Choose an application

• Reference Manager
• EndNote
• RefWorks (Direct export to RefWorks)

Fiscal rules—legal restrictions on government borrowing, spending, or debt accumulation (like the Gramm-Rudman-Hollings Act in the United States)—have recently been adopted or considered in several countries, both industrial and developing. Previous literature stresses that such laws restrict countercyclical government borrowing, thus preventing intertemporal equalization of marginal deadweight losses of taxation—an idea associated with Frank Ramsey. However, such literature typically abstracts from persistent current deficits that are financed by future tax increases. Eliminating such deficits may substantially reduce tax rate variability—the very goal of countercyclical borrowing—even over a finite horizon. Thus, Gramm-Rudman-Hollings and Frank Ramsey are not necessarily enemies and they may even be good friends!.

Fiscal policy. --- Business cycles. --- Taxation --- Tax rates --- Tax tables --- Economic cycles --- Economic fluctuations --- Cycles --- Tax policy --- Economic policy --- Finance, Public --- Rates and tables. --- Government policy --- Budgeting --- Macroeconomics --- Public Finance --- Allocative Efficiency --- Cost-Benefit Analysis --- Policy Objectives --- Policy Designs and Consistency --- Policy Coordination --- Fiscal Policy --- National Government Expenditures and Related Policies: General --- Taxation, Subsidies, and Revenues: Other Sources of Revenue --- Public finance & taxation --- Budgeting & financial management --- Expenditure --- Fiscal rules --- Fiscal policy --- Tax expenditures --- Public expenditure review --- Public financial management (PFM) --- Expenditures, Public --- Budget --- Argentina

Choose an application

• Reference Manager
• EndNote
• RefWorks (Direct export to RefWorks)

Ex-post deviations from uncovered interest parity (UIP) – realized differences between dollar returns on identical assets of different currencies – equal the real interest differential plus real exchange rate growth. Among industrialized countries, UIP deviations are largely explained by unanticipated real exchange rate growth, but among developing countries, real interest differentials are “where the action is.” This observation is due to the greater variability of inflation in developing countries, but may also stem from higher and more variable risks and capital controls in these countries. Also, among developing countries with moderate inflation, offsetting comovements of real interest differentials and real exchange growth support the sticky-price hypothesis.

Banks and Banking --- Econometrics --- Foreign Exchange --- Interest Rates: Determination, Term Structure, and Effects --- Time-Series Models --- Dynamic Quantile Regressions --- Dynamic Treatment Effect Models --- Diffusion Processes --- Open Economy Macroeconomics --- International Financial Markets --- Currency --- Foreign exchange --- Finance --- Econometrics & economic statistics --- Real exchange rates --- Interest rate parity --- Vector autoregression --- Real interest rates --- Exchange rate adjustments --- Financial services --- Econometric analysis --- Interest rates --- Argentina

Choose an application

• Reference Manager
• EndNote
• RefWorks (Direct export to RefWorks)

If permanent output is uncertain, tax smoothing can be perilous: both debt levels and tax rates are difficult to stabilize and may drift upwards. One practical remedy would be to target the debt. However, our simulations confirm that such a policy would require undesirably volatile fiscal adjustments and may inhibit countercyclical borrowing. An alternative would be to link the primary surplus not only to the debt ratio (like tax smoothing) but also to its volatility, thus preempting further adjustments while gradually reducing the debt.

Electronic books. -- local. --- Fiscal policy. --- Taxation -- Econometric models. --- Econometrics --- Public Finance --- Taxation --- Allocative Efficiency --- Cost-Benefit Analysis --- Policy Objectives --- Policy Designs and Consistency --- Policy Coordination --- Fiscal Policy --- National Government Expenditures and Related Policies: General --- Debt --- Debt Management --- Sovereign Debt --- Time-Series Models --- Dynamic Quantile Regressions --- Dynamic Treatment Effect Models --- Diffusion Processes --- Tax Evasion and Avoidance --- Public finance & taxation --- Macroeconomics --- Econometrics & economic statistics --- Fiscal policy --- Expenditure --- Public debt --- Vector autoregression --- Tax arrears management --- Expenditures, Public --- Debts, Public --- Tax administration and procedure

Choose an application

• Reference Manager
• EndNote
• RefWorks (Direct export to RefWorks)

This paper examines the policy challenges a country faces when it wants to both reduce inflation and maintain a sustainable external position. Mundell’s (1962) policy assignment framework suggests that these two goals may be mutually incompatible unless monetary and fiscal policies are properly coordinated. Unfortunately, if the fiscal authority is unwilling to cooperate—a case of fiscal intransigence—central banks that pursue a disinflation on a ‘go it alone’ basis will cause the country’s external position to further deteriorate. A dynamic analysis shows that if the central bank itself lacks credibility in its inflation goal, it must rely even more on cooperation from the fiscal authority than otherwise. Echoing Sargent and Wallace’s (1981) ‘unpleasant monetarist arithmetic,’ in these circumstances, a ‘go it alone’ policy may successfully stabilize prices and output, but only on a short-term basis.

Exports and Imports --- Foreign Exchange --- Inflation --- Macroeconomics --- Money and Monetary Policy --- Open Economy Macroeconomics --- Economic Growth of Open Economies --- Fiscal Policy --- Price Level --- Deflation --- International Lending and Debt Problems --- Monetary Policy --- Currency --- Foreign exchange --- International economics --- Monetary economics --- Fiscal consolidation --- Real exchange rates --- External debt --- Inflation targeting --- Fiscal policy --- Prices --- Monetary policy --- Debts, External --- South Africa

Choose an application

• Reference Manager
• EndNote
• RefWorks (Direct export to RefWorks)

Under a monetary dominant (MD) regime, the primary surplus adjusts to limit debt growth, permitting monetary policy to be conducted independently of fiscal financing requirements. In Brazil, some evidence favors an MD regime for 1995–97, but not for the decade of the 1990s as a whole. While fiscal adjustments of 1999 yielded a primary surplus of about 3 percent of GDP, consistent with solvency, a credible MD regime would require further adjustments of the primary surplus if debt increases, growth falls, or interest rates rise.

Banks and Banking --- Exports and Imports --- Finance: General --- Macroeconomics --- Public Finance --- Interest Rates: Determination, Term Structure, and Effects --- International Lending and Debt Problems --- Bankruptcy --- Liquidation --- Debt --- Debt Management --- Sovereign Debt --- Fiscal Policy --- Finance --- International economics --- Public finance & taxation --- Real interest rates --- Interest payments --- Solvency --- Public debt --- Fiscal consolidation --- Financial services --- External debt --- Financial sector policy and analysis --- Fiscal policy --- Interest rates --- Debt service --- Debts, Public --- Brazil