We all know about government debt. It is widely reported and a key issue in formulating public policy. And we understand that high debt makes countries vulnerable, leading to higher interest charges on this debt. For these reasons, government debt is a key focus in macroeconomic analysis.
But what about government assets? If government were a corporation your analysis would certainly include them. Yet the standard view of public finance does not. What if we were to change that? What would taking account of government assets mean for countries’ resilience in downturns? And if countries with more assets are less vulnerable, would this show up in the interest rate they pay on their debt?
A new IMF working paper addresses these questions. As the point of departure, it looks at the general government balance sheet. This means it analyzes government assets in addition to liabilities. The paper shows the different ways balance sheet information enriches the picture and allows one to look at the source of changes in assets and liabilities. For example, do they come from the sale or acquisition of a building or the contracting of a new loan? Or are they caused by changes in the value of existing infrastructure or oil reserves?
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