Fiscal Space for Investment in Infrastructure in Colombia
For the evaluation of macroeconomic policies Colombian authorities rely heavily, if not exclusively, on the operational framework known as the Financial Programming Model developed by the International Monetary Fund in the 1950s. Based on this static framework, the formulation of fiscal policy in th...
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| Format: | Policy Research Working Paper |
| Language: | English |
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World Bank, Washington, DC
2012
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| Online Access: | http://documents.worldbank.org/curated/en/2005/06/5852353/fiscal-space-investment-infrastructure-colombia http://hdl.handle.net/10986/8228 |
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okr-10986-8228 |
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| recordtype |
oai_dc |
| repository_type |
Digital Repository |
| institution_category |
Foreign Institution |
| institution |
Digital Repositories |
| building |
World Bank Open Knowledge Repository |
| collection |
World Bank |
| language |
English |
| topic |
ADVERSE EFFECTS AGGREGATE DEMAND ANALYTICAL APPROACH BALANCE OF PAYMENTS BALANCE SHEET BENCHMARK BORROWING BUDGET CONSTRAINT CAPITAL EXPENDITURES CAPITAL FORMATION CAPITAL GOODS CAPITAL MARKETS CENTRAL BANK CONSOLIDATION CONSTANT RETURNS TO SCALE CONSUMPTION EXPENDITURES CONSUMPTION TAXES CURRENT EXPENDITURES DEBT DEFICITS DIMINISHING RETURNS DISCOUNT RATES DOMESTIC PRICE ECONOMIC ACTIVITY ECONOMIC BEHAVIOR ECONOMIC GROWTH ELASTICITY ELASTICITY OF SUBSTITUTION EMPIRICAL EVIDENCE EMPIRICAL STUDIES EMPLOYMENT ENDOGENOUS VARIABLES EQUILIBRIUM EXCHANGE RATE EXOGENOUS VARIABLES EXPENDITURES EXPORTS EXTERNALITIES EXTERNALITY FINANCIAL MARKETS FISCAL ADJUSTMENT FISCAL AUTHORITY FISCAL BALANCE FISCAL DEFICIT FISCAL PERFORMANCE FISCAL POLICIES FISCAL POLICY FISCAL RETRENCHMENT FISCAL RULES FORECASTS FOREIGN EXCHANGE GDP GENERAL EQUILIBRIUM MODEL GOVERNMENT BONDS GOVERNMENT BUDGET GOVERNMENT DEBT GROSS DEBT GROSS PUBLIC DEBT GROWTH RATE HUMAN CAPITAL IMPERFECT SUBSTITUTES IMPORTS INCOME INCOME TAXES INFLATION INTEREST RATE INTEREST RATES INTERMEDIATE GOODS LAWS LEISURE MACROECONOMIC POLICIES MARGINAL PRODUCTIVITY MIDDLE INCOME COUNTRIES NATIONAL INCOME NATURAL MONOPOLY OIL OPERATING SURPLUS OPTIMIZATION PENSION LIABILITIES PENSION OBLIGATIONS POPULATION GROWTH PRIVATE CONSUMPTION PRIVATE GOODS PRIVATE SECTOR PRIVATIZATION PRODUCTION FUNCTION PRODUCTION TECHNOLOGY PROVISION OF INFRASTRUCTURE PUBLIC CAPITAL PUBLIC CAPITAL SPENDING PUBLIC DEBT PUBLIC ENTERPRISES PUBLIC INFRASTRUCTURE PUBLIC INVESTMENT PUBLIC INVESTMENT IN INFRASTRUCTURE PUBLIC POLICIES PUBLIC SECTOR PUBLIC SPENDING RANDOM WALK RATIONAL EXPECTATIONS REAL EXCHANGE RATE REAL WAGE RELATIVE PRICE RELATIVE PRICES RISK PREMIUM SECURITIES SOCIAL SECURITY SUPPLY CURVE SUSTAINABLE GROWTH TAX TAX COLLECTION TAX RATES TAX REVENUE TAX REVENUES TAXATION TELECOMMUNICATIONS TERMS OF TRADE TRANSPORT USER CHARGES VALUE ADDED |
| spellingShingle |
ADVERSE EFFECTS AGGREGATE DEMAND ANALYTICAL APPROACH BALANCE OF PAYMENTS BALANCE SHEET BENCHMARK BORROWING BUDGET CONSTRAINT CAPITAL EXPENDITURES CAPITAL FORMATION CAPITAL GOODS CAPITAL MARKETS CENTRAL BANK CONSOLIDATION CONSTANT RETURNS TO SCALE CONSUMPTION EXPENDITURES CONSUMPTION TAXES CURRENT EXPENDITURES DEBT DEFICITS DIMINISHING RETURNS DISCOUNT RATES DOMESTIC PRICE ECONOMIC ACTIVITY ECONOMIC BEHAVIOR ECONOMIC GROWTH ELASTICITY ELASTICITY OF SUBSTITUTION EMPIRICAL EVIDENCE EMPIRICAL STUDIES EMPLOYMENT ENDOGENOUS VARIABLES EQUILIBRIUM EXCHANGE RATE EXOGENOUS VARIABLES EXPENDITURES EXPORTS EXTERNALITIES EXTERNALITY FINANCIAL MARKETS FISCAL ADJUSTMENT FISCAL AUTHORITY FISCAL BALANCE FISCAL DEFICIT FISCAL PERFORMANCE FISCAL POLICIES FISCAL POLICY FISCAL RETRENCHMENT FISCAL RULES FORECASTS FOREIGN EXCHANGE GDP GENERAL EQUILIBRIUM MODEL GOVERNMENT BONDS GOVERNMENT BUDGET GOVERNMENT DEBT GROSS DEBT GROSS PUBLIC DEBT GROWTH RATE HUMAN CAPITAL IMPERFECT SUBSTITUTES IMPORTS INCOME INCOME TAXES INFLATION INTEREST RATE INTEREST RATES