IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this paper or follow this series

Vision Versus Prudence: Government Debt Financing of Investment

  • John Freebairn

    ()

    (Department of Economics, The University of Melbourne)

  • Max Corden

    (Department of Economics, The University of Melbourne)

Registered author(s):

    This article explores the arguments for and against the use of government debt to finance large-scale public investments. Relative to the options of higher taxation or lower other expenditures, debt finance means that both the costs and the benefits of the investment fall on future generations. Debt funded public investments can be an important component of a fiscal stimulus policy package, especially when the effectiveness of monetary policy is limited. While the vision arguments presume socially beneficial investment projects are chosen, political choices often involve projects with low benefit cost ratios. More debt involves higher and higher costs, not only interest costs, but also laxer fiscal choices, a weaker basis for macroeconomic policy to counter future economic shocks, and in extreme cases a loss of policy autonomy. An independent and transparent body to undertake benefit cost assessments of investment projects, and with public release and scrutiny, would support a higher level of debt finance.

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

    File URL: http://www.melbourneinstitute.com/downloads/working_paper_series/wp2013n30.pdf
    Download Restriction: no

    Paper provided by Melbourne Institute of Applied Economic and Social Research, The University of Melbourne in its series Melbourne Institute Working Paper Series with number wp2013n30.

    as
    in new window

    Length: 21pp
    Date of creation: Sep 2013
    Date of revision:
    Handle: RePEc:iae:iaewps:wp2013n30
    Contact details of provider: Postal: Melbourne Institute of Applied Economic and Social Research, The University of Melbourne, Victoria 3010 Australia
    Phone: +61 3 8344 2100
    Fax: +61 3 8344 2111
    Web page: http://www.melbourneinstitute.com/
    Email:


    More information through EDIRC

    No references listed on IDEAS
    You can help add them by filling out this form.

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    When requesting a correction, please mention this item's handle: RePEc:iae:iaewps:wp2013n30. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Abbey Treloar)

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.