## CHAPTER 2 PubLIC INveSTMeNT FOR The ReCOveRy

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### Introduction — Overview and purpose
- Immediate government focus during the COVID-19 crisis: address the health emergency and provide lifelines for vulnerable households and businesses.
- Governments now need to: prepare economies for safe and successful reopening, foster recovery in employment and economic activity, and facilitate transformation to a post-pandemic economy that can be more resilient, more inclusive, and greener.
- Chapter purpose:
  - Outline how governments can undertake public investment in a timely manner while safeguarding quality.
  - Estimate the potential for public investment to create jobs and boost growth.
  - Set out priorities for investments that strengthen resilience and sustainability.

### Macroeconomic case for public investment
- Key points:
  - Strongest case in advanced economies and many emerging market economies where nominal interest rates and inflation are expected to remain at historic lows.
  - Borrowing to finance high-quality investment can be desirable because cheap financing lowers the bar for undertaking investment; assets created generate taxable returns and are valued by markets when pricing sovereign risk.
  - Policymakers must ensure that the amount and quality of public investment do not overly worsen debt dynamics, especially for countries that do not issue reserve currencies.
  - With ample underused resources, public investment and its crowding-in effects on private investment could mitigate secular stagnation and the savings glut that predate COVID-19.
  - Public investment can encourage private investment and hiring when private sector activity is constrained by weakened balance sheets, losses in human capital, and sectoral demand shifts.
  - For low-income developing countries and some advanced and emerging market economies, deteriorating debt dynamics and tight financing conditions constrain investment, particularly where external debt is high and denominated in foreign currency.
  - Gradual scaling-up of public investment financed by borrowing could yield positive short- and long-term multipliers, provided interest rates do not increase too much and governments choose and manage projects to maximize economic returns; official support, and combining it with private finance, would help middle- and low-income countries scale up investment.

### Long-term importance and risks
- Public investment is essential to:
  - raise long-term economic growth,
  - progress toward the Sustainable Development Goals (SDGs),
  - strengthen resilience to crises.
- Distributional effects:
  - Public investment can reduce inequality by fostering structural transformation and facilitating regional convergence in low-income economies.
- Fiscal considerations:
  - Public investment is temporary by nature and can preserve fiscal space, but choices have long-lasting implications and could force lower discretionary spending or higher taxation if borrowing costs rise.

### Evidence on pre-pandemic investment gaps and needs
- Trends and sectoral patterns:
  - Public investment has slowed since the 1990s, reducing the capital-stock-to-GDP and public-to-private-capital ratios in all income groups (China is an exception).
  - Public investment ratios have been falling especially in health, housing, and environmental protection; investments in education and economic infrastructure have been preserved.
  - Between 2007 and 2016, total miles of roads increased by a cumulative 56 percent in low-income countries, by 33 percent in emerging market economies, and were nearly unchanged in advanced economies.
  - Between 2007 and 2018, share of population with internet access rose from 3 percent to 32 percent in low-income countries, from 16 percent to 72 percent in emerging market economies, and from 64 percent to 86 percent in advanced economies.
- SDG and energy investment needs:
  - Additional investment needed through 2030 to reach the SDGs for roads, electricity, water, and sanitation: 2.7 percent of GDP per year in emerging markets and 9.8 percent of GDP per year in low-income developing countries.
  - Energy investments would have to rise from 2.0 to 2.3 percent of GDP by 2030 as part of a package to reduce emissions consistent with a 2°C target.

### How public investment can be timely and effective — four immediate steps
- Four immediate steps:
  - (1) focus on maintenance of existing infrastructure,
  - (2) review and reprioritize active projects,
  - (3) create and maintain a pipeline of projects that can be delivered within a couple of years,
  - (4) start planning for new development priorities stemming from the crisis.
- Maintenance and COVID-19-proofing:
  - Maintenance projects are relatively small, short-duration, and often less complex, and are attractive during the pandemic because lower infrastructure usage makes maintenance less disruptive.
  - Need for smaller, shorter-duration projects to facilitate social distancing in work and school activities, on transportation, and in public spaces (physical adaptation and greater access to digital technologies).
  - Empirical evidence: US American Recovery and Reinvestment Act of 2009 directed about 60 percent of funds allocated to highways at repair or improvement; most associated projects were completed within two years.
  - Fixing water network leaks in developing countries could prevent losing the equivalent of the daily needs of 200 million people.
  - Failure to perform routine maintenance increases later costs: rehabilitation and replacement costs increase by 50 and 60 percent down the line in the transportation and the water and sanitation sectors, respectively.
- Maintenance is often underfunded:
  - OECD data: amounts spent on maintenance on roads, railways, waterways, and sea and air transport infrastructure in advanced economies ranged between 0.1 and 1 percent of GDP in 2018.
  - One-time expenditure needed to cover the backlog of highway and bridge repairs in the United States is estimated at 3.5 percent of GDP; 20 percent of dams are considered to have high hazard potential.
  - In emerging market and developing economies, average annual estimated costs for maintenance to achieve infrastructure SDGs are 2.75 percent of GDP.

### Strategic role of public investment across recovery phases (Table 2.1 summary)
- Phase 1 — Great Lockdown
  - Priority: Save lives and livelihoods
  - Key fiscal policies: Lifelines for people and firms
  - Role of public investment: Continue projects where safe, start planning
  - Preferable project characteristics: Maintenance
  - Public investment management actions: Review portfolio of planned and active projects
  - Priority sectors: Health
- Phase 2 — Partial Reopening
  - Priority: Safe reopening where possible
  - Key fiscal policies: Preserve lifelines; target support better; encourage workers to take new jobs
  - Role of public investment: Boost maintenance and job-rich projects; reassess priorities; prepare pipeline
  - Preferable project characteristics: Maintenance; ready for implementation; small-size, job-intensive with large short-term multiplier
  - Public investment management actions: Review, reprioritize, restart feasible projects put on hold; plan for new priorities; prepare pipeline of appraised projects to be implemented within 24 months
  - Priority sectors: Health (including R&D in vaccine and therapeutics); water and sanitation; digital; safe buildings, schools and transportation
- Phase 3 — Post-Pandemic
  - Priority: Transform to more inclusive, smart, and sustainable economies
  - Key fiscal policies: Depending on fiscal space, consider fiscal stimulus, repair balance sheets
  - Role of public investment: Satisfy infrastructure needs and support progress toward the SDGs; increase resilience to crises
  - Preferable project characteristics: Large, transformational projects with large long-term multiplier
  - Public investment management actions: Strengthen project planning, budgeting, and implementation practices to improve public investment efficiency
  - Priority sectors: Health; climate change adaptation and mitigation; digital

### Asset management, maintenance, and budgeting
- Life-cycle approach recommendations:
  - include identifying maintenance needs at appraisal based on standards and methodologies set in each country’s legal framework;
  - secure funding for maintenance;
  - invest in systems to collect asset performance data.
- Integrated preparation of capital and current expenditure budgets with a medium-term perspective is needed to prevent mismatches between infrastructure assets and their maintenance needs.
- Budgets should report maintenance spending exhaustively.
- Capital maintenance projects should be selected and prioritized as part of a wider public investment strategy, including reviewing whether maintaining existing assets is less efficient than replacing them or leapfrogging to new technologies.

