Intertemporal Adjustment And Fiscal Policy Under A Fixed Exchange Rate Regime
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Intertemporal Adjustment And Fiscal Policy Under A Fixed Exchange Rate Regime
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Author : Marcel Aloy
language : en
Publisher: World Bank Publications
Release Date : 2008
Intertemporal Adjustment And Fiscal Policy Under A Fixed Exchange Rate Regime written by Marcel Aloy and has been published by World Bank Publications this book supported file pdf, txt, epub, kindle and other format this book has been release on 2008 with Currencies and Exchange Rates categories.
Abstract: The paper presents a dynamic model for small to medium open economies operating under a fixed exchange rate regime. The model provides a partial explanation of the channels through which fiscal and monetary policy affects the real exchange rate. An empirical investigation is conducted for the case of Argentina during the currency board period of 1991-2001. Empirical estimates show that fiscal policy may indeed be an efficient instrument for promoting macroeconomic stability insofar as it encourages convergence toward long-run equilibrium and alters the long-term balance between exports and consumption, both private and public. The simulation applied to Argentina shows that if the share of public spending in the economy is higher than the share of imports, an increase in the tax rate will stimulate capital stock slightly, at least in the short term, and depreciate the real effective exchange rate. In the long run, the fiscal policy affects the value of the real exchange rate and consequently external competitiveness.
Intertemporal Adjustment And Fiscal Policy Under A Fixed Exchange Rate Regime
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Author : Marcel Aloy
language : en
Publisher:
Release Date : 2012
Intertemporal Adjustment And Fiscal Policy Under A Fixed Exchange Rate Regime written by Marcel Aloy and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2012 with categories.
The paper presents a dynamic model for small to medium open economies operating under a fixed exchange rate regime. The model provides a partial explanation of the channels through which fiscal and monetary policy affects the real exchange rate. An empirical investigation is conducted for the case of Argentina during the currency board period of 1991-2001. Empirical estimates show that fiscal policy may indeed be an efficient instrument for promoting macroeconomic stability insofar as it encourages convergence toward long-run equilibrium and alters the long-term balance between exports and consumption, both private and public. The simulation applied to Argentina shows that if the share of public spending in the economy is higher than the share of imports, an increase in the tax rate will stimulate capital stock slightly, at least in the short term, and depreciate the real effective exchange rate. In the long run, the fiscal policy affects the value of the real exchange rate and consequently external competitiveness.
Fiscal Policy And The Predictability Of Exchange Rate Collapse
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Author : Ms.Betty C. Daniel
language : en
Publisher: International Monetary Fund
Release Date : 1997-10-01
Fiscal Policy And The Predictability Of Exchange Rate Collapse written by Ms.Betty C. Daniel and has been published by International Monetary Fund this book supported file pdf, txt, epub, kindle and other format this book has been release on 1997-10-01 with Business & Economics categories.
It is well known that the long-run viability of a fixed exchange rate regime imposes constraints on monetary policy. This paper shows that, in a model with forward-looking agents, short-run viability imposes a fiscal constraint. When policy change, which destroys long-run viability, also violates the fiscal constraint, collapse is instantaneous. Delayed predictable collapse requires satisfaction of the fiscal constraint.
Fixed Versus Flexible Exchange Rates
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Author : Aaron Tornell
language : en
Publisher:
Release Date : 1995
Fixed Versus Flexible Exchange Rates written by Aaron Tornell and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 1995 with Fiscal policy categories.
In recent years the conventional wisdom has held that fixed rates provide more fiscal discipline than do flexible rates. In this paper we show that this wisdom need not hold in a standard model in which fiscal policy is endogenously determined by a maximizing fiscal authority. The claim that fixed rates induce more discipline stresses that sustained adoption of lax fiscal policies must eventually lead to an exhaustion of reserves and thus to a politically costly collapse of the peg. Hence, under fixed rates bad behavior today leads to punishment tomorrow. Under flexible rates bad behavior has costs as well. The difference is in the intertemporal distribution of these costs: flexible rates allow the effects of unsound fiscal policies to manifest themselves immediately through movements in the exchange rate. Hence, bad behavior today leads to punishment today. If fiscal authorities are impatient, flexible rates - by forcing the costs to be paid up-front - provide more fiscal discipline and higher welfare for the representative private agent. The recent experience of Sub- Saharan countries supplies some preliminary evidence that matches the predictions of the model.
