IDEAS home Printed from
   My bibliography  Save this paper

Fiscal rules, public investment, and growth


  • Serven, Luis


Solvency is an intertemporal concept, relating to the present value of revenues and expenditures, and encompassing both assets and liabilities. But the standard practice among policy makers, financial market participants and international financial institutions is to assess the strength of the fiscal accounts solely on the basis of the cash deficit. Short-term cash flows matter, but a preponderant focus on them can encourage governments to invest too little, especially during episodes of fiscal tightening. This has potentially adverse consequences for growth and, paradoxically, even for fiscal solvency itself. The paper offers an overview of the links between fiscal targets, public investment, and public sector solvency. After reviewing the international experience with public investment under fiscal adjustment, the paper lays out an analytical framework to illustrate the consequences of using the public deficit as a guide to solvency. The paper then discusses some alternatives to conventional cash deficit rules and their implications for investment and fiscal solvency.

Suggested Citation

  • Serven, Luis, 2007. "Fiscal rules, public investment, and growth," Policy Research Working Paper Series 4382, The World Bank.
  • Handle: RePEc:wbk:wbrwps:4382

    Download full text from publisher

    File URL:
    Download Restriction: no

    References listed on IDEAS

    1. Estrin, Saul & Jones, Derek C. & Svejnar, Jan, 1987. "The productivity effects of worker participation: Producer cooperatives in western economies," Journal of Comparative Economics, Elsevier, vol. 11(1), pages 40-61, March.
    2. Tyson, Laura DAndrea, 1979. "Incentives, income sharing, and institutional innovation in the yugoslav self-managed firm," Journal of Comparative Economics, Elsevier, vol. 3(3), pages 285-301, September.
    3. Cable, John R & FitzRoy, Felix R, 1980. "Productive Efficiency, Incentives and Employee Participation: Some Preliminary Results for West Germany," Kyklos, Wiley Blackwell, vol. 33(1), pages 100-121.
    Full references (including those not matched with items on IDEAS)


    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.

    Cited by:

    1. Mauricio Mesquita Moreira & Paolo Giordano & Antoni Estevadeordal & Tomás Serebrisky & Jordan Schwartz & Ricardo Sánchez & Aiga Stokenberga, 2010. "Nota de Discusión de Politícas: Cómo Reducir Las Brechas de Integración (Escenarios y Recomendaciones de Políticas para Promover la Infraestructura Física y Reducir los Costes del Comercio Intrarregio," IDB Publications (Working Papers) 9338, Inter-American Development Bank.

    More about this item


    Debt Markets; Public Sector Expenditure Analysis&Management; Access to Finance; Public Sector Economics&Finance;

    NEP fields

    This paper has been announced in the following NEP Reports:


    Access and download statistics


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:wbk:wbrwps:4382. 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: (Roula I. Yazigi). General contact details of provider: .

    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.

    We have no references for this item. You can help adding them by using 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 RePEc Author Service 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.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.