Public debt and currency crisis: how central bank opacity can make things bad?

This paper examines how the transparency in monetary policy decision can impact the likelihood of currency crisis in a simple open economy model with public debt. In the presence of opacity, it is found that if the debt is high, the government will devaluate and vice versa, and the self-fulfilling multiple equilibria solution disappears. Furthermore, the opacity reduces the threshold of public debt above which the government is considered as totally lacking the credibility in its pre-commitment to maintain fixed the exchange rate.central bank transparency, public debt, currency crisis, speculative attack

Legal, Economic and Political Aspect of Establishing Fiscal and Monetary Sovereignty of the Republic of Croatia

Croatian fiscal and monetary system stayed without one part of its income because of no fiscal and monetary sovereignty over the occupied territories. This would be of great importance especially after the war when Croatia claims the war compensation from Serbia and Montenegro, so it will be necessary to estimate the amount of public income which was collected on the territory of Republika Srpska Krajina in order to have an accurate amount once when Croatia claims its war and collateral compensation form these two states. The estimated public income is extremely important fiscal subject which was not transferred into the state budget and the budgets of the local communities since these financial means are usually ignored when Croatian war compensation is discussed publicly, scientifically and among scholars.fiscal sovereignty, monetary sovereignty

Fiscal Reform and its Firm-Level Effects in Eastern Europe and Central Asia

This paper reports the first empirical evidence that fiscal reform efforts in transition countries have positive effects. Using the EBRD BEEPS I and II data, reported in 1999 and 2002, rigorous econometric models are estimated showing that the share of bribes paid to tax collectors is reduced in countries with more extensive fiscal reforms. This effect controls for selection bias in the likelihood that firms are required to make unofficial payments to tax authorities. On the basis of this evidence, we now have some confidence in the success of fiscal reform efforts. In addition, we have insight regarding what forms of fiscal reform may be more successful as the share of revenues generated from direct taxes (both personal and corporate) has an impact on tax bribes.http://deepblue.lib.umich.edu/bitstream/2027.42/40186/3/wp800.pd

Dynamisme des Politiques Economiques pour Parvenir à la Stabilité Economique : Evidence de la Côte d'Ivoire

After more than a decade of wandering, linked to successive socio-political instabilities, the institutional environment in Côte d'Ivoire is more or less favorable to the proper functioning of the economy. Indeed, these numerous crises have caused a deterioration in the business climate, pushing foreign investors to other more stable sub-regional economies. Since April 2011, the state has embarked on the implementation of economic policies that can improve the dynamism of the economy in order to initiate the development process. This study analyzes the dynamism of economic policy instruments on economic growth in Côte d'Ivoire. The analysis of the cointegration between the variables in our study shows the existence of a cointegration relationship. This justifies the choice of an autoregressive vector model with a lag. Through annual data covering the period 1987 to 2020, the results of our estimates show that a high tax rate would lead to a drop in the level of economic activity. This means that taxation has a distorting effect on economic activity because it promotes tax uninviting behavior such as tax evasion and tax evasion. Likewise, a high unemployment rate would lead to a considerable drop in economic growth. Conversely, increased government spending and controlled inflation would benefit the economy. It emerges from all of the above that intervention through the stimulus policy based on increased spending on education and health is necessary to stimulate the process of economic growth.     JEL Classification: E4, E62, O23 Paper type: Empirical researchAprès plus d’une décennie d’errance, liée aux successives instabilités sociopolitiques, l’environnement institutionnel en Côte d’Ivoire est plus ou moins favorable au bon fonctionnement de l’économie. En effet ses nombreuses crises, ont engendré une détérioration du climat des affaires poussant les investisseurs étrangers vers d’autres économies sous régionale plus stable. Depuis avril 2011, l’État s’est lancé dans la mise en place des politiques économiques pouvant améliorer le dynamisme de l’économie afin d’amorcer le processus de développement. Cette étude analyse le dynamisme des instruments des politiques économiques sur la croissance économique en Côte d’Ivoire. L’analyse de la cointégration entre les variables de notre étude ne montre aucune existence de relation de cointégration. Ce qui justifie le choix d’un modèle vectoriel autorégressif à un retard. À travers des données annuelles couvrant la période 1987 à 2020, les résultats issus de nos estimations montrent qu’un taux d’imposition élevé conduirait une baisse du niveau de l’activité économique. Cela signifie que la fiscalité a un effet distorsif sur l’activité économique, car elle favorise des comportements d’incivisme fiscal tels que la fraude fiscale et l’évasion fiscale. De même, un taux de chômage élevé engendrerait une baisse considérable de la croissance économique. À l’inverse, une augmentation des dépenses gouvernementales et une inflation contrôlée seraient bénéfiques pour l’économie. Il ressort de tout ce qui précède que l’intervention par la politique de relance basée sur l’augmentation des dépenses d’éducation et de santé est nécessaire pour stimuler le processus de croissance économique.   Classification JEL : E4, E62, O23 Type de l’article : Recherche empiriqu