### Review and prioritization of active projects
- Crisis impacts and execution evidence:
  - Monthly data suggest advanced economies have maintained investment spending.
  - About half of emerging market and developing economies for which data have been collected have had to cut investment spending (sample of 13 countries).
  - The October 2020 World Economic Outlook projects public investment will be lower in 2020 than in 2019 in 72 out of 109 emerging markets and low-income developing countries.
  - The average expected reduction in public investment is 1 percent of GDP for these 72 countries.
- Active monitoring enables governments to:
  - revisit cost-benefit analyses,
  - renegotiate financing,
  - procure new contracts,
  - identify new risks and plan mitigating measures.
- Prioritization requires a well-coordinated system differentiated by project size, complexity, and stage.

### Establishment of a pipeline of projects
- Selecting projects only on immediate readiness may impede quality and allocation efficiency.
- Governments should prepare a pipeline of carefully appraised projects implementable within the following 24 months.
- Shortcomings:
  - More than half of the 63 countries that have undergone an IMF Public Investment Management Assessment do not effectively maintain such a pipeline.
- Recommendations to improve pipeline selection:
  - Conduct independent reviews and communicate results transparently.
  - Disclose selection criteria focusing on strategic relevance, feasibility and affordability, and implementation readiness.
  - Where appraisal is not systematic, establish a small expert task force to review viability.
  - Fast-track preparation through expedited appraisal and selection procedures or temporary exemptions, accompanied by transparency and quality-control safeguards.

### Planning for new development priorities and project timelines
- Governments should incorporate projects that reduce the likelihood or impact of future crises (including pandemics and climate change) and foster digitalization.
- Project preparation timelines:
  - Smaller projects can be prepared within a year.
  - Preparation typically takes five years or more for large infrastructure projects.
  - Figure 2.5 duration ranges: Preparation: 3–8 years; Implementation: 3–7 years; Total Duration: 6–15 years.
- Project preparation must ensure consistency with development strategies, technical and financial feasibility, and compliance with environmental and social safeguards.

### Maintaining quality when scaling up public investment
- Risks and inefficiencies:
  - On average, more than one-third of resources spent on public infrastructure are lost to inefficiencies.
  - Evidence on long-term growth benefits of large, long-lasting scaling-up is mixed.
  - Fast increases in public investment carry corruption risks because project selection and procurement are vulnerable when officials have higher discretion and complex projects hinder price comparison.
- Mitigating practices:
  - Publish project selection criteria;
  - Use e-procurement systems and project-monitoring platforms;
  - Implement alert systems (“red flags”).
- Absorptive capacity and empirical findings:
  - World Bank–financed project analysis (more than 2,200 project reports covering 110 emerging markets and developing economies):
    - Almost 40 percent of projects cost more than the estimated appraisal cost.
    - 75 percent of projects are delayed beyond their projected completion date at project outset.
    - Individual projects can cost 10–15 percent more simply because they are undertaken at a time of particularly high public investment.
    - In low-income developing countries, scaling up investment by 3 percent of GDP leads to an increase in costs of 6 percent above appraisal costs and delays extending project length by 2.5 percent beyond what was planned.
  - Drivers improving outcomes: projects with expected rate-of-return assessed at appraisal have shorter delays; larger and more complex projects may have better planning and shorter delays.
  - Projects funded fully by grants have a time overrun 14 percentage points higher than those funded without grants (a three-year project thus suffers from an extra five-month delay, on average, if it is fully funded by grants).
- Country ownership and local leadership are important; where capacity is limited, technical support by multilateral development banks can help and attract private finance.

### Job creation from public investment — direct evidence
- US American Recovery and Reinvestment Act (2009): created six to eight jobs in the short term per $1 million spent.
- Firm-level sectoral job-intensity (1999–2017; 27 advanced economies and 14 emerging markets):
  - Advanced economies: about two jobs per $1 million invested in schools and hospitals; three jobs per $1 million in electricity.
  - Emerging market economies: five jobs per $1 million in roads; eight jobs per $1 million in water and sanitation.
- Government R&D spending: estimated five jobs per $1 million invested in OECD member countries.
- Higher education R&D has job content twice as high as government R&D.
- Conservative estimate: job content in digital infrastructure could lie between estimates for electricity and those for R&D at each income level.
- Sectoral and income patterns:
  - Water and sanitation and electricity display greater job intensity than roads, schools, and hospitals.
  - Job intensity increases as country income decreases due to lower wages and more labor-intensive technology.
- Caveats: reported job-intensity numbers may underestimate total job creation because they exclude outsourced and indirect jobs; projects with larger unskilled labor components create more jobs and reduce inequality.

### Job creation and characteristics of green investment
- Job intensity estimates (per $1 million invested):
  - 8 jobs per $1 million invested in green electricity.
  - 2–13 jobs in efficient new buildings such as schools and hospitals.
  - 6–14 jobs in green water and sanitation through efficient agricultural pumps and recycling.
- Skills and intensity:
  - Many renewables jobs do not require high educational attainment; in the United States, less than 20 percent of workers in clean-energy production and energy-efficient occupations have college degrees.
  - Clean-energy infrastructure is labor intensive in the short term, though some green investments are capital intensive and require specific skills (for example, windmills).
- Policy design:
  - Combining green and environmental investment with public employment programs can maximize job impacts, retrain the labor force, and protect people in the informal sector (examples cited: Green Army projects in Australia, Conservation Corps in the United States, tree-planting programs in Ethiopia and Pakistan).

### Trade-offs: job quantity versus job quality
- Labor-intensive public work programs can reduce unemployment quickly by creating low-wage, low-productivity jobs, but may produce fewer high-wage, high-productivity jobs in capital-intensive sectors.
- Pandemic-driven permanent sectoral shifts can exacerbate skill mismatches, making it harder to generate high-quality formal jobs.
- Policy implication: allocate resources, including for digital investment, to train displaced workers and facilitate transitions to jobs that meet pandemic and post-pandemic needs.

### Fiscal multipliers in the COVID-19 crisis and recovery — overview and determinants
- Meta-analysis summary:
  - Public investment generally has larger short-term multipliers than public consumption, taxes, or transfers.
  - Medium- to long-term multipliers for public investment have often been estimated to be larger than 1.0, though some estimates are close to 0.
- Multipliers tend to be larger when:
  - Countries are less open to trade (lower import leakage).
  - Economies are in recessions (idle resources).
  - Countries have fixed exchange rate regimes or central banks at the effective lower bound.
- Quality matters:
  - For advanced economies with good scores on the World Economic Forum’s index of government-spending wastefulness, public investment fiscal multiplier estimated at 0.8 in the first year and above 2.0 at the four-year horizon.
  - The fiscal multiplier is estimated to be four times smaller for countries with a worse rating.
  - Similar differentiation holds for emerging markets and low-income countries when measured by IMF’s Public Investment Management Assessment.

