Buoyant Capital Spending and Worries over Real Appreciation: Cold Facts from Algeria

The Government of Algeria has pursed a relatively expansionary fiscal policy in recent years, thanks to rising oil prices and revenues. The paper explores the potential effects of such a stance on real exchange rate and uncovers a relatively small appreciating effect of increased government capital expenditure. This is explained by the fact that a significant share of capital spending falls into tradable imported goods. However, the envisaged increase in capital spending, if well designed and implemented, might in the long-run translate into rising operations and maintenance expenditure—mostly nontradable goods—thereby causing a higher real appreciation. This implies that Algeria should carefully consider the implications of its public investment program on recurrent expenditure.Government capital expenditure;real exchange rate;oil

Buoyant Capital Spending and Worries over Real Appreciation: Cold Facts from Algeria

The Government of Algeria has pursed a relatively expansionary fiscal policy in recent years, thanks to rising oil prices and revenues. The paper explores the potential effects of such a stance on real exchange rate and uncovers a relatively small appreciating effect of increased government capital expenditure. This is explained by the fact that a significant share of capital spending falls into tradable imported goods. However, the envisaged increase in capital spending, if well designed and implemented, might in the long-run translate into rising operations and maintenance expenditure—mostly nontradable goods—thereby causing a higher real appreciation. This implies that Algeria should carefully consider the implications of its public investment program on recurrent expenditure

Natural Disasters: Mitigating Impact, Managing Risks. Washington DC: International Monetary Fund.

Abstract This paper reviews the literature on the macroeconomic impact of natural disasters and presents the IMF's role in assisting countries coping with natural catastrophes. Focusing on seven country cases, the paper describes the emergency financing, policy support, and technical assistance provided by the Fund to help governments put together a policy response or build a macro framework to lay the foundation for recovery and/or unlock other external financing. The literature and experience suggests there are ways to strengthen policy frameworks to increase resilience to natural disaster shocks, including identifying the risks and probability of natural disasters and integrating them more explicitly into macro frameworks, increasing flexibility within fiscal frameworks, and improving coordination amongst international partners ex post and ex ante. JEL Classification Numbers: Q54, O44, H84 and F3

Labor Productivity and Real Exchange Rate

This paper seeks to investigate the transmission mechanisms linking productivity to the real exchange rate in the former Yugoslav Republic of Macedonia. At first glance, the stylized facts-low labor productivity growth and a trend real depreciation-suggest that a Balassa- Samuelson effect is in play. We find that the relationship between the two is not a result of the traditional Balassa-Samuelson effect. Instead, the depreciation of the real exchange rate reflects mainly the behavior of prices in the tradable sector. We argue that the depreciating real exchange rate may reflect a prolonged transition associated with slow technological growth and the low quality of the country''s tradable-goods basket.Productivity;Labor markets;Real effective exchange rates;exchange rate, reer, real effective exchange rate, effective exchange rate, export performance, equilibrium exchange rate, real exchange rate, exchange rates, export markets, export sector, export shares, nominal effective exchange rate, open economy macroeconomics, bilateral exchange rates, nominal bilateral exchange rates, nominal exchange rate, exportable goods, tariff barriers, exchange rate appreciation, real exchange rate changes, nominal exchange rates, exchange rate levels, exchange rate changes, foreign exchange, foreign investment

Revisiting the Determinants of Productivity Growth

This paper studies the main determinants of total factor productivity (TFP) growth using principal component analysis and a dynamic panel data model and, through a case study, explores key areas where accelerated reforms in the Maghreb countries would boost TFP gains. The results reveal that reforms targeted at attracting foreign direct investment and rationalizing government size, shifting resources from low-productivity sectors to higher ones, and encouraging women to enter the work force, could accelerate TFP gains. Equally important are reforms aimed at strengthening human capital, increasing the volume of trade, and improving the business environment.Maghreb;Economic growth;Emerging markets;Foreign direct investment;Government expenditures;Inflation rates;Labor markets;Women;productivity growth, real gdp, total factor productivity, gdp growth, growth accounting, gdp per capita, growth rate

