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This Selected Issues paper for the Republic of Armenia shows that building up fiscal space during economic expansions is crucial for the effective implementation of stimulatory policies during downturns. Armenia’s tax revenue remains one of the lowest in the region, and significantly below potential. The legislative changes introducing a VAT threshold and a simplified regime for those businesses below the threshold, as well as the adoption of a comprehensive and ambitious modernization plan for revamping tax administration, are promising steps in the right direction.

Finance: General --- Foreign Exchange --- Macroeconomics --- Public Finance --- Fiscal Policy --- National Government Expenditures and Related Policies: General --- International Financial Markets --- Taxation, Subsidies, and Revenue: General --- Currency --- Foreign exchange --- Public finance & taxation --- Finance --- Exchange rates --- Expenditure --- Fiscal stance --- Fiscal policy --- Foreign exchange intervention --- Expenditures, Public --- Foreign exchange market --- Revenue --- Armenia, Republic of

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Policymakers in many emerging markets are attempting to resist currency appreciation while simultaneously meeting targets for inflation. Using the recent experience of Colombia between 2004 and 2007, this paper examines the effectiveness of the Central Bank's intervention in stemming domestic currency appreciation under an inflation targeting regime. The results indicate that exchange rate intervention was effective during 2004-2006, when foreign currency purchases were undertaken during a period of monetary easing. During 2007, on the other hand, intervention was ineffective in reversing or slowing down domestic currency appreciation, as large-scale intervention became incompatible with meeting the inflation target in an overheating economy. Currency derivative markets-which have grown in depth and sophistication-played a key role in blunting the effectiveness of intervention.

Banks and banking, Central --- Inflation (Finance) --- Monetary policy --- Monetary management --- Economic policy --- Currency boards --- Money supply --- Banker's banks --- Banks, Central --- Central banking --- Central banks --- Banks and banking --- Econometric models. --- Banks and Banking --- Foreign Exchange --- Inflation --- Money and Monetary Policy --- Monetary Systems --- Standards --- Regimes --- Government and the Monetary System --- Payment Systems --- Price Level --- Deflation --- Financial Institutions and Services: Government Policy and Regulation --- Currency --- Foreign exchange --- Monetary economics --- Macroeconomics --- Economic & financial crises & disasters --- Exchange rates --- Currencies --- Foreign exchange intervention --- Bank resolution --- Money --- Prices --- Crisis management --- Colombia