Working Papers
1996
September 1, 1996
Monetary Policy in Central and Eastern Europe: Lessons After Half a Decade of Transition
Description: The paper uses data from transition economies in Central and Eastern Europe to assess four questions: (i) Did the standard blueprint for stabilization work, and was it implemented? (ii) To what extent was normal macroeconomics impeded by solvency problems in banks, and how successful have been policies to improve incentives within banks? (iii) Could financial markets and other infrastructure for monetary policy have been developed more quickly? (iv) How should transition economies respond to the monetary inflows that typically accompany success? The paper concludes by evaluating the changing advice offered by external agencies during the 1990s.
September 1, 1996
Domestic, Foreign or Common Shocks?
Description: A stochastic general equilibrium model of the world economy is used to analyze the origin of international business cycles using data for Germany, Japan and the United States. The findings indicate that after 1973, common shocks play a major role in accounting for similarities in output fluctuations. However, trade interdependencies with the United States may have also played a very important role; more than 20 percent of output fluctuations of the German and Japanese economies could have been imported from the United States.
September 1, 1996
A Robust and Efficient Method for Solving Nonlinear Rational Expectations Models
Description: The development and use of forward-looking macro models in policymaking institutions has proceeded at a pace much slower than predicted in the early 1980s. An important reason is that researchers have not had access to robust and efficient solution techniques for solving nonlinear forward-looking models. This paper discusses the properties of a new algorithm that is used for solving MULTIMOD, the IMF’s multicountry model of the world economy. This algorithm is considerably faster and much less prone to simulation failures than to traditional algorithms and can also be used to solve individual country models of the same size.
September 1, 1996
Noise Traders and Herding Behavior
Description: Recent developments in financial economics have included many explorations into market microstructure, that is, the internal functioning of markets and the ways in which they provide liquidity to traders. An important contribution of this literature is that prices can deviate from their fundamental values. This paper describes models of imperfect liquidity and improperly processed information in financial markets, focusing on the noise trader and investor herding literature. The motivations for this line of research are presented, followed by a description of some of the major contributions and tests of some of their empirical implications.
September 1, 1996
Improving the Efficiency of the U.S. CPI
Description: The IMF Working Papers series is designed to make IMF staff research available to a wide audience. Almost 300 Working Papers are released each year, covering a wide range of theoretical and analytical topics, including balance of payments, monetary and fiscal issues, global liquidity, and national and international economic developments.
September 1, 1996
Erosion of Expenditure Management System: An Unintended Consequence of Donor Approaches
Description: The paper considers the various procedures and practices relating to budgeting and accounting of foreign aid, and points out that as a result of the high degree of ringfencing associated with the aid, a kind of functional dyarchy has emerged with serious implications for expenditure management in the recipient countries. It concludes that more structured negotiations, improved information systems as well as performance agreements have the potential of avoiding the problems now encountered.
September 1, 1996
The Feldstein-Horioka Test of International Capital Mobility: Is it Feasible?
Description: Feldstein and Horioka (1980) argued that the correlation of saving and investment in a cross-section of countries may provide a test of global capital mobility. This paper argues that neither the long-run nor the short-run correlation can serve as a reliable basis for such a test. The intertemporal budget constraint implies that each country’s saving and investment should be cointegrated over time. Simulations show that the cross-section regressions used in the literature will produce correlations that strongly tend towards one, regardless of the degree of capital mobility. Although the short-run correlation is not affected by the intertemporal budget constraint, the empirical analysis shows it is primarily a country-specific business cycle fact.
September 1, 1996
Gender Bias in Tax Systems
Description: This paper examines the nature of gender bias in tax systems. Gender bias takes both explicit and implicit forms. Explicit gender bias is found in many personal income tax systems. Several countries, especially those in Western Europe, have undertaken to eliminate explicit gender bias in recent years. It is more difficult to identify implicit gender bias, since this depends in large part on value judgments as to desirable social and economic behavior. Implicit gender bias has also been a target for reform of tax systems in recent years.
September 1, 1996
The Effects of Corruptionon Growth, Investment, and Government Expenditure
Description: This paper discusses the possible causes and consequences of corruption. It provides a synthetic review of recent studies that analyze this phenomenon empirically. In addition, it presents further results on the effects of corruption on growth and investment, and new cross-country evidence on the link between corruption and the composition of government expenditure.
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