### Important initial conditions and COVID-specific features affecting multipliers
- High public debt:
  - Historic highs globally; high public debt can lower fiscal multipliers if deficit-financed investment raises sovereign spreads and private financing costs.
  - Calibrated sovereign-debt model for typical emerging market or frontier economy with high external debt shows borrowing-to-invest strategies can crowd out the private sector if spreads increase significantly; smaller scaling-up mitigates this effect.
- Supply constraints:
  - Fiscal multipliers likely lower in phase 2 when social-distancing constrains supply, and higher in phase 3 when lockdowns are lifted but slack remains.
- Acute uncertainty:
  - Uncertain virus and economic trajectory could reduce multipliers via precautionary saving or increase multipliers if fiscal action raises confidence.
- Weak balance sheets:
  - Deteriorating firm balance sheets may lead firms to prioritize debt repayment over new investments.
  - Cash flow constraints particularly affect small firms’ investment spending.
  - Liquidity provision and effective debt resolution can preserve productive capacity and strengthen fiscal policy effectiveness; targeted support to vulnerable but viable firms is important.

### Empirical estimates: output, private investment, and employment responses
- Sample and method:
  - Empirical exercise covers 72 advanced economies and emerging markets, using forecaster disagreement as proxy for economic uncertainty.
- Output multipliers:
  - An unanticipated positive shock to public investment of 1 percent of GDP increases the level of output by between 0.25 and 0.5 percent in the first year.
  - After two years, the effect is much larger in periods of higher uncertainty; the multiplier could be above 2.0 versus 0.6 for the baseline estimate.
- Employment effects:
  - In periods of uncertainty, employment increases by between 0.9 and 1.5 percent over two years in response to a shock of 1 percent of GDP to public investment.
  - The point estimate in a period of high uncertainty is 1.2, with a 10–90 percent confidence interval of 0.9–1.5.
- Macro-implied job creation:
  - Applying the lower- and upper-bound employment estimates to total employment in advanced and emerging market economies (about 2.2 billion workers) implies that increasing public investment by 1 percent of GDP would create between 20 and 33 million jobs.
  - This exceeds the direct job-content estimate (about 7 million jobs for a 1 percent of GDP shock) because of indirect macroeconomic effects.

### Comparison of direct job-content estimates and macro-induced job creation
- Direct job-content estimates:
  - Advanced economies: job content of 4.9 jobs per $1 million invested (unweighted average of 2.3 in construction, 7.5 for green investment, and 4.8 for research and development).
  - Emerging markets: job content of 14.7 for emerging markets (three times the estimate for advanced economies, per regression estimates for construction).
- Scale assumptions:
  - 1 percent of GDP in advanced economies approximated as about $500 billion in 2020.
  - 1 percent of GDP in emerging markets approximated as about $320 billion.
- Combined direct estimate yields about 7 million jobs for a 1 percent of GDP investment shock; macro effects raise implied job creation to between 20 and 33 million.

### Private firms’ investment responses to public investment shocks
- Firm-level evidence (about 400,000 firms in eight sectors across 26 advanced economies and 23 emerging market and developing economies):
  - Public investment shocks tend to increase private investment among both cash-constrained and unconstrained firms; impact is higher for less financially constrained firms.
  - Firms with low leverage respond more strongly: in the first period net investment rates increase by 2.5 percent, cumulative impact is 11 percent after six years.
  - For firms with high leverage, the multiplier is marginally insignificant statistically.
- Sectoral effects:
  - Public investments in health care and other social services are associated with sizable increases in private investment at the one-year horizon.
  - Crowding-in is stronger for private investment in industries critical to crisis resolution (communications and transport) and recovery (construction and manufacturing).
- Policy implication:
  - Liquidity provision to firms and an effective debt resolution system, including streamlined restructuring, would support preservation of productive capacity and amplify fiscal policy effectiveness; targeting vulnerable but viable firms increases benefits.

### Long-term returns, resilience, and role of international support
- Returns and resilience:
  - Health care and social spending have strong Keynesian multipliers due to low import leakages and labor intensity.
  - Investing in adaptation to climate change often has high returns, frequently exceeding 100 percent.
  - Long-term savings from investment in resilience and coping mechanisms can reach 300 percent for droughts and 1,200 percent for storms in sub-Saharan Africa.
- International role and vaccine distribution cost:
  - Vulnerable and fiscally constrained low-income countries will need official aid and international cooperation to support additional investment and reduce poverty impacts.
  - Universal access to COVID-19 vaccines or treatments at low cost is essential for global recovery.
  - According to the Gates Foundation, the cost of global distribution of vaccines has been estimated in the range of about $25 billion.

### Medical preparedness and pandemic-related spending
- Increasing preparedness by 10 index points on the WHO International Health Regulations index would cost about 0.02 percent of GDP per year in medical products.
- Public investment in health care spending is higher by about 0.1 to 0.2 percent of GDP in countries that score 10 points higher on the WHO index.
- Previous estimate: R&D spending to fight other zoonotic infectious diseases is $4.5 billion annually.
- Figure 2.11 slope: 0.002 for the correlation between the WHO preparedness score and respiratory medical product imports to GDP (percent).

### Digital infrastructure and education
- Education and connectivity gaps:
  - Half of the 1.5 billion students affected by COVID-related school closures do not have access to a computer.
  - More than 40 percent of those students have no internet access at home (UNESCO 2020).
  - Internet access: about 35 percent of the population in developing countries versus about 80 percent in advanced economies.
  - Africa’s average broadband penetration was 25 percent in 2018.
  - Sub-Saharan Africa household electrification averaged 44 percent of the population in 2017.

### Climate change adaptation: needs, aid, and investment priorities
- IMF staff assessment (based on World Bank data): low-income countries need about $25 billion annually (1.1 percent of GDP) in public investment for adaptation.
- Annual aid to low-income developing countries for adaptation was $10 billion in 2018 and would thus have to more than double to fulfill the needs.
- Correlation between IMF estimates of adaptation needs and official aid for adaptation: 0.56.
- Green bond issuance:
  - Average annual issuance of $52 billion between 2008 and 2018.
  - Total issuance of $255 billion for 2019 alone.
- Types of adaptation investment to consider:
  - (1) upgrading investment projects,
  - (2) retrofitting existing assets,
  - (3) building new coastal protection infrastructure.
- Unit costs and guidance (Box 2.1):
  - Additional up-front cost to increase resilience standards for new infrastructure projects: about 15 percent of the typical initial cost.
  - Retrofitting assets: costs greater than 50 percent of the asset value.
  - Over the medium term, an average annual investment of 1 percent of GDP globally would be beneficial.
  - Coastal protection is most expensive for low-income countries and small states; upgrading costs are high where many projects are exposed.

### Fiscal role of public investment in the COVID-19 recovery and conditions for scaling-up
- Roles and benefits:
  - Public investment is urgently needed in sectors critical to controlling the pandemic: health care, schools, digital infrastructure, safe buildings, and safe transportation.
  - Public investment can:
    - create millions of jobs directly in the short term,
    - create many additional jobs indirectly and in the longer term,
    - promote private investment in the near term,
    - increase productivity, make progress toward the SDGs, and strengthen resilience in the longer term.
- Multipliers expectation:
  - In advanced economies and several emerging market economies, the fiscal multiplier for well-chosen public investment projects is expected to be larger than in normal times and well above 1.0, given idle resources, interest rates stuck at the effective lower bound, and potential confidence effects.
  - The macroeconomic case is weaker in emerging market economies and low-income countries facing tighter financing constraints, but investment is needed to meet the SDGs and enhance domestic revenue mobilization.
- Conditions for timely, efficient scaling-up:
  - Priority to maintenance spending and existing projects to preserve investment quality.
  - Identify a pipeline of projects appraised and ready within the next 24 months; maintain a longer-horizon pipeline for complex resilience and climate projects.
  - Strengthen selection and procurement procedures immediately because weak public investment management lowers project outcomes and fiscal multipliers.
  - Increase impact on jobs and private activity by bringing COVID-19 under control, improving mechanisms for private debt resolution, and strengthening public investment management institutions.
  - Investments that resolve the COVID-19 crisis, create jobs quickly, and build resilience should be prioritized and supported by the international community.