Fiscal Constraints Of A Fixed Exchange Rate Regime
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Author : International Monetary Fund
language : en
Publisher: International Monetary Fund
Release Date : 1989-12-29
Fiscal Constraints Of A Fixed Exchange Rate Regime written by International Monetary Fund and has been published by International Monetary Fund this book supported file pdf, txt, epub, kindle and other format this book has been release on 1989-12-29 with Business & Economics categories.
The paper considers whether the implementation of a fixed exchange rate regime requires or implies binding constraints on fiscal policy. The main conclusions are that, from a country perspective, the effective constraint is on the degree of monetary financing, which bears an uncertain relationship to the size of the budget deficit; that, from a systemic perspective, the financial stability of the currency area can be ensured by making the monetary and fiscal authorities independent of one another; and that the case for coordination of fiscal policies—whatever its merits—is not enhanced by the creation of a fixed exchange rate regime.
Trade And Payments Adjustment Under Flexible Exchange Rates
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Author : International Economics Study Group
language : en
Publisher: Trade Policy Research Centre
Release Date : 1979
Trade And Payments Adjustment Under Flexible Exchange Rates written by International Economics Study Group and has been published by Trade Policy Research Centre this book supported file pdf, txt, epub, kindle and other format this book has been release on 1979 with Business & Economics categories.
Macroeconomics In Emerging Markets
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Author : Peter J. Montiel
language : en
Publisher: Cambridge University Press
Release Date : 2003-04-10
Macroeconomics In Emerging Markets written by Peter J. Montiel and has been published by Cambridge University Press this book supported file pdf, txt, epub, kindle and other format this book has been release on 2003-04-10 with Business & Economics categories.
This book is a rigorous, yet nonmathematical analysis of key macroeconomic issues faced by emerging economies. The first part develops an analytical framework that can be used as a workhorse model to study short-run macroeconomic issues of stabilization and adjustment in such economies, comparable to the IS-LM framework widely used in intermediate-level macroeconomics textbooks for industrial countries. The rest of the book considers fiscal issues, financial sector issues, and issues concerning exchange rate regimes and policies. In the fiscal area, the focus is on the formulation of intertemporal policies, i.e. fiscal sustainability, seigniorage, and the roles of central bank independence and privatization of public enterprises in achieving fiscal credibility. The analysis of the financial sector examines its role in promoting welfare and growth. Finally, the book explores recent developments in the theory of appropriate exchange rate regimes and management, and provides an overview of currency crises.
Money Based Versus Exchange Rate Based Stabilization With Endogenous Fiscal Policy
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Author : Aaron Tornell
language : en
Publisher:
Release Date : 1995
Money Based Versus Exchange Rate Based Stabilization With Endogenous Fiscal Policy written by Aaron Tornell and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 1995 with Economic stabilization categories.
We present a standard intertemporal model in which fiscal policy is determined by an optimizing but non-benevolent fiscal authority. If the fiscal authority is impatient, a money-based stabilization provides more fiscal discipline and higher welfare for the representative agent than does an exchange rate-based stabilization. Data for Latin American stabilizations in the last quarter-century seem to confirm the notion that stabilizing by using money rather than the exchange rate helps induce politicians to reduce the fiscal deficit.
Fiscal Policy And The Predictability Of Exchange Rate Collapse
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Author : Betty Daniel
language : en
Publisher:
Release Date : 2006
Fiscal Policy And The Predictability Of Exchange Rate Collapse written by Betty Daniel and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2006 with categories.
It is well known that the long-run viability of a fixed exchange rate regime imposes constraints on monetary policy. This paper shows that, in a model with forward-looking agents, short-run viability imposes a fiscal constraint. When policy change, which destroys long-run viability, also violates the fiscal constraint, collapse is instantaneous. Delayed predictable collapse requires satisfaction of the fiscal constraint.
The Effectiveness Of Fiscal Policy In Stimulating Economic Activity
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Author : Richard Hemming
language : en
Publisher: International Monetary Fund
Release Date : 2002-12
The Effectiveness Of Fiscal Policy In Stimulating Economic Activity written by Richard Hemming and has been published by International Monetary Fund this book supported file pdf, txt, epub, kindle and other format this book has been release on 2002-12 with Business & Economics categories.
This paper reviews the theoretical and empirical literature on the effectiveness of fiscal policy. The focus is on the size of fiscal multipliers, and on the possibility that multipliers can turn negative (i.e., that fiscal contractions can be expansionary). The paper concludes that fiscal multipliers are overwhelmingly positive but small. However, there is some evidence of negative fiscal multipliers.