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This paper explores the impact of political and institutional variables on public investment. Working with a sample of 80 presidential and parliamentary democracies between 1975 and 2012, we find that the rate of growth of public investment is higher at the beginning of electoral cycles and decelerates thereafter. The peak in public investment growth occurs between 21 and 25 months before elections. Cabinet ideology and government fragmentation influence the size of investment booms. More parties in government are associated with smaller increases in public investment while left-wing cabinets are associated with higher sustained increases in investment. Stronger institutions help attenuate the impact of elections on investment, but available information is insufficient to draw definitive conclusions.

Public investments. --- Government investments --- Investments, Public --- Expenditures, Public --- Investments --- Capital budget --- Economic development projects --- Investment of public funds --- Finance --- Macroeconomics --- Public Finance --- Fiscal Policies and Behavior of Economic Agents: Other --- National Government Expenditures and Related Policies: Infrastructures --- Other Public Investment and Capital Stock --- National Budget --- Budget Systems --- National Government Expenditures and Related Policies: General --- Debt --- Debt Management --- Sovereign Debt --- Fiscal Policy --- Public finance & taxation --- Public investment spending --- Current spending --- Expenditure --- Public debt --- Fiscal rules --- Fiscal policy --- Public investments --- Debts, Public --- United States

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This paper introduces fiscal policy in a model of sovereign risk spreads ("spreads"). Using panel data from emerging market countries, we find that reductions in public expenditure are a more powerful tool for reducing spreads than increases in revenues. Specifically, cuts in current spending lower spreads by more than cuts in investment spending, and they also lower spreads by more than increases in revenue. We also show that debt-financed current spending increases sovereign risk by more than tax-financed current spending, suggesting that international investors have some preference for the latter. In line with the empirical literature on the determinants of spreads, we find that liquidity and solvency indicators, as well as macroeconomic fundamentals, are also important determinants of spreads.

Capital market. --- Electronic books. -- local. --- Fiscal policy -- Econometric models. --- Political Science --- Law, Politics & Government --- Public Finance --- Fiscal policy --- Econometric models. --- Capital markets --- Market, Capital --- Tax policy --- Taxation --- Government policy --- Finance --- Financial institutions --- Loans --- Money market --- Securities --- Crowding out (Economics) --- Efficient market theory --- Economic policy --- Finance, Public --- Financial Risk Management --- Macroeconomics --- Inflation --- Fiscal Policy --- International Financial Markets --- Fiscal Policies and Behavior of Economic Agents: Other --- Debt --- Debt Management --- Sovereign Debt --- National Government Expenditures and Related Policies: General --- Financial Crises --- Price Level --- Deflation --- Public finance & taxation --- Economic & financial crises & disasters --- Current spending --- Fiscal consolidation --- Expenditure --- Financial crises --- Prices --- Expenditures, Public --- United States

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This paper reviews the fiscal activities that governments in a sample of 26 developing countries have obliged their central banks to undertake. In the main, these activities fall under five categories: (1) collecting seigniorage; (2) imposing financial restriction; (3) implementing selective credit policies; (4) undertaking foreign exchange operations at nonmarket-clearing prices; and (5) providing implicit or explicit deposit insurance at subsidized rates and recapitalizing insolvent financial institutions. Not all central banks engage in all these activities, but some central banks perform additional fiscal activities such as collecting taxes and running food procurement programs.

Banking --- Banks and Banking --- Banks and banking --- Banks --- Currencies --- Currency --- Debt Management --- Debt --- Debts, Public --- Deflation --- Depository Institutions --- Fiscal Policies and Behavior of Economic Agents: Other --- Foreign Exchange --- Foreign exchange --- Government and the Monetary System --- Government debt management --- Inflation --- Macroeconomics --- Micro Finance Institutions --- Monetary base --- Monetary economics --- Monetary Policy, Central Banking, and the Supply of Money and Credit: General --- Monetary Systems --- Money and Monetary Policy --- Money supply --- Money --- Mortgages --- Payment Systems --- Price Level --- Prices --- Public finance & taxation --- Public Finance --- Public financial management (PFM) --- Regimes --- Sovereign Debt --- Standards --- Turkey

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Subnational governments can create sizable fiscal risks for central governments. In addition to impacting service delivery at the grassroots level, unsustainable subnational finances can be a continuous drain on central resources. The need for stronger public financial management systems and capacities to analyze and manage risks at the subnational government level cannot be overemphasized. Central governments need to develop sound institutional mechanisms to systematically monitor the health of subnational finances to be able to proactively manage associated risks. This How to Note provides a framework for central governments that seek to assess and manage fiscal risks stemming from weak subnational finances. It analyzes the sources of subnational finance vulnerabilities and argues that central governments would benefit from putting in place the following: (1) a stronger regulatory framework, (2) improved fiscal reporting, and (3) enhanced central oversight. The lessons distilled from the international experience are particularly useful for developing economies where the management of risks can be improved.