A new view into political business cycles: Household expenditures in Albania

Over the last decades, there has been plenty of research and articles on Political Business Cycles (PBC), aiming at analyzing and explaining the use of fiscal and monetary instruments to stimulate economic growth before elections, to impress the voters. Following other researches for PBC in Albania, in which there was found clear evidence of fiscal expansion before elections, but no significant changes in inflation and GDP, as theory predicts, we analyze the peoples' expectations related to elections outcomes, and the way these expectations influence their decisions to spend, and consequently the macroeconomic variables. --Political Business Cycle,Household Behaviour,Albanian

Optimal Economic Growth Using Fiscal and Monetary Policies

The literature on growth theory is rich with models attempting to explain growth differences among countries. Several variables have been proposed many of which were found to be positively related to growth. However, a major problem with these models is that the factors explaining growth are endogenously determined by their environment so that a slow-growing or a poor country will find itself helpless because all the crucial variables it has `inherited' are either deficient or inexistent. We propose policyoriented model that empowers (poor or slow-growing) countries in the sense that they can use economic policies to achieve high growth and eliminate the gap of unused productive capacity of society. We demonstrate that such objectives are possible by manipulating some key control variables, namely the rate of interest and the net government spending.growth, maximization, fiscal policy, interest rates, deficit, money

The Macroeconomic Management of Increased Aid: Policy Lessons from Recent Experience

This paper investigates the macroeconomic challenges created by a surge in aid inflows. It develops an analytical framework for examining possible policy responses to increased aid, in terms of absorption and spending of aid?where the central bank controls absorption through monetary policy and the sale of foreign exchange and the fiscal authority controls spending. Different combinations of absorption and spending lead to different macroeconomic consequences. Evidence from five countries that recently experienced an aid surge (Ethiopia, Ghana, Tanzania, Mozambique and Uganda) shows no support for aid-related real exchange rate appreciation in these countries, but indicates that the fear of Dutch disease played an important part in the policy reaction to aid surges. Fiscal and monetary authorities should coordinate their responses to an aid surge, because an uncoordinated response?typically when fiscal authority wants to spend aid while the central bank wants to avoid exchange rate appreciation?can have serious negative macroeconomic consequences.aid, exchange rate, aid absorption, policy

Macroeconomic Policies for Growth in Small Pacific Island Economies

This paper examines macroeconomic performance and policies in small Pacific island economies (SPIEs). These economies are highly prone to various supply shocks and face severe obstacles to development arising from their geography and demography. However, the paper contends that their lacklustre growth performance over the last two decades has also been due to excessively conservative macroeconomic policies. That is, a confluence of supply shocks and policy-induced constrained demand has resulted in poor economic performance. Given a very weak private sector, poor state of infrastructure and low-level human capital, the paper argues for the leading role of the government. It then elaborates on the elements of macroeconomic policies within a state-led development strategy.Pacific islands, macroeconomics, growth, aid, fiscal policy

Foreign Aid and Economic Development in Postwar Lebanon

This paper shows that foreign aid in postwar Lebanon passed through two phases with distinct features that have had far reaching implications for postwar development. In the first phase lasting from 1992-97, foreign aid was mainly channelled towards providing resources for postwar reconstruction projects. The second phase from 1997 to the present witnessed a qualitative shift in foreign aid utilization from reconstruction needs towards financial stability and balance-of-payments equilibrium needs. This shift allowed the government to intervene in the foreign exchange market, maintained balance of payments surpluses during this period, reduced interest rates on public debt instruments and finally provided the necessary liquidity and 'confidence' for the government to continue borrowing funds from local commercial banks and foreign investors. More importantly this shift in foreign aid allowed the government to avoid financial and currency crises in 2002. However, the cost of such a qualitative shift was large in terms of fiscal management, diversion of funds from reconstruction, and the increased dependency of the Lebanese economy on foreign aid for stabilization purposes.foreign aid, postwar reconstruction, post-conflict, Lebanon