### Box 2.1 — Quantitative estimates and illustrative cost figures
- Annual costs (figure labels as presented):
  - $229.5 billion
  - $494.4 billion
  - $24.6 billion
  - $1.5 billion
- Methodology notes:
  - Upgrading costs use public investment projections, the share of exposed assets, and a unit cost of 15 percent.
  - Retrofitting costs use the share of exposed public assets and a unit cost of 50 percent, spreading costs equally over 10 years.
  - Coastal protection costs are based on global high-definition representations of coastal zones and the climate model in Nicholls and others (2019).
  - Disparities in needed adaptation investment are substantial, with countries in Asia and the Pacific, Africa, and the Caribbean facing above-average costs due to a large share of infrastructure exposed to hazards.

*International Monetary Fund | October 2020 — CHAPTER 2 PubLIC INveSTMeNT FOR The ReCOveRy (PDF).*

### Introduction

### ch2 - Introduction

### Overview and purpose
- Immediate government focus during the COVID-19 crisis has been to address the health emergency and provide lifelines for vulnerable households and businesses.
- Governments now need to: prepare economies for safe and successful reopening, foster recovery in employment and economic activity, and facilitate transformation to a post-pandemic economy that can be more resilient, more inclusive, and greener.
- This chapter outlines how governments can undertake public investment in a timely manner while safeguarding quality, estimates the potential for public investment to create jobs and boost growth, and sets out priorities for the types of investment that will strengthen resilience and sustainability.

### Macroeconomic case for public investment
- The case for public investment is strongest in advanced economies and many emerging market economies where nominal interest rates and inflation are expected to remain at historic lows, allowing easy financing of an investment scale-up.
- Borrowing to finance high-quality investment can be desirable because cheap financing lowers the bar for undertaking investment; assets created generate taxable returns and are valued by markets when pricing sovereign risk.
- Policymakers must ensure that the amount and quality of public investment do not overly worsen debt dynamics, especially for countries that do not issue reserve currencies; abrupt changes in global market sentiment can result in sudden increases in financing costs.
- With ample underused resources, public investment and its crowding-in effects on private investment could mitigate secular stagnation and the savings glut that predate COVID-19.
- Public investment can encourage private investment and hiring when private sector activity is constrained by weakened balance sheets, losses in human capital, and sectoral demand shifts.
- For low-income developing countries and some advanced and emerging market economies, deteriorating debt dynamics and tight financing conditions constrain investment, particularly where external debt is high and denominated in foreign currency.
- Gradual scaling-up of public investment financed by borrowing could yield positive short- and long-term multipliers, provided interest rates do not increase too much and governments choose and manage projects to maximize economic returns; official support, and combining it with private finance, would help middle- and low-income countries scale up investment.

### Long-term importance and risks
- Public investment is essential to raise long-term economic growth, progress toward the Sustainable Development Goals (SDGs), and strengthen resilience to crises.
- Public investment can reduce inequality by fostering structural transformation and facilitating regional convergence in low-income economies.
- Public investment is temporary by nature and can preserve fiscal space, but choices about expenditures and investments have long-lasting implications and could force lower discretionary spending or higher taxation if borrowing costs rise.

### Evidence on pre-pandemic investment gaps and needs
- Public investment has slowed since the 1990s, reducing the capital-stock-to-GDP and public-to-private-capital ratios in all income groups (China is an exception).
- Public investment ratios have been falling especially in the health, housing, and environmental protection sectors, while investments in education and economic infrastructure have been preserved.
- Traditional infrastructure stocks have not risen fast enough: between 2007 and 2016, the total number of miles of roads increased by a cumulative 56 percent in low-income countries and by 33 percent in emerging market economies; the number was nearly unchanged in advanced economies.
- Digital infrastructure grew faster but sizable gaps remain: between 2007 and 2018, share of population with internet access rose from 3 percent to 32 percent in low-income countries, from 16 percent to 72 percent in emerging market economies, and from 64 percent to 86 percent in advanced economies.
- Additional investment needed through 2030 to reach the SDGs for roads, electricity, water, and sanitation has been estimated at 2.7 percent of GDP and 9.8 percent of GDP per year in emerging markets and low-income developing countries, respectively.
- Energy investments, public and private, would have to rise from 2.0 to 2.3 percent of GDP by 2030 as part of a package to reduce emissions consistent with a 2°C target.

### How public investment can be timely and effective
- Four immediate steps to facilitate timely, high-quality public investment:
  - (1) focus on maintenance of existing infrastructure,
  - (2) review and reprioritize active projects,
  - (3) create and maintain a pipeline of projects that can be delivered within a couple of years, and
  - (4) start planning for new development priorities stemming from the crisis.
- Maintenance and COVID-19-proofing:
  - Maintenance projects are relatively small, short-duration, and often less complex, and are attractive during the pandemic because lower infrastructure usage makes maintenance less disruptive.
  - Urgent need for smaller, shorter-duration projects to facilitate social distancing in work and school activities, on transportation, and in public spaces—projects include physical adaptation (greater spacing, transparent barriers) and greater access to digital technologies.
  - Empirical evidence: the US American Recovery and Reinvestment Act of 2009 directed about 60 percent of the funds allocated to highways at repair or improvement, and most associated projects were completed within two years.
  - Maintenance preserves economic gains from infrastructure, helps prevent hazards, limits waste, and helps the environment; fixing water network leaks in developing countries could prevent losing the equivalent of the daily needs of 200 million people.
  - Failure to perform routine maintenance increases later costs: rehabilitation and replacement costs increase by 50 and 60 percent down the line in the transportation and the water and sanitation sectors, respectively.
- Maintenance is often structurally underfunded:
  - OECD data: amounts spent on maintenance on roads, railways, waterways, and sea and air transport infrastructure in advanced economies ranged between 0.1 and 1 percent of GDP in 2018.
  - The one-time expenditure needed to cover the backlog of highway and bridge repairs in the United States is estimated at 3.5 percent of GDP; 20 percent of dams are considered to have high hazard potential.
  - In emerging market and developing economies, ensuring a steady flow of maintenance spending will be key to achieving infrastructure SDGs, with average annual estimated costs of 2.75 percent of GDP.

