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

WPIEA2372003 Image
Price:  $15.00

Author/Editor: Naoko C. Kojo, Emanuele Baldacci, Arye L. Hillman
Release Date: © December, 2003
ISBN : 978-1-45187-573-7
Stock #: WPIEA2372003
Stock Status: Available

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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.


Economic policy , Fiscal policy

More publications in this series: Working Papers

More publications by: Naoko C. Kojo ; Emanuele Baldacci ; Arye L. Hillman