Public finance, governance, and growth in transition economies : empirical evidence from 1992-2004

This paper revisits the early empirical literature on economic growth in transition economies, with particular focus on fiscal policy variables-fiscal balance and the size of government. The baseline model uses a parsimonious specification, drawn from Fischer and Sahay (2000), of economic growth as a function of initial conditions, stabilization, liberalization, and structural reform. The paper expands the data used in previous analyses by up to 10 years and finds unambiguous evidence that fiscal balance matters for growth, while confirming other previous findings on the correlates of economic growth in transition economies. In addition, the paper extends the baseline model and explores potential sources of nonlinearities in the relationship between growth and public finance. A key finding is that determinants of growth may vary in relative importance, depending on the underlying institutional quality. The evidence indicates that there could be higher growth payoffs from macroeconomic stability and public expenditure in countries characterized by relatively better public sector governance as measured by relevant indicators. In addition, the size of government matters for growth in a nonlinear manner: Beyond indicative thresholds of expenditure levels, public spending has a negative impact, while at levels below the threshold, there is no measurable impact on economic growth.Public Sector Expenditure Analysis&Management,Governance Indicators,Achieving Shared Growth,National Governance,Macroeconomic Management

The impact of energy price changes in Moldova

In January 2006 the price of natural gas supplied to Moldova increased from $80 to$110 per thousand cubic meters (mcm). Prices may increase further in the near future, putting additional pressure on the economy and leading to adverse effects on the poorest households. This study examines the potential impact of higher energy prices on the economy of Moldova by simulating the likely macroeconomic consequences of recent and future price increases. Moreover, it estimates the direct impact on individual households using data drawn from the 2004 Household Budget Survey. It assesses the distributional implications of the price shock, noting how the social impact may vary depending on the intensity of energy use, geographic location, and the relative share of energy in household expenditure. The results suggest that energy price changes could dampen economic growth while putting additional strains on the current account deficit. The impact on the poorest households could be significant and protecting them may require resources in the amount of 0.7 to 1.7 percent of GDP. This study identifies possible policy responses to dampen the shock of the energy price increase and to promote the longer-term objective of reducing energy vulnerability.Energy Production and Transportation,Environment and Energy Efficiency,Energy and Environment,Markets and Market Access,Transport and Environment

Access, affordability, and alternatives: Modern infrastructure services in Africa

This report reviews recent trends in household access to infrastructure services and associated budgetary expenditures in Africa. It is based on a pooled database that draws upon the entire body of household surveys conducted in sub-Saharan Africa in the last 15 years.Basic Infrastructure; Water; Electricity; sub-Saharan Africa

Access, affordability, and alternatives: Modern infrastructure services in Africa

This report reviews recent trends in household access to infrastructure services and associated budgetary expenditures in Africa. It is based on a pooled database that draws upon the entire body of household surveys conducted in sub-Saharan Africa in the last 15 years