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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.

Access to Finance --- Cash Flows --- Debt Markets --- Expenditures --- Finance and Financial Sector Development --- Financial Market --- Financial Market Participants --- Financial Markets --- Fiscal Policy --- International Bank --- International Financial Institutions --- Investment and Investment Climate --- Macroeconomics and Economic Growth --- Public Investment --- Public Sector Economics and Finance --- Public Sector Expenditure Analysis and Management --- Solvency

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An adequate supply of infrastructure services has long been viewed by both academics and policy makers as a key ingredient for economic development. Over the past quarter-century, the retrenchment of Latin America's public sector from its dominant position in the provision of infrastructure, and the opening up of these industries to private participation, have renewed the debate on the role of infrastructure in the region's development. The focus of this paper is three-fold. First, it documents, in a comparative cross-regional perspective, the trends in Latin America's infrastructure development, as reflected in the quantity and quality of infrastructure services and the universality of their access. Overall, this suggests the emergence of an infrastructure gap vis-a-vis other industrial and developing regions. Second, it provides an empirical assessment of the contribution of infrastructure development to growth across Latin America. Third, it examines the trends in the financing of infrastructure investment - documenting the changing roles of the public and private sectors - and analyzes how they have been shaped by macroeconomic policy constraints.

Accessibility --- Banks & Banking Reform --- Finance and Financial Sector Development --- Financing of infrastructure --- Infrastructure development --- Infrastructure Economics --- Infrastructure Economics and Finance --- Infrastructure investment --- Inspection --- Land transport --- Non Bank Financial Institutions --- Population density --- Public Sector Development --- Public Sector Economics --- Public utilities --- Road --- Road network --- Road quality --- Roads --- Sanitation --- Trails --- Transport --- Transport Economics Policy & Planning --- Transport infrastructure --- Transport network --- Transportation --- Transportation services --- Vehicle

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This paper surveys the academic and policy debate on the roots of global imbalances, their role in the inception of the global crisis, and their prospects in its aftermath. The conventional view holds that global imbalances result primarily from unsustainably high demand for goods in the United States and other rich countries, and that their impending correction must involve major United States trade adjustment and dollar depreciation - although recent literature argues that their extent may be dampened by financial adjustment effects. In contrast, an alternative view portrays global imbalances as the equilibrium result of asymmetries in world asset demand and supply. Absent changes in the deep determinants of these, global imbalances can persist. International capital flow patterns before and during the crisis lend support to the equilibrium view. The paper also examines different hypotheses proposed in the literature on the role of global imbalances in the generation and propagation of the financial crisis. On the whole, the evidence suggests that global imbalances were not among the major causes of the crisis. Lastly, the paper assesses alternative scenarios about the future of global imbalances, considering in particular their potential consequences for developing countries, and the policy measures that these might adopt to enhance their growth prospects in a changing global equilibrium.

Capital flows --- Currencies and Exchange Rates --- Current account --- Current account deficit --- Current account deficits --- Current account surplus --- Debt Markets --- Depreciation --- Economic stability --- Economic Theory & Research --- Emerging Markets --- Equilibrium --- External deficit --- External deficits --- Finance and Financial Sector Development --- Financial crisis --- Global economy --- Global imbalances --- International capital flow --- Investment and Investment Climate --- Investment rates --- Macroeconomics and Economic Growth --- Oil exporting countries --- Oil-exporting countries --- Private Sector Development --- Surplus --- Surpluses --- World economy

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The view that policies directed at the real exchange rate can have an important effect on economic growth has been gaining adherents in recent years. Unlike the traditional "misalignment" view that temporary departures of the real exchange rate from its equilibrium level harm growth by distorting a key relative price in the economy, the recent literature stresses the growth effects of the equilibrium real exchange rate itself, with the claim being that a depreciated equilibrium real exchange rate promotes economic growth. While there is no consensus on the precise channels through which this effect is generated, an increasingly common view in policy circles points to saving as the channel of transmission, with the claim that a depreciated real exchange rate raises the domestic saving rate - which in turn stimulates growth by increasing the rate of capital accumulation. This paper offers a preliminary exploration of this claim. Drawing from standard analytical models, stylized facts on saving and real exchange rates, and existing empirical research on saving determinants, the paper assesses the link between the real exchange rate and saving. Overall, the conclusion is that saving is unlikely to provide the mechanism through which the real exchange rate affects growth.

Currencies and Exchange Rates --- Debt Markets --- Economic growth --- Economic Stabilization --- Emerging Markets --- Exchange rate depreciation --- Finance and Financial Sector Development --- Growth rate --- Macroeconomic impact --- Macroeconomic Management --- Macroeconomics and Economic Growth --- Policy Research --- Private Sector Development --- Real exchange --- Real exchange rate --- Real exchange rate volatility --- Real exchange rates --- Saving rates

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Fiscal policy in Latin America has been guided primarily by short-term liquidity targets whose observance was taken as the main exponent of fiscal prudence, with attention focused almost exclusively on the levels of public debt and the cash deficit. Very little attention was paid to the effects of fiscal policy on growth and on macroeconomic volatility over the cycle. Important issues such as the composition of public expenditures (and its effects on growth), the ability of fiscal policy to stabilize cyclical fluctuations, and the currency composition of public debt were largely neglected. As

Fiscal policy --- Finance, Public --- Economic stabilization --- Latin America --- Economic policy.