INTERMEDIATE GOODS LAWS LEISURE MACROECONOMIC POLICIES MARGINAL PRODUCTIVITY MIDDLE INCOME COUNTRIES NATIONAL INCOME NATURAL MONOPOLY OIL OPERATING SURPLUS OPTIMIZATION PENSION LIABILITIES PENSION OBLIGATIONS POPULATION GROWTH PRIVATE CONSUMPTION PRIVATE GOODS PRIVATE SECTOR PRIVATIZATION PRODUCTION FUNCTION PRODUCTION TECHNOLOGY PROVISION OF INFRASTRUCTURE PUBLIC CAPITAL PUBLIC CAPITAL SPENDING PUBLIC DEBT PUBLIC ENTERPRISES PUBLIC INFRASTRUCTURE PUBLIC INVESTMENT PUBLIC INVESTMENT IN INFRASTRUCTURE PUBLIC POLICIES PUBLIC SECTOR PUBLIC SPENDING RANDOM WALK RATIONAL EXPECTATIONS REAL EXCHANGE RATE REAL WAGE RELATIVE PRICE RELATIVE PRICES RISK PREMIUM SECURITIES SOCIAL SECURITY SUPPLY CURVE SUSTAINABLE GROWTH TAX TAX COLLECTION TAX RATES TAX REVENUE TAX REVENUES TAXATION TELECOMMUNICATIONS TERMS OF TRADE TRANSPORT USER CHARGES VALUE ADDED Suescún, Rodrigo Fiscal Space for Investment in Infrastructure in Colombia |
| geographic_facet |
Latin America & Caribbean Colombia |
| relation |
Policy Research Working Paper; No. 3629 |
| description |
For the evaluation of macroeconomic policies Colombian authorities rely heavily, if not exclusively, on the operational framework known as the Financial Programming Model developed by the International Monetary Fund in the 1950s. Based on this static framework, the formulation of fiscal policy in the country, just as in various Latin American countries, focuses primarily on fiscal deficit and gross debt targets. However, the type of fiscal policy advice derived from it is not useful for understanding the asset-creating nature and the inter-temporal tradeoffs involved in public investment decisions. The author develops a perfect foresight, dynamic small open economy model to provide an alternative framework for fiscal analysis and policy purposes. He shows that the two competing frameworks deliver differing paths for the expected behavior of the Colombian economy. He then uses the proposed framework to study the likely consequences of using public capital spending to achieve deficit targets since, in addition to an already high public debt, in the years ahead unfunded pension obligations will put enormous pressure on the Colombian government's solvency. The results indicate that public capital compression is costly in terms of foregone growth and very ineffective in achieving fiscal consolidation. The adoption of fiscal rules such as the golden rule or the permanent balance rule to shield public investment from undue budgetary pressures makes little sense in the presence of sustainability concerns. The author shows that a transitory capital spending increase is not self-amortizing in the long run; hence an extra peso of public capital spending deteriorates the inter-temporal fiscal position. A permanent increase largely pays for itself in terms of additional tax revenue but this effect is offset by a deterioration of infrastructure user charges, as long as public prices are determined competitively. |
| format |
Publications & Research :: Policy Research Working Paper |
| author |
Suescún, Rodrigo |
| author_facet |
Suescún, Rodrigo |
| author_sort |
Suescún, Rodrigo |
| title |
Fiscal Space for Investment in Infrastructure in Colombia |
| title_short |
Fiscal Space for Investment in Infrastructure in Colombia |
| title_full |
Fiscal Space for Investment in Infrastructure in Colombia |
| title_fullStr |
Fiscal Space for Investment in Infrastructure in Colombia |
| title_full_unstemmed |
Fiscal Space for Investment in Infrastructure in Colombia |
| title_sort |
fiscal space for investment in infrastructure in colombia |
| publisher |
World Bank, Washington, DC |
| publishDate |
2012 |
| url |
http://documents.worldbank.org/curated/en/2005/06/5852353/fiscal-space-investment-infrastructure-colombia http://hdl.handle.net/10986/8228 |
| _version_ |
1764407559549091840 |
| spelling |
