net worth, and, where appropriate, including such measures in fiscal targets or even fiscal rules.
format	Journal Article
author	Easterly, William Irwin, Timothy Servén, Luis
author_facet	Easterly, William Irwin, Timothy Servén, Luis
author_sort	Easterly, William
title	Walking up the Down Escalator : Public Investment and Fiscal Stability
title_short	Walking up the Down Escalator : Public Investment and Fiscal Stability
title_full	Walking up the Down Escalator : Public Investment and Fiscal Stability
title_fullStr	Walking up the Down Escalator : Public Investment and Fiscal Stability
title_full_unstemmed	Walking up the Down Escalator : Public Investment and Fiscal Stability
title_sort	walking up the down escalator : public investment and fiscal stability
publisher	World Bank
publishDate	2012
url	http://hdl.handle.net/10986/4414
_version_	1764391257195413504

Walking up the Down Escalator : Public Investment and Fiscal Stability

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