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The IMF Working Papers series is designed to make IMF staff research available to a wide audience. Almost 300 Working Papers are released each year, covering a wide range of theoretical and analytical topics, including balance of payments, monetary and fiscal issues, global liquidity, and national and international economic developments.
Fiscal policy seeks to equilibrate the public sector's financing needs with the private sector's demand for investment and a sustainable balance of payments. Correct measurement of the public sector's net use of resources is therefore an important prerequisite for managing the macroeconomy. This volume, edited by Mario I. Blejer and Adrienne Cheasty, is organized around four issues: the adequacy of summary measures of the fiscal deficit, conventional and adjusted deficits, coverage (size) of the public sector, and the public sector's intertemporal budget constraint.
This paper describes methodological issues pertaining to measurement of fiscal impact. The fiscal deficit is, under any circumstances, a crude tool for assessing the impact of fiscal policy on the economy. This paper also analyzes various ways in which the conventional definition of the fiscal deficit is affected by high rates of inflation. It has shown that, as the rate of inflation rises, the picture emerging from the conventional measure may, under certain circumstances, become somewhat blurred since the conventional measure may magnify the size of the fiscal adjustment that a country need. In fact, the size of the debt service that compensates bondholders for the reduction in the real value of their assets arising from inflation should be made explicit so as to indicate that part of the deficit whose impact depends mainly on portfolio decisions regarding the public's demand for government bonds, and on the potential effects of these bonds on the monetary and liquidity conditions of the economy.
The concept of fiscal impulse is defined, discussed, and differentiated from measures that attempt to summarize the macroeconomic effects of fiscal policy. Two methodologies are briefly discussed and their corresponding measures presented for the G-7 countries over the ten-year period ending in 1989. Controversies about the measure are highlighted and potential improvements are also discussed.
1. Introduction. 1.1. Macroeconomic programming exercises. 1.2. The projection exercise, in summary. 1.3. Uses of multiannual macroeconomic programming exercises. 1.4. Macroeconomic "consistency" analysis. 1.5. Programming assumptions. 1.6. Pacífica's macroeconomy. 1.7. The book's structure -- 2. Overview of the projection procedure. 2.1. The projection procedure. 2.2. Programming assumptions. 2.3. National-accounts projections. 2.4. External-accounts projections. 2.5. Fiscal-accounts projections. 2.6. Monetary-accounts projections. 2.7. Consistency relationships among the national, external, fiscal and monetary accounts projections. 2.8. Concluding observations on the solution procedure -- 3. Basic programming variables. 3.1. Introduction : Basic programming variables. 3.2. Gross domestic product and its growth rate. 3.3. The price level and the exchange rate. 3.4. Sectors and sub-sectors of the gross domestic product. 3.5. Central-bank international-reserve holdings. 3.6. Population and labor force. 3.7. Algebraic relationships among year-average and year-end GDP, price indices, and exchange rates. 3.8. Basic macroeconomic programming variables for "Pacífica" -- 4. Programming variables : Non-interest government expenditure. 4.1. Introduction : Non-interest government-expenditure projections. 4.2. Non-interest current-expenditure projections. 4.3. Capital and other non-recurrent expenditure. 4.4. Pacífica's government expenditure -- 5. Programming variables : external debt and internal government debt. 5.1. Programming external and internal debt. 5.2. External-debt programming techniques. 5.3. External debt-rescheduling and -reduction concepts. 5.4. Debt-reduction concepts associated with the Highly-Indebted Poorest Countries initiative. 5.5. Projections of internal government debt and financial assets. 5.6. Pacífica's external and internal debt -- 6. National-expenditure accounts projections. 6.1. Introduction : national-expenditure accounts projections. 6.2. Capital formation and real-GDP growth. 6.3. Inventory holdings. 6.4. Exports and imports of goods and non-factor services. 6.5. Government capital formation and consumption. 6.6. Non-government capital formation and consumption. 6.7. National-accounts projections for "Pacífica" -- 7. External-accounts projections. 7.1. Introduction: External-accounts projections. 7.2. Balance-of-payments projections. 7.3. Reconciling above- and below-the-line balance-of-payments projections. 7.4. External-accounts projections for "Pacífica" -- 8. Fiscal-accounts projections. 8.1. Introduction : financing the fiscal-expenditure flow. 8.2. Government-revenue projections. 8.3. Reconciling above- and below-the-line fiscal projections. 8.4. Taking account of disaggregated public-sector entities. 8.5. Fiscal-accounts projections for "Pacífica" -- 9. Monetary-accounts projections. 9.1. Introduction : monetary-accounts projections. 9.2. Monetary policy consistent with a given macroeconomic program. 9.3. Central-bank capitalization and decapitalization flows. 9.4. Projecting commercial-bank performance. 9.5. Consolidated monetary accounts. 9.6. Monetary-accounts projections for "Pacífica" -- 10. Practical programming and projection issues. 10.1. Introduction : practical programming and projection issues. 10.2. Setting up a macroeconomic projection exercise : data, assumptions, and presentation of results. 10.3. Setting projection assumptions. 10.4. Multiannual macroeconomic projection analysis in government budget-processing cycles. 10.5. Sensitivity analysis. 10.6. Sensitivity analysis for "Pacífica". 10.7. Sensitivity analysis involving debt-reduction exercises. 10.8. A concluding note.
Dornbusch, Fischer, and Startz has been a long-standing, leading intermediate macroeconomic theory text since its introduction in 1978. This revision retains most of the text's traditional features, including a middle-of-the-road approach and very current research, while updating and simplifying the exposition. A balanced approach explains both the potential and limitations of economic policy. Macroeconomics employs a model-based approach to macroeconomic analysis and demonstrates how various models are connected with the goal of giving students the capacity to analyze current economic issues in the context of an economic frame of reference. The only pre-requisite continues to be principles of economics.
The book considers when governments should give guarantees to private investors. After describing the history of guarantees, and the challenges the politics and psychology create for good decisions, the book sets out a principles for allocating risk (and therefore guarantees), techniques for valuing guarantees, and rules to encourage good decisions.