### Strategic role of public investment in recovery phases (from Table 2.1)
- Phase 1 — Great Lockdown
  - Priority: Save lives and livelihoods
  - Key fiscal policies: Lifelines for people and firms
  - Role of public investment: Continue projects where safe, start planning
  - Preferable project characteristics: Maintenance
  - Public investment management actions: Review portfolio of planned and active projects
  - Priority sectors: Health
- Phase 2 — Partial Reopening
  - Priority: Safe reopening where possible
  - Key fiscal policies: Preserve lifelines; target support better; encourage workers to take new jobs
  - Role of public investment: Boost maintenance and job-rich projects; reassess priorities; prepare pipeline
  - Preferable project characteristics: Maintenance; ready for implementation; small-size, job-intensive with large short-term multiplier
  - Public investment management actions: Review, reprioritize, restart feasible projects put on hold; plan for new priorities; prepare pipeline of appraised projects to be implemented within 24 months
  - Priority sectors: Health, including R&D in vaccine and therapeutics; water and sanitation; digital; safe buildings, schools and transportation
- Phase 3 — Post-Pandemic
  - Priority: Transform to more inclusive, smart, and sustainable economies
  - Key fiscal policies: Depending on fiscal space, consider fiscal stimulus, repair balance sheets
  - Role of public investment: Satisfy infrastructure needs and support progress toward the SDGs; increase resilience to crises
  - Preferable project characteristics: Large, transformational projects with large long-term multiplier
  - Public investment management actions: Strengthen project planning, budgeting, and implementation practices to improve public investment efficiency
  - Priority sectors: Health; climate change adaptation and mitigation; digital

### Research questions and chapter focus
- The chapter examines:
  - (1) how investment can be accelerated and scaled up in the near term while retaining quality,
  - (2) to what extent investment will foster job creation,
  - (3) how the fiscal multiplier of investment could depend on different circumstances before and after the pandemic is brought under control, and
  - (4) how investment can render societies more resilient to health crises and to the impacts of climate change.

*Source: IMF staff.*

### CHAPTER 2 PubLIC INveSTMeNT FOR The ReCOveRy

### CHAPTER 2 PubLIC INveSTMeNT FOR The ReCOveRy

### Asset Management, Maintenance, and Budgeting
- Countries should shift to a life cycle approach for public investment projects that:
  - includes identifying maintenance needs at appraisal based on standards and methodologies set in each country’s legal framework;
  - secures funding for maintenance;
  - invests in systems to collect asset performance data.
- An integrated preparation of capital and current expenditure budgets, with a medium-term perspective, is needed to prevent mismatches between infrastructure assets and their maintenance needs (both routine and capital).
- Budgets should report maintenance spending exhaustively.
- Capital maintenance projects should be selected and prioritized as part of wider public investment strategy, including reviewing asset portfolios to ascertain whether maintaining existing assets is less efficient than replacing them or leapfrogging to new technologies.

### Review and Prioritization of Active Projects
- Crises significantly affect public investment portfolios; projects under implementation may be interrupted or suffer delays and financing issues.
- Evidence on execution during the Great Lockdown:
  - Monthly data suggest advanced economies have maintained investment spending.
  - About half of emerging market and developing economies for which data have been collected have had to cut investment spending, likely owing to financing constraints (sample of 13 countries).
  - The October 2020 World Economic Outlook projects that public investment will be lower in 2020 than in 2019 in 72 out of 109 emerging markets and low-income developing countries.
  - The average expected reduction in public investment is 1 percent of GDP for these 72 countries.
- Prioritizing and restarting active projects requires a well-coordinated system for actively monitoring projects, differentiated according to project size, complexity, and stage.
- Active monitoring enables governments to:
  - revisit cost-benefit analyses in light of outdated underlying assumptions;
  - renegotiate financing;
  - procure new contracts;
  - identify new risks and plan mitigating measures.

### Establishment of a Pipeline of Projects
- Selecting projects primarily on the basis of immediate readiness may impede quality and allocation efficiency.
- Governments should prepare a pipeline of carefully appraised projects that can be selected for financing and implemented within the following 24 months.
- Shortcomings in appraisal and selection processes:
  - More than half of the 63 countries that have undergone an IMF Public Investment Management Assessment do not effectively maintain such a pipeline.
- Recommendations to improve pipeline quality and selection:
  - Conduct independent reviews of projects and communicate results transparently to reduce approval of low-quality projects.
  - Disclose selection criteria focusing on strategic relevance, feasibility and affordability, and implementation readiness.
  - Where appraisal is not systematic, establish a small task force of experts to review viability of major active and pipeline projects.
  - Fast-track project preparation through expedited appraisal and selection procedures or temporary exemptions (examples cited such as Australia), but accompany these with transparency and quality control safeguards.

### Planning for New Development Priorities
- Governments should incorporate new development priorities stemming from the COVID-19 crisis—projects that reduce the likelihood or impact of future crises (including pandemics and climate change) and foster digitalization.
- Project preparation timelines:
  - Smaller projects can be prepared within a year.
  - Preparation typically takes five years or more for large infrastructure projects.
  - Figure 2.5 duration ranges: Preparation: 3–8 years; Implementation: 3–7 years; Total Duration: 6–15 years.
- Project preparation entails ensuring consistency with development strategies, technical and financial feasibility, and compliance with environmental and social safeguards.

### Maintaining Quality When Scaling Up Public Investment
- Scaling up public investment must preserve project quality in selection and implementation and avoid scaling up too much and too fast.
- Inefficiency and risks:
  - On average, more than one-third of the resources spent on public infrastructure are lost to inefficiencies.
  - The evidence on long-term growth benefits of large, long-lasting scaling-up is mixed.
  - Fast increases in public investment carry risks of facilitating corruption because project selection and procurement are particularly vulnerable when public officials have higher discretion and complex projects hinder price comparison.
- Practices to mitigate corruption and ensure quality:
  - Publish project selection criteria;
  - Use e-procurement systems and project-monitoring platforms;
  - Implement alert systems (“red flags”).
- Absorptive-capacity constraints and supply bottlenecks may inflate costs and delay implementation when multiple new projects are undertaken simultaneously.
- Empirical findings from World Bank–financed project analysis (more than 2,200 project reports covering 110 emerging markets and developing economies):
  - Almost 40 percent of projects cost more than the estimated appraisal cost.
  - 75 percent of projects are delayed beyond their projected completion date at project outset.
  - Individual projects can cost 10–15 percent more simply because they are undertaken at a time of particularly high public investment (Figure 2.6, panel 1).
  - In low-income developing countries, scaling up investment by 3 percent of GDP leads to:
    - an increase in costs of 6 percent above appraisal costs;
    - delays extending project length by 2.5 percent beyond what was planned.
- Drivers improving project outcomes:
  - Projects in which the expected rate of return is assessed at appraisal have shorter delays (Figure 2.6, panel 2).
  - Larger and more complex projects may have better planning and thus shorter delays.
  - Projects funded fully by grants have a time overrun 14 percentage points higher than those funded without grants (a three-year project thus suffers from an extra five-month delay, on average, if it is fully funded by grants).
- Country ownership and leadership of local authorities are important for project success and for the effectiveness of scaling-up investment.
- Where capacity is limited, technical support by multilateral development banks can be beneficial and help attract private finance.

### Job Creation from Public Investment
- Job intensity evidence:
  - US American Recovery and Reinvestment Act created six to eight jobs in the short term per $1 million spent.
  - Firm-level data for selected sectors covering 27 advanced economies and 14 emerging markets over 1999 to 2017 show:
    - In advanced economies: about two jobs per $1 million invested in schools and hospitals; three jobs per $1 million in electricity.
    - In emerging market economies: five jobs per $1 million in roads; eight jobs per $1 million in water and sanitation.
  - Government R&D spending generates an estimated five jobs per $1 million invested in OECD member countries.
  - Higher education R&D has job content twice as high as government R&D.
  - Conservative estimate: job content in digital infrastructure could lie between the estimates for electricity and those for R&D at each income level.
- Sectoral and income patterns:
  - Water and sanitation and electricity display greater job intensity than roads, schools, and hospitals.
  - Job intensity increases as country income decreases due to lower wages and more labor-intensive technology.
- Caveats: reported job-intensity numbers may underestimate total job creation because they exclude outsourced jobs and indirect jobs created through higher demand; projects with larger unskilled labor components will create more jobs and reduce inequality.

