August 12, 2013Doug Hadden
FreeBalance Clients on the Road to Success, Part 9
Carlos Lipari, FreeBalance Advisory Services
The number of variables that affect economic growth rates and the quality of Public Financial Management are, to some extent, countless. Our goal in this paper is not to establish a cause and effect analysis between the solutions provided by FreeBalance and the economic performance of its clients, but instead to build a global picture of what has been going on in these economies, an examine any regional patterns. In addition to this analysis, we find empirical evidence that suggests that strong government effectiveness and investment levels deliver significantly higher economic growth rates, encouraging countries to continue investing in better governance.
When analyzing the evolution of public expenditures, revenues, gross debt, economic growth rates and gross investment of countries operating FreeBalance Governance Resource Planning (GRP) solutions, we find that these countries have been outperforming their regions in multiple economic indicators and are expected to continue doing so in the years to come. Public deficits have been considerably reduced, which along with debt relief programs and robust economic growth rates has allowed these countries to register sharp decreases in gross public debt to GDP ratios. Government revenues of most FreeBalance customers have increased considerably over the last decade, which can be considered positive as they converged to their region averages, providing resources to finance a moderate level of public expenditures with lower fiscal deficits.
The overall economic growth of FreeBalance customer economies has outperformed the World average and often the regions where they are located in. This trend is expected to continue in the years to come, supported by relatively strong gross investment levels.
Finally, by running an econometric analysis on cross-sectional data on a dataset of 172 countries we find evidence that Governance Effectiveness and Gross Investment levels are strongly associated with higher economic growth rates. This suggests that GRP solutions can play an important role in boosting economic growth rates as they improve government effectiveness and might increase the ability that an economy has to attract external financing.
- Barro, Robert J. "Economic Growth in a Cross Section of Countries." Quarterly Journal of
- Economics, May 1991
- Sala-I-Martin. " I Just Ran Two Million Regressions". American Economic Association, May 1997
- IMF World Economic Databases (April 2013 & October 2012) http://www.imf.org/external/pubs/ft/weo/2013/01/weodata/index.aspx
- UNDP http://hdr.undp.org/en/
- World Wide Governance Indicators http://info.worldbank.org/governance/wgi/index.asp
- Introduction to the Study
- Government Revenue
- Government Expenditures
- Government Gross Debt
- Country Investment
- Real Investment Growth Rates
- Government Effectiveness
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