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 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.
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Format: | Journal Article biblioteca |
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World Bank
2008-03-01
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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 |
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dig-okr-1098644142021-04-23T14:02:17Z 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 |
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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 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 |
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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 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 |
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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 |
topic_facet |
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 |
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 |
2008-03-01 |
url |
http://hdl.handle.net/10986/4414 |
work_keys_str_mv |
AT easterlywilliam walkingupthedownescalatorpublicinvestmentandfiscalstability AT irwintimothy walkingupthedownescalatorpublicinvestmentandfiscalstability AT servenluis walkingupthedownescalatorpublicinvestmentandfiscalstability |
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