New Zealand --- Economics: General --- Macroeconomics --- Public Finance --- Budgeting --- Fiscal Policies and Behavior of Economic Agents: Other --- National Budget, Deficit, and Debt: Other --- State and Local Borrowing --- Governmental Loans, Loan Guarantees, Credits, and Grants --- Public Administration --- Public Sector Accounting and Audits --- National Government Expenditures and Related Policies: General --- Debt --- Debt Management --- Sovereign Debt --- National Budget --- Budget Systems --- Economics of specific sectors --- Economic & financial crises & disasters --- Public finance & taxation --- Budgeting & financial management --- Economic sectors --- Financial crises --- Fiscal risks --- Public financial management (PFM) --- Public debt --- Budget planning and preparation --- Expenditure --- Informal sector --- Economics --- Currency crises --- Fiscal policy --- Debts, Public --- Finance, Public --- Budget --- Expenditures, Public

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This compilation of summaries of Working Papers released during July-December 1993 is being issued as a part of the Working Paper series. It is designed to provide the reader with an overview of the research work performed by the staff during the period. Authors of Working Papers are normally staff members of the Fund or consultants, although on occasion outside authors may collaborate with a staff member in writing a paper. The views expressed in the Working Papers or their summaries are, however, those of the authors and should not necessarily be interpreted as representing the views of the Fund. Copies of individual Working Papers and information on subscriptions to the annual series of Working Papers may be obtained from IMF Publication Services, International Monetary Fund, 700 19th Street N.W., Washington, D.C. 20431. Telephone: (202) 623-7430 Telefax: (202) 623-7201.

Exports and Imports --- Foreign Exchange --- Labor --- Macroeconomics --- Public Finance --- Finance: General --- Socialist Systems and Transitional Economies: General --- Monetary Policy, Central Banking, and the Supply of Money and Credit: General --- Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook: General --- Fiscal Policies and Behavior of Economic Agents: General --- Other Economic Systems: General --- Fiscal Policies and Behavior of Economic Agents: Other --- Economic Growth of Open Economies --- Efficiency --- Optimal Taxation --- Price Level --- Inflation --- Deflation --- Socialist Systems and Transitional Economies: Planning, Coordination, and Reform --- Financial Markets and the Macroeconomy --- Market Structure and Pricing: Oligopoly and Other Forms of Market Imperfection --- International Factor Movements and International Business: General --- Monetary Policy --- Central Banks and Their Policies --- International Monetary Arrangements and Institutions --- International Financial Markets --- Taxation, Subsidies, and Revenue: General --- Socialist Institutions and Their Transitions: Public Economics --- Comparative Studies of Particular Economies --- Macroeconomics: Consumption --- Saving --- Wealth --- Foreign Aid --- Fiscal Policies and Behavior of Economic Agents: Household --- International Policy Coordination and Transmission --- Monetary Systems --- Standards --- Regimes --- Government and the Monetary System --- Payment Systems --- Comparative or Joint Analysis of Fiscal and Monetary Policy --- Stabilization --- Treasury Policy --- Tax Evasion and Avoidance --- Open Economy Macroeconomics --- Macroeconomic Analyses of Economic Development --- Economywide Country Studies: Africa --- Economic Development: Financial Markets --- Saving and Capital Investment --- Corporate Finance and Governance --- One, Two, and Multisector Growth Models --- Model Construction and Estimation --- General Aggregative Models: Forecasting and Simulation --- Current Account Adjustment --- Short-term Capital Movements --- Macroeconomic Aspects of International Trade and Finance: General --- Interest Rates: Determination, Term Structure, and Effects --- Banks --- Depository Institutions --- Micro Finance Institutions --- Mortgages --- Policy Objectives --- Policy Designs and Consistency --- Policy Coordination --- Employment --- Unemployment --- Wages --- Intergenerational Income Distribution --- Aggregate Human Capital --- Aggregate Labor Productivity --- Labor Demand --- Fiscal Policy --- International Fiscal Issues --- International Public Goods --- Trade Policy --- International Trade Organizations --- Multinational Firms --- International Business --- Intertemporal Firm Choice and Growth, Investment, or Financing --- Economic Growth and Aggregate Productivity: General --- Trade: Forecasting and Simulation --- National Security and War --- Noncooperative Games --- Models of Political Processes: Rent-seeking, Elections, Legislatures, and Voting Behavior --- Incomes Policy --- Price Policy --- Demand and Supply of Labor: General --- Business Fluctuations --- Cycles --- Analysis of Health Care Markets --- Health: Government Policy --- Regulation --- Public Health --- General Financial Markets: General (includes Measurement and Data) --- Labour --- income economics --- Currency --- Foreign exchange --- Public finance & taxation --- Finance --- Defense spending --- Real exchange rates --- Exchange rates --- Price controls --- Banking --- Expenditure --- Prices --- Private investment --- National accounts --- Expenditures, Public --- Saving and investment --- Debts, External --- Banks and banking --- Fiscal policy --- Russian Federation --- Income economics