Working Papers
2002
June 1, 2002
Exchange Rate Pass-Through and Monetary Policy in Croatia
Description: Exchange rate targeting is considered the best policy option in dollarized economies when wages and prices are indexed to the exchange rate. Croatia is a highly dollarized economy, but empirical investigation conducted in this paper shows that exchange rate pass-through has been low after stabilization. This finding, which is robust to different methodologies (VAR, cointegration), would suggest that dollarization is mostly limited to financial assets and therefore that strict exchange rate targeting may not necessarily be the best option. However, policy implications are unclear due to the endogeneity of the pass-through to the policy regime.
June 1, 2002
Experience with Budgetary Convergence in the WAEMU
Description: This paper reviews the experience of fiscal adjustment undertaken in the West African Economic and Monetary Union (WAEMU) countries since the entry into force of the 1994 treaty establishing the framework for a regional convergence of national fiscal policies. We propose a measure of the structural deficit that corrects for movements of both the business cycle and terms of trade. Though the fiscal deficit worsened in 1998-2001 in some countries because of terms of trade deterioration and unfavorable movements in the business cycle, convergence stalled even when corrected for these factors. Meeting fiscal deficit targets in the future will be facilitated by a favorable external environment but, in any case, will require a higher revenue ratio and downward pressure on government wages as shares of GDP.
June 1, 2002
The Micro Basis of Budget System Reform: The Case of Transitional Economies
Description: In reviewing the means to strengthen public expenditure management (PEM) systems, there has been increased emphasis on the micro basis of broader budget system reforms, especially reforms of the internal financial management systems in government agencies. Specifically in transition economies, there has been increasing recognition that OECD-type budget systems need to be broadly based on a firm platform of financial management in government institutions. At the same time, many transitional countries have generally acknowledged that this aspect of their PEM systems is problematic and needs to be rectified; hence, international agencies have been actively promoting reforms in these areas. In particular, three areas have been emphasized: human resource management, procurement, and internal audit. This paper explores the problems faced by transitional economies in each of these areas and reviews the generally recommended solutions to these problems.
June 1, 2002
Long-Run Determinants of Exchange Rate Regimes: A Simple Sensitivity Analysis
Description: Many studies have attempted to uncover empirical regularities in how countries choose their exchange rate regimes. We survey previous studies showing that, taken as a whole, the literature is inconclusive. Drawing on a large dataset with many potential explanatory variables and a variety of exchange rate regime classifications, we test old and new theories and confirm that no robust empirical regularities emerge.
June 1, 2002
Structural Balances and All That: Which Indicators to Use in Assessing Fiscal Policy
Description: Structural indicators of a country's fiscal position are regularly used as estimates of both discretionary changes in fiscal policy and the effect of fiscal policy on aggregate demand. This paper looks at such indicators and evaluates, from a theoretical standpoint and from empirical case studies, their usefulness in measuring the size of discretionary policy action or fiscal demand stimulus. Two propositions are examined in detail: first, that the change in the primary structural balance provides a better indicator of discretionary fiscal policy than does the change in the primary balance; and second, that the change in the structural balance is a good indicator of the demand stimulus arising from changes in the fiscal position. In addition, the paper discusses measurement problems relating to structural balances and the use of the fiscal impulse as an alternative to structural balances.
June 1, 2002
Financial Liberalization and Real Investment: Evidence From Turkish Firms
Description: There is increasing emphasis on the importance of efficient financial markets for sustained real investment and economic growth, yet limited empirical research on the effects of the deregulation of financial markets on the firm's investment decisions. The purpose of this paper is to model the impact of financial reforms on borrowing constraints faced by firms and to test the impact of financial reforms on the investment decisions of firms in Turkey. To do so, the paper builds a dynamic investment model, where financial variables and real investment are linked through the net present value of the firm. The derived investment model is employed to test whether Turkey's efforts at financial liberalization in 1980 were able to relax the borrowing constraints faced by Turkish firms. A dynamic panel data methodology is used on a panel data set of 1036 Turkish firms over the 1983-86 period. In addition, time-series analysis is employed on Turkish aggregate data over the 1971-91 period.
May 20, 2002
Statistical Inference as a Bargaining Game
Description: This paper extends the analogy, previously established by Learner (1978a), between a Bayesian inference problem and an economics allocation problem to show that posterior modes can be interpreted as optimal outcomes of a bargaining game. This bargaining game, over a parameter value, is played between two players: the researcher (with preferences represented by the prior) and the data (with preferences represented by the likelihood).
0001
January 1, 0001
$name
January 1, 0001
$name
January 1, 0001