Real Exchange Rates, Preferences, and Incomplete Markets: Evidence, 1961-2001

Many international macroeconomic models link the real exchange rate to a ratio of marginal utilities. We examine this link empirically, allowing the marginal utility of consumption to depend on government expenditure, real money balances, or external habit. We also consider two environments with incomplete asset markets; one with exogenously missing markets but an endogenous discount rate that anchors the distribution of wealth and one with endogenous market segmentation. Although none of these satisfies theoretical and over-identifying restrictions for every country, utility with external habit persistence provides the best match with real exchange rates for OECD countries between 1961 and 2001.real exchange rate, consumption, marginal utility

Real exchange rates, preferences, and incomplete markets: Evidence, 1961-2001

Many international macroeconomic models link the real exchange rate to a ratio of marginal utilities. We examine this link empirically, allowing the marginal utility of consumption to depend on government expenditure, real money balances, or external habit. We also consider two environments with incomplete asset markets; one with exogenously missing markets but an endogenous discount rate that anchors the distribution of wealth and one with endogenous market segmentation. Although none of these satisfies theoretical and over-identifying restrictions for every country, utility with external habit persistence provides the best match with real exchange rates for OECD countries between 1961 and 2001

Money isn't Everything

This paper outlines the challenge of developing an operational macroeconomic framework in Ethiopia consistent with the large envisaged scaling up of aid to achieve the Millennium Development Goals (MDGs). This paper describes an MDG scenario that addresses both microeconomic and macroeconomic constraints, such as the need to boost sustainable growth, limit Dutch disease, formulate an exit strategy from aid dependency, enhance public financial management (PFM), and expand the supply of skilled labor. The paper will argue that a carefully sequenced MDG strategy is essential so that the scaled-up aid and public spending will remain in line with Ethiopia''s absorptive capacity.Millennium Development Goals;Absorptive capacity;Investment;Taxation;public spending, expenditure, fiscal framework, public expenditure, medium-term fiscal framework, public debt, fiscal policy, expenditure management, public expenditure management, fiscal operations, expenditure composition, capital expenditure, total expenditure, fiscal impact, fiscal accounts, expenditures, public financial management, budget support, tax revenue, expenditure growth, expenditure framework, fiscal policies, fiscal transparency, fiscal deficit, recurrent expenditure, public sector wage bill, fiscal activities, fiscal reporting, poverty-reducing expenditure, tax policy, defense spending, public expenditure review, fiscal space, fiscal risks, fiscal strategy, structural fiscal reforms, fiscally sustainable, fiscal reports, tax administration, tax base, fiscal reforms, budget balance, fiscal management, medium-term expenditure, fiscal balance, taxpayer office, fiscal costs, medium-term expenditure framework, fiscal accounting data, fiscal affairs, fiscal accounting, fiscal projections, fiscal outturn, expenditure commitments, quasi-fiscal activities, domestic expenditure, structural fiscal, debt-service, fiscal affairs department, fiscal frameworks, medium-term projections

Budget Rigidity and Expenditure Efficiency in Slovenia

This paper assesses the relative efficiency and flexibility of public spending in Slovenia compared to the advanced and new EU member states. Spending on health care, education, and social protection is relatively high in Slovenia without achieving correspondingly better outcomes. Inefficiencies appear to stem from the financing mechanisms for social services, institutional arrangements, and the weak targeting of social benefits. In addition, the composition of spending appears to be strongly tilted towards nondiscretionary items that reduce the fiscal room for maneuver. Greater flexibility is needed to facilitate the reallocation of relatively inefficient expenditure into higher priorities. In this manner, medium-term expenditure rationalization can focus on reducing inefficient outlays rather than restraining traditionally flexible components of the budget, such as public investment.Government expenditures;Budgetary policy;Public investment;expenditure, public spending, health spending, health care, expenditures, public expenditure, expenditure rationalization, public health, public health spending, expenditure efficiency, health insurance, budget process, medium-term expenditure, health sector, social expenditures, income households, health care providers, expenditure categories, health care spending, insurance system, capital spending, composition of expenditure, private insurers, health clinics, fiscal policy, short-term expenditure, administrative costs, health financing, public expenditure efficiency, health care financing, primary care doctors, budget target, competition among providers, health care reform, healthcare services, public expenditure adjustment, expenditure data, health insurers, expenditure items, private insurance, health care efficiency, primary health care, public health care, adverse selection, composition of public spending, health indicators, social protection expenditures, efficiency of government expenditure, health care system, primary care, health care services, capital investments, hospital services, moral hazard, hospital financing, expenditure assignments, government expenditure, financial incentive, total expenditure, higher expenditure, public insurance, private spending