The Choice Between External and Domestic Debt in Financing Budget Deficits

The paper reviews the principles and practical considerations involved in the choice between foreign and domestic financing of fiscal deficits, and derives a series of recommendations broadly applicable to Central and West African countries. The paper develops a simple analytical framework and shows that highly concessional external debt is usually a superior choice to domestic debt in terms of financial costs and risks, even in the face of a probable devaluation. The paper stresses the importance of the availability and terms of financing, and of overall long-term debt sustainability. It concludes that these countries need to take a gradual approach to domestic debt financing, beginning with the issuance of short-term bills, and ensure a solid track record of meeting their debt-service obligations.External debt;Domestic debt;Central Africa;West Africa;public debt, debt management, central bank, budget deficit, debt service, domestic financing, external borrowing, foreign debt, debt sustainability, external financing, foreign loan, public debt management, domestic currency, debt relief, foreign borrowing, government expenditure, debt sustainability analysis, domestic borrowing, current account, primary deficit, deficit financing, balance of payments, debt burden, fiscal policy, government deficit, fiscal deficits, budget deficits, external loans, government revenue, debt servicing, central banks, debt strategy, debt management agency, debt management strategy, government deficits, external debt management, public and publicly guaranteed debt, bilateral creditors, foreign currency debt, concessional debt, debt situation, accumulation of arrears, debt crisis, government debt, long-term debt, external borrowings, domestic financial markets, public and publicly guaranteed, external public debt, debt managers, taxation, fiscal policies, currency debt, public finance, domestic debts, increase in government expenditure, commercial borrowing, debt management strategies, external debt service, long-term debt sustainability, foreign aid, fiscal management, budget constraint, debt service to exports, day-to-day debt management, domestic investors, debt recording, debt buildup, external debt sustainability, debt-service, external shocks, public sector debt, debt problem, domestic savings, commercial debt, debt ratio, principal repayments, domestic debt management, foreign loans, debt portfolio, national budget, amortization payments, government budget constraint, external debt situation, borrowing on debt sustainability, debt relief mechanisms, primary expenditure, fiscal stability, reserve bank, public deficits, government budget, debt crises, long-term external debt, debt management functions, traditional debt relief, debt-service obligations, debt management system, repayments, debt sustainability analyses, ratio of debt, debt stocks, domestic saving, traditional debt relief mechanisms, currency composition, tax system, debt burdens, stock of debt, composition of government expenditure, tax burden, debt management authority, debt outstanding, relief mechanisms

Buoyant Capital Spending and Worries Over Real Appreciation

The Government of Algeria has pursed a relatively expansionary fiscal policy in recent years, thanks to rising oil prices and revenues. The paper explores the potential effects of such a stance on real exchange rate and uncovers a relatively small appreciating effect of increased government capital expenditure. This is explained by the fact that a significant share of capital spending falls into tradable imported goods. However, the envisaged increase in capital spending, if well designed and implemented, might in the long-run translate into rising operations and maintenance expenditure-mostly nontradable goods-thereby causing a higher real appreciation. This implies that Algeria should carefully consider the implications of its public investment program on recurrent expenditure.Oil;Government expenditures;Real effective exchange rates;exchange rate, real exchange rate, government spending, public spending, capital expenditure, real effective exchange rate, effective exchange rate, fiscal policy, aggregate demand, real exchange rate appreciation, increase in capital spending, exchange rate appreciation, exchange rates, public expenditure, government expenditure, fiscal sustainability, expansionary fiscal, government revenue, foreign exchange, expansionary fiscal policy, composition of government expenditure, fiscal expansion, fiscal deficits, nominal exchange rate, fiscal resources, expenditure programs, equilibrium exchange rate, additional fiscal resources, exchange rate determination, real exchange rates, level of public spending, fiscal stance, exchange rate regime, fiscal space, exchange rate information, share of public spending, fiscal policies, effective exchange rates, composition of public spending

The Impact of External Indebtednesson Poverty in Low-Income Countries

This paper explores the relationship between external debt and poverty. A number of observers have argued that high external indebtedness is a major cause of poverty. Using the first-differenced general method of moments (GMM) estimator, the paper models the impact of external debt on poverty, measured by life expectancy, infant mortality, and gross primary enrollment rates, while duly taking into account the impact of external debt on income. The paper thus endeavors to bring together the literature that links external debt with income growth and poverty. The main conclusion is that once the effect of income on poverty has been taken into account, external indebtedness indicators have a limited but important impact on poverty.Poverty;External debt;HIPC Initiative;Economic growth;mortality rate, life expectancy, debt service, infant mortality, infant mortality rate, external indebtedness, debt overhang, birth, debt relief, debt service to exports, life expectancy at birth, net present value of debt, external debt indicators, debt crisis, stock of debt, debt service payment, debt service payments, debt burden, nominal stock of debt, debt servicing, ratio of debt, debt service to export, foreign debt, external borrowings, external resources, debt sustainability, external finance, debt stocks, debt reduction, debt stock, debt problems, mortality rates, external debts, ratio of debt service to exports, infant mortality rates, number of deaths, debt data, multilateral debt relief, relief mechanisms, international debt, traditional debt relief, debt sustainability analyses, external debt burden, debt relief mechanisms, births, lower life expectancy, live birth, international lending, multilateral debt, external debt stock, traditional debt relief mechanisms, debt service reduction, relief debate