IMF Working Papers

Growth, Governance, and Fiscal Policy Transmission Channels in Low-Income Countries

By Naoko C. Kojo, Arye L. Hillman, Emanuele Baldacci

December 1, 2003

Download PDF

Preview Citation

Format: Chicago

Naoko C. Kojo, Arye L. Hillman, and Emanuele Baldacci. Growth, Governance, and Fiscal Policy Transmission Channels in Low-Income Countries, (USA: International Monetary Fund, 2003) accessed November 21, 2024
Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

Private investment is the principal transmission channel through which fiscal policy affects growth in high-income countries. In low-income countries, governance and also other considerations suggest that the primary channel is factor productivity. Empirical results reported in this paper confirm this expectation: in low-income countries, factor productivity is some four times more effective than investment as a channel for increasing growth through fiscal policy. Although the private investment response to fiscal contraction may be minor, high-deficit, low-income countries can nonetheless benefit from a reduction in unsustainable fiscal deficits because of governance-related factor productivity responses that increase growth.

Subject: Expenditure, Fiscal policy, Government debt management, Government debt planning, Private investment

Keywords: Deficit, Exchange rate, Low-deficit dummy, WP

Publication Details

  • Pages:

    39

  • Volume:

    ---

  • DOI:

    ---

  • Issue:

    ---

  • Series:

    Working Paper No. 2003/237

  • Stock No:

    WPIEA2372003

  • ISBN:

    9781451875737

  • ISSN:

    1018-5941

You May Also Be Interested In...

Islamic Republic of Mauritania: Technical Assistance Project on Public Debt Projections: Scoping Mission Report

November 15, 2024

Growth Convergence and Public Finances of India and its States

November 15, 2024

Republic of Tajikistan: Technical Assistance Report-Public Investment Management Assessment with the Climate Module

November 8, 2024

Kenya: Seventh and Eighth Reviews Under the Extended Fund Facility and Extended Credit Facility Arrangements, Requests for Reduction of Access, Augmentation and Rephasing of Access Under the Arrangements, Modifications of Performance Criteria, Waiver of Nonobservance of Performance Criteria, and Review Under the Resilience and Sustainability Facility Arrangement-Press Release; Staff Report; and Statement by the Executive Director for Kenya

November 1, 2024