Basu, Kaushik2014-05-152014-05-152014-05https://hdl.handle.net/10986/18348This paper investigates the role of fiscal guarantees in promoting infrastructure investment. Infrastructure is a critical driver of economic growth, but infrastructure entails significant up-front costs that yield benefits after a time lag. Investors hesitate to put their money down on private infrastructure ventures because of the long lag and governments do not give guarantees for reasons of fiscal prudence. The paper argues that governments and large investment guarantee agencies can in many situations give suitably-calibrated guarantees to private projects by exploiting the fact that a guarantee on one project can reduce the risk of another one failing. The paper works out the architecture of such guarantees, which can be fiscally prudent and yet boost investment, especially in infrastructure, and thereby promote growth.en-USCC BY 3.0 IGOADVERSE SELECTIONBANK POLICYBANKRUPTBANKRUPTCYBINDING CONSTRAINTBOOST TO GROWTHBORROWINGCAPITAL FORMATIONCONTRACT ENFORCEMENTCREDIT DEFAULTCREDIT MARKETDEBTDEBT CRISISDEBT RATIOSDEFICITSDELIVERY OF GOODSDEPENDENTDEVELOPMENT BANKSDISBURSEMENTEARNINGSECONOMETRICSECONOMIC DEVELOPMENTECONOMIC GROWTHECONOMIC POLICYECONOMIC RECESSIONECONOMIC TRANSACTIONSECONOMICSEMERGING ECONOMIESEMERGING MARKETEMERGING MARKET ECONOMIESEMERGING MARKETSENTREPRENEURENTREPRENEURSEXPENDITUREFINANCIAL INSTITUTIONSFINANCIAL SECTORFINANCIAL SECTOR REFORMSFISCAL DEFICITSFISCAL EXPENDITUREFISCAL POLICIESFISCAL POLICYFISCAL SUPPORTFOREIGN BANKSFOREIGN CAPITALFOREIGN DIRECT INVESTMENTGLOBALIZATIONGOOD GOVERNANCEGOVERNANCE SYSTEMGOVERNMENT FINANCEGOVERNMENT GUARANTEESGOVERNMENT INVESTMENTGROWTH RATEGUARANTEE AGENCIESGUARANTEE AGENCYINCOMEINFLATIONINFRASTRUCTURE INVESTMENTINFRASTRUCTURE PROJECTINFRASTRUCTURE PROJECTSINSTRUMENTINSURANCEINSURANCE SERVICEINTEREST RATEINTERNATIONAL BANKINTERNATIONAL INVESTORINTERNATIONAL LENDINGINTERNATIONAL STANDARDINVESTINGINVESTMENT CLIMATEINVESTMENT PROJECTSINVESTMENT RATEJOINT LIABILITYJUDICIAL DECISIONSJUDICIARYLABOR FORCELEGAL JURISDICTIONLENDERLIMITED LIABILITYLIQUIDITYLOANLONG-TERM INVESTMENTLOW-INCOME COUNTRIESMONETARY POLICYMORTGAGESMULTILATERAL FINANCIAL INSTITUTIONSNOMINAL INTEREST RATEOPPORTUNITY COSTPOLITICAL ECONOMYPRIVATE ENTREPRENEURPRIVATE INFRASTRUCTUREPRIVATE INVESTMENTPRIVATE INVESTORPRIVATE INVESTORSPROBABILITY OF DEFAULTPUBLIC INVESTMENTPUBLIC-PRIVATE PARTNERSHIPPUBLIC-PRIVATE PARTNERSHIPSRAPID GROWTHRECESSIONREGULATORY REGIMERETURNRETURNSRISK OF DEFAULTSELF-FINANCESOVEREIGN DEBTSTART-UPSTATE GUARANTEESTATE GUARANTEESTREASURYTREATYWORLD DEVELOPMENT INDICATORShttps://doi.org/10.1596/1813-9450-6850