okr-10986-82282021-04-23T14:02:42Z Fiscal Space for Investment in Infrastructure in Colombia Suescún, Rodrigo ADVERSE EFFECTS AGGREGATE DEMAND ANALYTICAL APPROACH BALANCE OF PAYMENTS BALANCE SHEET BENCHMARK BORROWING BUDGET CONSTRAINT CAPITAL EXPENDITURES CAPITAL FORMATION CAPITAL GOODS CAPITAL MARKETS CENTRAL BANK CONSOLIDATION CONSTANT RETURNS TO SCALE CONSUMPTION EXPENDITURES CONSUMPTION TAXES CURRENT EXPENDITURES DEBT DEFICITS DIMINISHING RETURNS DISCOUNT RATES DOMESTIC PRICE ECONOMIC ACTIVITY ECONOMIC BEHAVIOR ECONOMIC GROWTH ELASTICITY ELASTICITY OF SUBSTITUTION EMPIRICAL EVIDENCE EMPIRICAL STUDIES EMPLOYMENT ENDOGENOUS VARIABLES EQUILIBRIUM EXCHANGE RATE EXOGENOUS VARIABLES EXPENDITURES EXPORTS EXTERNALITIES EXTERNALITY FINANCIAL MARKETS FISCAL ADJUSTMENT FISCAL AUTHORITY FISCAL BALANCE FISCAL DEFICIT FISCAL PERFORMANCE FISCAL POLICIES FISCAL POLICY FISCAL RETRENCHMENT FISCAL RULES FORECASTS FOREIGN EXCHANGE GDP GENERAL EQUILIBRIUM MODEL GOVERNMENT BONDS GOVERNMENT BUDGET GOVERNMENT DEBT GROSS DEBT GROSS PUBLIC DEBT GROWTH RATE HUMAN CAPITAL IMPERFECT SUBSTITUTES IMPORTS INCOME INCOME TAXES INFLATION INTEREST RATE INTEREST RATES INTERMEDIATE GOODS LAWS LEISURE MACROECONOMIC POLICIES MARGINAL PRODUCTIVITY MIDDLE INCOME COUNTRIES NATIONAL INCOME NATURAL MONOPOLY OIL OPERATING SURPLUS OPTIMIZATION PENSION LIABILITIES PENSION OBLIGATIONS POPULATION GROWTH PRIVATE CONSUMPTION PRIVATE GOODS PRIVATE SECTOR PRIVATIZATION PRODUCTION FUNCTION PRODUCTION TECHNOLOGY PROVISION OF INFRASTRUCTURE PUBLIC CAPITAL PUBLIC CAPITAL SPENDING PUBLIC DEBT PUBLIC ENTERPRISES PUBLIC INFRASTRUCTURE PUBLIC INVESTMENT PUBLIC INVESTMENT IN INFRASTRUCTURE PUBLIC POLICIES PUBLIC SECTOR PUBLIC SPENDING RANDOM WALK RATIONAL EXPECTATIONS REAL EXCHANGE RATE REAL WAGE RELATIVE PRICE RELATIVE PRICES RISK PREMIUM SECURITIES SOCIAL SECURITY SUPPLY CURVE SUSTAINABLE GROWTH TAX TAX COLLECTION TAX RATES TAX REVENUE TAX REVENUES TAXATION TELECOMMUNICATIONS TERMS OF TRADE TRANSPORT USER CHARGES VALUE ADDED For the evaluation of macroeconomic policies Colombian authorities rely heavily, if not exclusively, on the operational framework known as the Financial Programming Model developed by the International Monetary Fund in the 1950s. Based on this static framework, the formulation of fiscal policy in the country, just as in various Latin American countries, focuses primarily on fiscal deficit and gross debt targets. However, the type of fiscal policy advice derived from it is not useful for understanding the asset-creating nature and the inter-temporal tradeoffs involved in public investment decisions. The author develops a perfect foresight, dynamic small open economy model to provide an alternative framework for fiscal analysis and policy purposes. He shows that the two competing frameworks deliver differing paths for the expected behavior of the Colombian economy. He then uses the proposed framework to study the likely consequences of using public capital spending to achieve deficit targets since, in addition to an already high public debt, in the years ahead unfunded pension obligations will put enormous pressure on the Colombian government's solvency. The results indicate that public capital compression is costly in terms of foregone growth and very ineffective in achieving fiscal consolidation. The adoption of fiscal rules such as the golden rule or the permanent balance rule to shield public investment from undue budgetary pressures makes little sense in the presence of sustainability concerns. The author shows that a transitory capital spending increase is not self-amortizing in the long run; hence an extra peso of public capital spending deteriorates the inter-temporal fiscal position. A permanent increase largely pays for itself in terms of additional tax revenue but this effect is offset by a deterioration of infrastructure user charges, as long as public prices are determined competitively. 2012-06-15T22:16:34Z 2012-06-15T22:16:34Z 2005-06 http://documents.worldbank.org/curated/en/2005/06/5852353/fiscal-space-investment-infrastructure-colombia http://hdl.handle.net/10986/8228 English Policy Research Working Paper; No. 3629 CC BY 3.0 IGO http://creativecommons.org/licenses/by/3.0/igo/ World Bank World Bank, Washington, DC Publications & Research :: Policy Research Working Paper Publications & Research Latin America & Caribbean Colombia |