Economics & Development

This paper examines whether uncertainty surrounding fiscal policy weakens the effectiveness of discretionary fiscal stimulus. Fiscal policy uncertainty reflects ambiguity about government actions on taxation, spending, and public debt sustainability. Using a Bayesian panel threshold vector autoregression with country-specific regimes for a sample of 55 advanced and emerging market and developing economies, the authors estimate state-dependent government spending multipliers. The authors find that fiscal stimulus is substantially less effective in high-uncertainty environments: when fiscal policy uncertainty is elevated, the government spending multiplier is roughly one-third of its size under low uncertainty, declining from about 0.6 to 0.2 between the 5th and 95th percentiles of the uncertainty distribution. This pattern holds for both advanced and emerging market and developing economies. The results are robust to controlling for fiscal foresight and to alternative measures of fiscal policy uncertainty that account explicitly for adverse macroeconomic conditions. Overall, the findings suggest that policy uncertainty can materially undermine the macroeconomic effectiveness of fiscal interventions.

In accordance with the Board paper approving changes to International Bank for Reconstruction and Development and International Development Association operational policies to enhance the World Bank crisis preparedness and response toolkit on February 1, 2024, this report shares information on the triggering of Rapid Response Options and the repurposing of funds, including the types of crises, the instruments employed, and portfolio reallocation parameters. On April 23, 2026, the Division Director approved Mali’s request to repurpose funds through the Mali Contingent Emergency Response Project (CERP) to address a severe energy crisis caused by a prolonged fuel supply blockade and sharp increases in global oil prices that led to widespread electricity shortages, disruption of essential services, and significant economic and social impacts. The Rapid Response Option was triggered, and the reallocation was within the ten percent limit in a fiscal year of the total undisbursed Investment Project Financing and Program for Results Bank Loan portfolio. The funds were sourced from International Development Association operations, specifically from the Bamako Urban Resilience Project, the Mali Water Security Project, the Mali Community Resilience and Inclusive Services Project Malidenko, and the Mali Connectivity and Road Resilience Project, and were disbursed via the Contingent Emergency Response Project instrument. The report concludes that the repurposing adheres to policy limits and procedures, provides timely support to mitigate the crisis’s social and economic impacts, and demonstrates the effective operationalization of the revised Rapid Response Options. The policy change referenced is the Board’s approval of enhanced operational policies for crisis preparedness and response, and this case illustrates their implementation, including the use of CERP and systematic reporting to the Board on triggers and repurposing.

This chapter provides an overview of air transport finance and economics, with a particular focus on the airport business and the evaluation of airport investments. It examines the aviation industry's relationship with the broader economy, the regulatory environment, and key concepts such as the Freedoms of the Air, air service agreements, and trends toward liberalization. The chapter introduces airport business models, air transport demand forecasting, and revenue structures for airports and air navigation service providers, including aeronautical and non-aeronautical income sources. It also discusses single till, dual till, and hybrid till approaches to infrastructure financing and operations. In addition, the chapter reviews revenue forecasting, investment planning, economic appraisal methods, and the broader economic impact of air transport, while outlining financing approaches for aviation development projects.