*Italic: Source — CHAPTER 2 PubLIC INveSTMeNT FOR The ReCOveRY (PDF).*

### CHAPTER 2 PubLIC INveSTMeNT FOR The ReCOveRy

### CHAPTER 2 PubLIC INveSTMeNT FOR The ReCOveRy

### Job creation and characteristics of green investment
- Job intensity estimates (per $1 million invested):
  - 8 jobs per $1 million invested in green electricity.
  - 2–13 jobs in efficient new buildings such as schools and hospitals.
  - 6–14 jobs in green water and sanitation through efficient agricultural pumps and recycling.
- Many renewables jobs do not require high educational attainment; in the United States, less than 20 percent of workers in clean-energy production and energy-efficient occupations have college degrees.
- Clean-energy infrastructure is labor intensive in the short term, though not all green investments create jobs quickly; some green investments are capital intensive and require specific skills (for example, windmills).
- Combining green and environmental investment with public employment programs can maximize job impacts, retrain the labor force, and protect people in the informal sector (examples cited: Green Army projects in Australia, Conservation Corps in the United States, tree-planting programs in Ethiopia and Pakistan).

### Trade-offs: job quantity versus job quality
- Public work programs or investment in labor-intensive sectors can reduce unemployment quickly by creating low-wage, low-productivity jobs, but may produce fewer high-wage, high-productivity jobs in capital-intensive sectors.
- Pandemic-driven permanent sectoral shifts can exacerbate skill mismatches, making it harder to generate high-quality formal jobs.
- Policy implication: allocate resources, including resources for digital investment, to train displaced workers and facilitate transitions to jobs that meet pandemic and post-pandemic needs.

### Fiscal multipliers in the COVID-19 crisis and recovery — overview
- Meta-analysis findings:
  - Public investment generally has larger short-term multipliers than public consumption, taxes, or transfers.
  - Medium- to long-term multipliers for public investment have often been estimated to be larger than 1.0.
  - Some estimates of fiscal multipliers are close to 0.
- Multipliers tend to be larger when:
  - Countries are less open to trade (lower import leakage).
  - Economies are in recessions (idle resources).
  - Countries have fixed exchange rate regimes or central banks at the effective lower bound.
- Quality of investment affects multipliers:
  - For advanced economies with good scores on the World Economic Forum’s index of government-spending wastefulness, public investment fiscal multiplier estimated at 0.8 in the first year and above 2.0 at the four-year horizon.
  - The fiscal multiplier is estimated to be four times smaller for countries with a worse rating.
  - Similar differentiation holds for emerging markets and low-income countries when measured by IMF’s Public Investment Management Assessment.

### Important initial conditions and COVID-specific features affecting multipliers
- High levels of public debt:
  - Historic highs globally; high public debt can lower fiscal multipliers if deficit-financed investment raises sovereign spreads and private financing costs.
  - A sovereign debt model calibrated for typical emerging market or frontier economy with high external debt shows borrowing-to-invest strategies can crowd out the private sector if spreads increase significantly; smaller scaling-up of investment mitigates this effect.
- Supply constraints:
  - Fiscal multipliers likely lower in phase 2 of the pandemic when social-distancing constrains supply, and higher in phase 3 when lockdowns are lifted but slack remains.
- Acute uncertainty:
  - Uncertain virus and economic trajectory could reduce multipliers via precautionary saving or increase multipliers if fiscal action raises confidence.
- Weak balance sheets:
  - Many firms’ balance sheets will deteriorate due to COVID-related lockdowns; highly leveraged firms may prioritize debt repayment over new investments.
  - Cash flow constraints particularly affect small firms’ investment spending.
  - Liquidity provision and effective debt resolution can preserve productive capacity and strengthen fiscal policy’s effectiveness; targeted support to vulnerable but viable firms is important.

### Empirical estimates: output, private investment, and employment responses
- Sample and method:
  - Empirical exercise covers 72 advanced economies and emerging markets, using disagreement among forecasters as proxy for economic uncertainty.
- Output multipliers:
  - An unanticipated positive shock to public investment of 1 percent of GDP increases the level of output by between 0.25 and 0.5 percent in the first year.
  - After two years, the effect is much larger in periods of higher uncertainty; the multiplier could be above 2.0 versus 0.6 for the baseline estimate.
- Employment effects:
  - In periods of uncertainty, employment increases by between 0.9 and 1.5 percent over two years in response to a shock of 1 percent of GDP to public investment.
  - The point estimate in a period of high uncertainty is 1.2, with a 10–90 percent confidence interval of 0.9–1.5.
- Job creation implied by macro effects:
  - Applying the lower- and upper-bound employment estimates to total employment in advanced and emerging market economies (about 2.2 billion workers) implies that increasing public investment by 1 percent of GDP would create between 20 and 33 million jobs.
  - This number exceeds the estimate based on direct job creation (about 7 million jobs when applying direct job-content figures; see below) because of indirect macroeconomic effects.

### Comparison of direct job-content estimates and macro-induced job creation
- Direct job-content estimate for advanced economies:
  - Job content of 4.9 jobs per $1 million invested for advanced economies (unweighted average of 2.3 in construction, 7.5 for green investment, and 4.8 for research and development).
  - 1 percent of GDP in advanced economies approximated as about $500 billion in 2020.
- Direct job-content estimate for emerging markets:
  - Job content of 14.7 for emerging markets (three times the estimate for advanced economies, per regression estimates for construction).
  - 1 percent of GDP in emerging markets approximated as about $320 billion.
- Combined direct estimate yields about 7 million jobs for a 1 percent of GDP investment shock; macro effects raise the implied job creation to between 20 and 33 million.

### Private firms’ investment responses to public investment shocks
- Firm-level evidence (about 400,000 firms in eight sectors across 26 advanced economies and 23 emerging market and developing economies):
  - Public investment shocks tend to increase private investment among both cash-constrained and unconstrained firms; impact is higher for less financially constrained firms.
  - Firms with low leverage respond more strongly: in the first period net investment rates increase by 2.5 percent, cumulative impact is 11 percent after six years.
  - For firms with high leverage, the multiplier is marginally insignificant statistically.
- Sectoral effects:
  - Public investments in health care and other social services are associated with sizable increases in private investment at the one-year horizon.
  - Crowding-in is stronger for private investment in industries critical to crisis resolution (communications and transport) and recovery (construction and manufacturing).
- Policy implication: liquidity provision to firms and an effective debt resolution system, including streamlined restructuring, would support preservation of productive capacity and amplify fiscal policy effectiveness; targeting vulnerable but viable firms increases benefits.

