A Fiscal Policy Framework to Safeguard Public Investment

18 Pages Posted: 25 Mar 2012

See all articles by Annalisa Fedelino

Annalisa Fedelino

International Monetary Fund (IMF)

Richard Hemming

International Monetary Fund (IMF)

Date Written: March 31, 2005

Abstract

Fedelino and Hemming analyse different choices of fiscal indicators and targets that are better suited to promoting and safeguarding public investment. After having documented the decline in public investment as a share of GDP in many countries over the last two decades, they note that the empirical evidence on the links between public investment and growth has so far been inconclusive and, furthermore, there is no guarantee that public investment is especially meritorious or productive. The Authors thus propose several “public investment-friendly” approaches to fiscal policy without abandoning the traditional framework based on overall balance and gross debt: broadening the usual set of fiscal indicators and targets, by paying more attention to the current balance; introducing more budgetary flexibility; strengthening the institutional framework for public investment; promoting private sector involvement. They conclude that the best solution to protecting public investment is to implement fiscal policy in a flexible, sustainable and transparent way.

Suggested Citation

Fedelino, Annalisa and Hemming, Richard, A Fiscal Policy Framework to Safeguard Public Investment (March 31, 2005). Available at SSRN: https://ssrn.com/abstract=2028351 or http://dx.doi.org/10.2139/ssrn.2028351

Annalisa Fedelino (Contact Author)

International Monetary Fund (IMF) ( email )

700 19th Street NW
Washington, DC 20431
United States

Richard Hemming

International Monetary Fund (IMF) ( email )

700 19th Street NW
Washington, DC 20431
United States

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