nep-ppm New Economics Papers
on Project, Program and Portfolio Management
Issue of 2016‒09‒11
three papers chosen by
Arvi Kuura
Tartu Ülikool

  1. Investing in Electricity, Growth, and Debt Sustainability; The Case of Lesotho By Michele Andreolli; Aidar Abdychev
  2. Less public investment due to an aging population: The constant decline in public investment over the last four decades can only partly be explained by high public debt By Jäger, Philipp
  3. Uniunea Pietelor de capital - un proiect esential pentru Europa By Danila, Marius

  1. By: Michele Andreolli; Aidar Abdychev
    Abstract: This paper analyses a large public investment in a construction of a hydropower plant in Lesotho and its implications on the growth and debt sustainability. The paper employs an open economy dynamic general equilibrium model to assess the benefits of a large public investment through growth-enhancing increase in domestic energy supply and receipts from selling electricity abroad to ease the fiscal burden, which is often associated with big investment projects. During the transition (construction stage), various financing options are explored: increase in the public debt, increase in domestic revenue (fiscal adjustment), and combination. The calibration matches Lesotho's data and it captures the project's main challenges regarding the project costs. Moreover,the key remaining issue is the agreement with South Africa to purchase sufficient amount of electricity to allow the potential plant to run at a high capacity. We find that, the project can lead to sizable macroeconomic benefits as long as costs are relatively low and demand from South Africa is sufficiently high. However, the risks for the viability of the project are high, if these assumptions are violated.
    Keywords: Public investment;Lesotho;Electricity;Energy sector;Economic growth;Debt sustainability;Econometric models;Public Investment, Energy Production, Growth, Debt Sustainability, Fiscal Policy.
    Date: 2016–06–09
  2. By: Jäger, Philipp
    Abstract: Public investment, for instance in infrastructure, has been constantly decreasing for four decades. New research by RWI for 13 OECD-countries shows: this development significantly correlates with population aging. Senior citizens do not value future payoffs of infrastructure projects and other public investments as much as working-age-individuals since people's time preferences change with age. Because of their growing voting power, elderly voters exhibit an increasing influence on policy proposals of political parties. To counter these effects, politicians should consider demeny voting, where parents get additional votes for each child. Other options include user-pay-infrastructure or alternative funding sources like Public Private Partnerships.
    Date: 2016
  3. By: Danila, Marius
    Abstract: Within the optimisation effort associated with the European financial markets integration special attention is paid to two important initiatives: the Banking Union and the Capital Markets Union (CMU). Both projects are also important for Romania, considering the current status of the economy and financial market, as well as the country’s long and medium term priorities. Banking Union is targeting a full integration of the banking markets by employing a Single Supervisory Mechanism and Single Resolution Mechanism and a single deposit guarantee framework. In a similar manner, CMU is aiming at the creation of a single capital market across Europe in order to maximise the benefits associated with cross – border risk sharing and bring the highest possible level of compatibility when it comes to national legal frameworks. CMU is focused on identifying new and improved solutions for an efficient use of the available financial resources – making such resources available where they are needed, especially when it comes to infrastructure projects and SME financing.
    Keywords: Capital Markets Union, European stock exchanges, SME Financing, European Union, securitisation, Uniunea Pietelor de Capital, burse europene, finantarea IMM, Uniunea Europeana, securitizare, fluxuri de capital
    JEL: F02 F34 F36 F45 F65 G15 G23 G24
    Date: 2016–08–30

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