### Long-term returns, resilience, and role of international support
- Long-term multipliers and returns:
  - Health care and social spending have strong Keynesian multipliers due to low import leakages and labor intensity.
  - Investing in adaptation to climate change often has high returns, frequently exceeding 100 percent.
  - Long-term savings from investment in resilience and coping mechanisms can reach 300 percent for droughts and 1,200 percent for storms in sub-Saharan Africa.
- International community role and vaccine distribution cost:
  - For vulnerable and fiscally constrained low-income countries, official aid and international cooperation will be needed to support additional investment and reduce poverty impacts.
  - Universal access to COVID-19 vaccines or treatments at low cost is essential for global recovery.
  - According to the Gates Foundation, the cost of global distribution of vaccines has been estimated in the range of about $25 billion.

*International Monetary Fund | October 2020 — CHAPTER 2 PubLIC INveSTMeNT FOR The ReCOveRy*

### 1. By Type of Public Investment2. By Sector of Operation of Firms

### 1. By Type of Public Investment2. By Sector of Operation of Firms

### Medical preparedness and pandemic-related spending
- Increasing preparedness by 10 index points on the World Health Organization (WHO) International Health Regulations index would cost about 0.02 percent of GDP per year in medical products.
- Public investment in health care spending is higher by about 0.1 to 0.2 percent of GDP in countries that score 10 points higher on the WHO index (Online Annex 2.6).
- A previous estimate of R&D spending to fight other zoonotic infectious diseases is $4.5 billion annually.
- Figure 2.11 shows a slope = 0.002 for the correlation between the WHO preparedness score and respiratory medical product imports to GDP (percent).

### Digital infrastructure and education
- Half of the 1.5 billion students affected by COVID-related school closures do not have access to a computer.
- More than 40 percent of those students have no internet access at home (UNESCO 2020).
- Internet access: about 35 percent of the population in developing countries has access to the internet versus about 80 percent in advanced economies.
- Africa’s average broadband penetration was only 25 percent in 2018.
- Sub-Saharan Africa household electrification averaged 44 percent of the population in 2017 (half of the world average; Broadband Commission 2019).
- Within sub-Saharan Africa, e-commerce engagement varies widely: in some countries more than half the population is engaged, while in others the share remains below 15 percent (April 2020 Regional Economic Outlook: Sub-Saharan Africa).

### Climate change adaptation: needs, aid, and investment priorities
- IMF staff assessment (based on World Bank data) finds low-income countries need about $25 billion annually (1.1 percent of GDP) in public investment for adaptation.
- Annual aid to low-income developing countries for adaptation was $10 billion in 2018 and would thus have to more than double to fulfill the needs.
- Correlation between IMF estimates of adaptation needs and official aid for adaptation to climate change is about 56 percent (0.56).
- Green bond issuance: average annual issuance of $52 billion between 2008 and 2018; total issuance of $255 billion for 2019 alone.
- Types of adaptation investment countries should consider:
  - (1) upgrading investment projects,
  - (2) retrofitting existing assets,
  - (3) building new coastal protection infrastructure.
- Estimated unit costs and investment guidance from Box 2.1:
  - Additional up-front cost to increase resilience standards for new infrastructure projects: about 15 percent of the typical initial cost.
  - Retrofitting assets: costs greater than 50 percent of the asset value.
  - Over the medium term, an average annual investment of 1 percent of GDP globally would be beneficial.
- Disparities across countries:
  - Coastal protection is most expensive for low-income countries and small states.
  - Low-income countries and emerging markets can encounter large upgrading costs because they typically have more investment projects.
  - Retrofitting costs are more evenly distributed across country groups.

### Fiscal role of public investment in the COVID-19 recovery
- Public investment is urgently needed in sectors critical to controlling the pandemic: health care, schools, digital infrastructure, safe buildings, and safe transportation.
- Public investment can:
  - create millions of jobs directly in the short term,
  - create many additional jobs indirectly and in the longer term,
  - promote job creation and private investment in the near term,
  - increase productivity, make progress toward the SDGs, and strengthen resilience in the longer term.
- In advanced economies and several emerging market economies, the fiscal multiplier for well-chosen public investment projects is expected to be larger than in normal times and well above 1.0, given idle resources, interest rates stuck at the effective lower bound, and potential confidence effects.
- The macroeconomic case for public investment is weaker in emerging market economies and low-income countries facing tighter financing constraints, but investment is needed to meet the SDGs and enhance domestic revenue mobilization.

### Conditions for timely and efficient investment scaling-up
- Priority should be given to maintenance spending and to existing projects to preserve investment quality.
- Governments should identify a pipeline of projects that can be carefully appraised and ready for implementation within the next 24 months; a longer-horizon pipeline is needed for complex projects addressing resilience and climate change.
- Procedures for selection and procurement of public investment projects should be strengthened immediately because weak public investment management lowers project outcomes and fiscal multipliers.
- Policymakers can increase the impact of public investment on jobs and private sector activity by:
  - bringing COVID-19 under control and allowing safe reopening,
  - improving mechanisms for private debt resolution,
  - strengthening public investment management institutions.
- Investments that resolve the COVID-19 crisis, create jobs quickly, and build resilience (including for global warming) should be prioritized and supported by the international community.

### Box 2.1 — Quantitative estimates and illustrative cost figures
- Annual costs (figure labels as presented):
  - $229.5 billion
  - $494.4 billion
  - $24.6 billion
  - $1.5 billion
- Methodology notes:
  - Upgrading costs use public investment projections, the share of exposed assets, and a unit cost of 15 percent.
  - Retrofitting costs use the share of exposed public assets and a unit cost of 50 percent, spreading costs equally over 10 years.
  - Coastal protection costs are based on global high-definition representations of coastal zones and the climate model in Nicholls and others (2019).
  - Disparities in needed adaptation investment are substantial, with countries in Asia and the Pacific, Africa, and the Caribbean facing above-average costs due to a large share of infrastructure exposed to hazards.

*Source: International Monetary Fund, Fiscal Monitor: Public Investment for the Recovery, October 2020, Chapter 2.*

### References

### ch2 - References

### Public investment, infrastructure, and growth
- Abiad, A., D. Furceri, and P. Topalova. 2016. “The Macroeconomic Effects of Public Investment: Evidence from Advanced Economies.” Journal of Macroeconomics 50: 224–40.
- Buffie, E., A. Berg, C. Pattillo, R. Portillo, and F. Zanna. 2012. “Public Investment, Growth and Debt Sustainability: Putting Together the Pieces.” IMF Working Paper 12/144.
- Calderón, C., E. Moral-Benito, and L. Servén. 2015. “Is Infrastructure Capital Productive? A Dynamic Heterogeneous Approach.” Journal of Applied Econometrics 30: 177–98.
- Miyamoto, H., N. Gueorguiev, J. Honda, A. Baum, and S. Walker. 2020. “Growth Impact of Public Investment and the Role of Infrastructure Governance.” In Well Spent: How Strong Infrastructure Governance Can End Waste in Public Investment.
- Warner, A. 2014. “Public Investment as an Engine of Growth.” IMF Working Paper 14/148.

### Fiscal multipliers, fiscal policy effectiveness, and macroeconomic responses
- Auerbach, A., and Y. Gorodnichenko. 2012. “Measuring the Output Responses to Fiscal Policy.” American Economic Journal: Economic Policy 4 (2): 1–27.
- Blanchard, O., and D. Leigh. 2013. “Growth Forecast Errors and Fiscal Multipliers.” American Economic Review 103 (3): 117–20.
- Ilzetzki, E., E. G. Mendoza, and C. A. Végh. 2013. “How Big (Small?) Are Fiscal Multipliers?” Journal of Monetary Economics 60 (2): 239–54.
- Gechert, S., and A. Rannenberg. 2018. “Which Fiscal Multipliers Are Regime-Dependent? A Meta-regression Analysis.” Journal of Economic Surveys 32 (4): 1160–82.
- Huidrom, R., M. A. Kose, J. J. Lim, and F. L. Ohnsorge, 2019. “Why Do Fiscal Multipliers Depend on Fiscal Positions?” CAMA Working Paper 28/2019.

