Michele Andreolli's Books

Macroeconomic Dimensions of Public-Private Partnerships

By: Mr.Edward F. Buffie,Michele Andreolli,Bin Grace Li,Luis-Felipe Zanna

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Macroeconomic Dimensions of Public-Private Partnerships

By: Mr.Edward F. Buffie,Michele Andreolli,Bin Grace Li,Luis-Felipe Zanna

The voluminous literature comparing public-private partnerships (P3s) and own-investment (OI) by the public sector is dominated by contributions from microeconomic theory. This paper gives macroeconomics a voice in the debate by investigating the repercussions of P3 vs. OI in a dynamic general equilibrium model featuring private capital accumulation and involuntary unemployment with efficiency wages. Typically P3s cost more but produce higher-quality infrastructure and boast a better on-time completion record than OI; consequently, they are comparatively more effective in reducing underinvestment in private capital, underinvestment in infrastructure, unemployment and poverty. The asymmetric impact on macro externalities raises the social return in the P3 2 - 9 percentage points relative to the social return to OI, depending on whether the externalities operate singly or in combination and on whether P3 enjoys an advantage in speed of construction.

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International Monetary Fund

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ISBN 10

1475517254

ISBN 13

9781475517255

Investing in Electricity, Growth, and Debt Sustainability

The Case of Lesotho

By: Michele Andreolli,Aidar Abdychev

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Investing in Electricity, Growth, and Debt Sustainability

The Case of Lesotho

By: Michele Andreolli,Aidar Abdychev

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.

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