ISBN 978-0-8213-9630-8 SKU 19630 D i r e c t i o n s i n D e v e lo p m e n t Public Sector Governance Is Fiscal Policy the Answer? A Developing Country Perspective Blanca Moreno-Dodson, Editor Moreno-Dodson —Jack Mintz, James and Barbara Palmer Chair and Director, School of Public Policy, University of Calgary Is Fiscal Policy the Answer? “The world is challenged by the aftermath of the Great Global Recession, with many countries facing difficult tax and spending policy choices and slow economic growth. This book makes a welcome contribution to policy by reviewing the state of knowledge with respect to the effectiveness of fiscal policies. It is not just a matter of how much money is spent, but how best to spend it. Nor is it a matter that any tax is acceptable to fund public services. The answers to many interesting questions are lurking in these pages.” A Developing Country Perspective The global crisis that started in 2008–09 reignited interest in counter-cyclical fiscal policy as a critical instrument to provide immediate economic stimulus. Counter-cyclical fiscal policy has returned to prominence, either in conjunction with or in lieu of monetary policy and exchange rate adjustments, as an alternative response to the unexpected and acute shocks that the crisis produced. More subtly, the global crisis has refocused interest in fiscal policy as an instrument for longer-term growth and development, particularly among developing countries. In the potential “new normal” of continued sluggishness in the advanced world, developing countries have strong incentives to seek out new domestic engines for efficiency and productivity growth, as well as for greater equity in development. The long-term effects, however, are less well known and constitute a challenge for many countries. Is Fiscal Policy the Answer? A Developing Country Perspective explores methodological advances and new practices for fiscal policy implementation. The chapters adopt a broad perspective to better understand the dynamics of long-term effects, rather than isolating the temporary effects of the crisis, as the narrower focus could mask the larger challenges underlying the conduct of fiscal policy, particularly in countries where long-term growth patterns remain sluggish or volatile, and poverty and inequality persist. The book seeks to improve the understanding of the challenges and identify possible innovative solutions in implementing fiscal policy for growth and welfare purposes. From expenditure composition to benefit incidence analysis and the difficulties of improving public investment management, the chapters cover a range of methodological advances and new practices to enlighten policy makers designing fiscal policy packages targeted to the realities of their countries. In addition, several knowledge gaps are identified and recommendations for future research in several areas are made, including the effects of public spending and taxation on inequality, the removal of institutional constraints to public investments, the implications of fiscal policy making for climate change, and the need to prioritize fiscal policy reforms.