Real Exchange Rates, Preferences, and Incomplete Markets: Evidence, 1961-2001

Many international macroeconomic models link the real exchange rate to a ratio of marginal utilities. We examine this link empirically, allowing the marginal utility of consumption to depend on government expenditure, real money balances, or external habit. We also consider two environments with incomplete asset markets; one with exogenously missing markets but an endogenous discount rate that anchors the distribution of wealth and one with endogenous market segmentation. Although none of these satisfies theoretical and over-identifying restrictions for every country, utility with external habit persistence provides the best match with real exchange rates for OECD countries between 1961 and 2001

Rebuilding Fiscal Institutions in Postconflict Countries

This paper discusses experiences in reestablishing fiscal management in postconflict countries. Building fiscal institutions in postconflict countries essentially entails a three-step process: (1) creating a legal or regulatory framework for fiscal management; (2) establishing or strengthening fiscal authority; and (3) designing appropriate revenue and expenditure policies while simultaneously strengthening revenue administration and public expenditure management. Based on experiences in 14 postconflict countries, the paper reviews the challenges in rebuilding fiscal institutions in these countries, and identifies key priorities in the fiscal area following the cessation of hostilities.Post-conflict emergency assistance;public expenditure, expenditure, expenditure management, public expenditure management, fiscal institutions, expenditure management system, expenditures, tax policy, fiscal authority, fiscal policy, public expenditure management system, tax administration, budget law, tax system, tax base, public spending, taxation, fiscal affairs, real gdp, revenue collection, fiscal issues, government expenditure, fiscal operations, central fiscal, fiscal management, government spending, fiscal affairs department, post-conflict countries, fiscal decentralization, fiscal federalism, macroeconomic management, fiscal deficit, post-conflict, budget management, budget process, annual budget, tax returns, tax revenues, public expenditure reform, budget deficit, public expenditure management area, expenditure control, tax collections, tax collection, expenditure reform, expenditure management reform, gdp growth, public expenditure management reform, tax revenue, intergovernmental fiscal, fiscal rules, intergovernmental fiscal relations, tax payments, tax incentives, expenditure policy, public expenditures, tax evasion, capital expenditure, expenditure management systems, public expenditure management systems, public expenditure review, capital expenditures, tax on wages, expenditure policies, fiscal relations, government revenue, armed conflict, macroeconomic stabilization, tax compliance, public expenditure reform strategy, public expenditure tracking surveys, tax authority, expenditure tracking, taxpayer office, tax administrations, tax structure, public finances, expenditure program, expenditure responsibilities, public expenditure system, public expenditure tracking, fiscal strategy, fiscal institution, fiscal surplus, intergovernmental transfers, fiscal priorities, public financial management, fiscal reporting, public expenditure program, fiscal policy development, expenditure tracking surveys, expenditure assignments, fiscal system, expenditure classification, fiscal reforms, expenditure framework, fiscal aggregates, medium-term expenditure framework, fiscal discipline, medium-term expenditure, fiscal consequences, data on expenditures, classification of expenditures, expenditure classification systems, government expenditures, tax reform, fiscal vulnerability, fiscal imbalances, taxpayer registration, budget requests, fiscal decisions, expenditure needs, fiscal developments, fiscal arrangement, flat income tax, expenditure priorities, fiscal position, fiscal reports, macroeconomic policy, macroeconomic variables, tax credit, expenditure authorization, budget execution reports, fiscal policies, expenditure allocations, intergovernmental fiscal affairs, structural fiscal, expenditure issues, fiscal outturns, fiscal impact, fiscal projections, fiscal adjustments, budget deficits, fiscal situation, government expenditure system, fiscal variables, tax rates, fiscal conditions, fiscal transparency, total expenditures, defense spending, expenditure composition, international community, gross domestic product, macroeconomic policies, key macroeconomic variables, growth rates