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

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Growth, Governance, and Fiscal Policy Transmission Channels in Low-Income Countries is written by Naoko C. Kojo and published by International Monetary Fund. It's available with International Standard Book Number or ISBN identification 1451875738 (ISBN 10) and 9781451875737 (ISBN 13).

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.