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Public Investments: Is There a Golden Rule Separating “Good” from “Bad” Debt?

Torben M. Andersen
CESifo, Munich, 2023

EconPol Forum 24 (4), 45-48
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  • Across EU countries there is no general tendency for public investment to be crowded out by fiscal rules
  • The notion of investment in the public sector is different from the private sector, and it is problematic to base policy rules on the national account definition of investment
  • A Golden Rule allowing debt financing of public net investment requires a fundamental change in accounting principles to be applied consistently and raises fundamental implementation issues
  • Needs for government investment are increasing due to the green transition, energy supply disruption and digitalization, but do not require more complicated fiscal rules
  • Policy focus on investment can be increased by a continuous in-depth monitoring of public investment and/or separate expenditure targets for public consumption and investment

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