Public Investment Quality and Its Implications for Sovereign Risk and Debt Sustainability

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Tác giả: Amat Adarov

Ngôn ngữ: eng

Ký hiệu phân loại: 336.3 Public debt and expenditures

Thông tin xuất bản: Washington, DC: World Bank, 2024

Mô tả vật lý:

Bộ sưu tập: Tài liệu truy cập mở

ID: 328324

This paper introduces a novel index to measure public investment quality, utilizing the World Bank's investment project performance data from 120 countries over 2000-21. After detailing the construction of the index, the paper examines how public investment quality influences the relationship between the level of public investment and sovereign risk. The findings show that high levels of public investment are linked to lower sovereign risk in countries with high investment quality and, conversely, to higher sovereign risk in countries with low investment quality. This relationship is especially pronounced in sub-investment grade countries. These results are corroborated by showing that when public investment quality is high, scaling up public investment enhances fiscal sustainability by reducing the ratio of debt to gross domestic product in the long run: high-quality public investment is self-financing. However, the opposite is true when public investment quality is low, where increased public investment results in a deterioration of fiscal fundamentals.
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