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Fiscal Policy for Growth and Development


  • Brahmbhatt, Milan

    () (World Bank)


The global economic crisis that broke out in 2008 has reawakened interest in fiscal policy. In the early stages of the crisis, there was a widespread turn to countercyclical fiscal stimulus. Furthermore, the recent euro area crisis has underlined the importance of long-term fiscal sustainability for macroeconomic stability. More subtly, the global crisis has also refocused interest in fiscal policy as an instrument for longer-term growth and development. In the potential Ònew normalÓ of continued sluggishness in the advanced world, developing countries have strong incentives to seek out new domestic engines for efficiency and productivity growth, as well as for greater equity in development. The potential of fiscal policy to promote these ends is therefore of great interest to developing country policy makers. This note focuses on that potential and provides an overview of how fiscal positions in developing countries have evolved in the wake of the crisis, as well as some emerging policy lessons. It then sketches a conceptual framework for thinking about the connections between fiscal policy and longer-term growth and development. Finally, this note highlights some findings about the connections between fiscal policy and development.

Suggested Citation

  • Brahmbhatt, Milan, 2012. "Fiscal Policy for Growth and Development," World Bank - Economic Premise, The World Bank, issue 91, pages 1-7, October.
  • Handle: RePEc:wbk:prmecp:ep91

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    References listed on IDEAS

    1. Frankel, Jeffrey A. & Vegh, Carlos A. & Vuletin, Guillermo, 2013. "On graduation from fiscal procyclicality," Journal of Development Economics, Elsevier, vol. 100(1), pages 32-47.
    2. Otaviano Canuto & Marcelo Giugale, 2010. "The Day After Tomorrow : A Handbook on the Future of Economic Policy in the Developing World," World Bank Publications, The World Bank, number 2507, June.
    3. Gupta, Sanjeev & Kangur, Alvar & Papageorgiou, Chris & Wane, Abdoul, 2014. "Efficiency-Adjusted Public Capital and Growth," World Development, Elsevier, vol. 57(C), pages 164-178.
    4. Brahmbhatt, Milan & Canuto, Otaviano, 2010. "Natural Resources and Development Strategy after the Crisis," World Bank - Economic Premise, The World Bank, issue 1, pages 1-7, February.
    5. Era Dabla-Norris & Jim Brumby & Annette Kyobe & Zac Mills & Chris Papageorgiou, 2012. "Investing in public investment: an index of public investment efficiency," Journal of Economic Growth, Springer, vol. 17(3), pages 235-266, September.
    6. Adam, Christopher S. & Bevan, David L., 2005. "Fiscal deficits and growth in developing countries," Journal of Public Economics, Elsevier, vol. 89(4), pages 571-597, April.
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    JEL classification:

    • E6 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook
    • H2 - Public Economics - - Taxation, Subsidies, and Revenue
    • H3 - Public Economics - - Fiscal Policies and Behavior of Economic Agents
    • H5 - Public Economics - - National Government Expenditures and Related Policies
    • O1 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development


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