EconPapers    
Economics at your fingertips  
 

Public Investment Quality and Its Implications for Sovereign Risk and Debt Sustainability

Amat Adarov and Ugo Panizza

No 10877, Policy Research Working Paper Series from The World Bank

Abstract: This paper introduces a novel index to measure public investment quality, utilizing the World Bank’s investment project performance data from 120 countries over 2000–21. After detailing the construction of the index, the paper examines how public investment quality influences the relationship between the level of public investment and sovereign risk. The findings show that high levels of public investment are linked to lower sovereign risk in countries with high investment quality and, conversely, to higher sovereign risk in countries with low investment quality. This relationship is especially pronounced in sub-investment grade countries. These results are corroborated by showing that when public investment quality is high, scaling up public investment enhances fiscal sustainability by reducing the ratio of debt to gross domestic product in the long run: high-quality public investment is self-financing. However, the opposite is true when public investment quality is low, where increased public investment results in a deterioration of fiscal fundamentals.

Date: 2024-08-21
New Economics Papers: this item is included in nep-fdg
References: View complete reference list from CitEc
Citations:

Downloads: (external link)
https://documents.worldbank.org/curated/en/0997502 ... 7a1-52abdf7e4224.pdf (application/pdf)

Related works:
Working Paper: Public Investment Quality and its Implications for Sovereign Risk and Debt Sustainability (2024) Downloads
Working Paper: Public Investment Quality and its Implications for Sovereign Risk and Debt Sustainability (2024) Downloads
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:wbk:wbrwps:10877

Access Statistics for this paper

More papers in Policy Research Working Paper Series from The World Bank 1818 H Street, N.W., Washington, DC 20433. Contact information at EDIRC.
Bibliographic data for series maintained by Roula I. Yazigi ().

 
Page updated 2025-03-29
Handle: RePEc:wbk:wbrwps:10877