### Infrastructure governance, public investment management, and waste
- Baum, A., T. Mogues, and G. Verdier. 2020. “Getting the Most from Public Investment.” In Well Spent: How Strong Infrastructure Governance Can End Waste in Public Investment.
- Blazey, A., F. Gonguet, and P. Stokoe. 2020. “Maintaining and Managing Public Infrastructure Assets.” In Well Spent.
- Chaponda, T., C. Matsumoto, and L. Murara. 2020. “The Public Investment Management Assessment Framework: An Overview.” In Well Spent.
- Monteiro, R., I. Rial, and E. Tandberg. 2020. “Fiscal Risks in Infrastructure.” In Well Spent.
- Pattanayak, S., and C. Verdugo-Yepes. 2020. “Protecting Public Infrastructure from Vulnerabilities to Corruption: A Risk-Based Approach.” In Well Spent.

### Crisis, COVID-19, and recovery-focused fiscal actions
- Balibek, E., P. Medas, J. Ralyea, and S. Saxena. 2020. “Public Sector Support to Firms.” Special Series on COVID-19, IMF.
- Tandberg, E., and R. Allen. 2020. “Managing Public Investment Spending during the Crisis.” Special Series on COVID-19, Fiscal Affairs Department, IMF.
- Guerrieri, V., G. Lorenzoni, L. Straub, and I. Werning. 2020. “Macroeconomic Implications of COVID-19: Can Negative Supply Shocks Cause Demand Shortages?” Becker Friedman Institute Working Paper 2020–35.
- Coalition of Finance Ministers for Climate Action. 2020. “Better Recovery, Better World: Resetting Climate Action in the Aftermath of the COVID-19 Pandemic.” Group of Experts Report.
- Hepburn, C., B. O’Callaghan, N. Stern, J. Stiglitz, and D. Zenghelis. Forthcoming. “Will COVID-19 Fiscal Recovery Packages Accelerate or Retard Progress on Climate Change?” Oxford Review of Economic Policy 36 (S1).

### Climate, green finance, and adaptation
- Climate Bonds Initiative. 2019. Green Bonds: The State of the Market 2018.
- Fatin, L. 2020. “Record 2019 GB Issuance 255bn! EU Largest Market: US, China, France Lead Top 20 National Rankings: Sovereign GBs & Certified Bonds Gain Momentum.” Climate Bonds Connected (blog), January 16.
- Global Commission on Adaptation. 2019. Adapt Now: A Global Call for Leadership on Climate Resilience.
- UNEP. 2016. Adaptation Finance Gap Report 2016.
- Wang, H., I. Al-Saadi, P. Lu, and A. Jasim. 2020. “Quantifying Greenhouse Gas Emission of Asphalt Pavement Preservation at Construction and Use Stages Using Life Cycle Assessment.” International Journal of Sustainable Transportation 14 (1): 25–34.

### Multilateral development banks, financing, and mobilization
- Arezki, R., P. Bolton, S. Peters, F. Samama, and J. Stiglitz. 2017. “From Global Savings Glut to Financing Infrastructure.” Economic Policy 32 (90): 221–61.
- Broccolini, C., G. Lotti, A. Maffioli, A. F. Presbitero, and R. Stucchi. Forthcoming. “Mobilization Effects of Multilateral Development Banks.” World Bank Economic Review.
- Chelsky, J., C. Morel, and M. Kabir. 2013. “Investment Financing in the Wake of the Crisis: The Role of Multilateral Development Banks.” Economic Premise Work Report 78974, World Bank.

### Digital infrastructure, connectivity, and inequality
- Broadband Commission. 2019. Connecting Africa through Broadband: A Strategy for Doubling Connectivity by 2021 and Reaching Universal Access by 2030.
- Chiou, L., and C. Tucker. 2020. “Social Distancing, Internet Access and Inequality.” NBER Working Paper 26982.
- Shenglin, B., F. Simonelli, Z. Ruidong, R. Bosc, and L. Wenwei. 2017. “Digital Infrastructure: Overcoming the Digital Divide in Emerging Economies.” G20 Insights 3.
- UNESCO. 2020. “Startling Disparities in Digital Learning Emerge as COVID-19 Spreads: UN Education Agency.” UN News, April 21.

### Project preparation, execution, and absorptive capacity
- Avellan, L. M., V. G. Cavalcanti, and G. Lotti. 2019. “Is Shorter Project Preparation Time Associated with Longer Project Execution Time?” IDB Technical Note 714.
- Klakegg, O. J., T. Williams, and A. T. Shiferaw. 2016. “Taming the Trolls: Major Public Projects in the Making.” International Journal of Project Management 34 (2): 282–96.
- Presbitero, A. 2016. “Too Much and Too Fast? Public Investment Scaling-Up and Absorptive Capacity.” Journal of Development Economics 120: 17–31.
- Gurara, D., K. Kpodar, A. F. Presbitero, and D. Tessema. 2020. “On the Capacity to Absorb Public Investment: How Much Is Too Much?” IMF Working Paper 20/48.

### Health, education, and social aspects of public investment
- Allen, J. G., and J. D. Macomber. 2020. Healthy Buildings: How Indoor Spaces Drive Performance and Productivity. Cambridge, MA: Harvard University Press.
- Commission on a Global Health Risk Framework for the Future and National Academy of Medicine. 2016. The Neglected Dimension of Global Security: A Framework to Counter Infectious Disease Crises.
- Reeves, A., S. Basu, M. McKee, C. Meissner, and D. Stuckler. 2013. “Does Investment in the Health Sector Promote or Inhibit Economic Growth?” Globalization and Health 9, art. 43.
- Muro, M., A. Tomer, R. Shivaram, and J. Kane. 2019. “Advancing Inclusion through Clean Energy Jobs.” Metropolitan Policy Program, Brookings Institution.

### Methodology, theory, and measurement
- Bloom, N., M. Floetotto, N. Jaimovich, I. Saporta-Eksten, and S. J. Terry. 2018. “Really Uncertain Business Cycles.” Econometrica 86 (3): 1031–65.
- Eggertsson, G. B., N. R. Mehrotra, and J. A. Robbins. 2019. “A Model of Secular Stagnation: Theory and Quantitative Evaluation.” American Economic Journal: Macroeconomics 11 (1): 1–48.
- Rachel, L., and L. H. Summers. 2019. “On Falling Neutral Real Rates, Fiscal Policy, and the Risk of Secular Stagnation.” Brookings Papers on Economic Activity (Spring): 1–76.
- Ramey, V. A. 2020. “The Macroeconomic Consequences of Infrastructure Investment.” NBER Working Paper 27625.

*References listed in Chapter 2, Fiscal Monitor: Public Investment for the Recovery (October 2020).*

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_Source: https://www.imf.org/-/media/files/publications/fiscal-monitor/2020/october/english/ch2.pdf_