Working Papers
1991
April 1, 1991
Fiscal Reform in European Economies in Transition
Description: Most European economies in transition are engaged in public sector reform aimed mainly at replacing the previous fiscal system subordinated to the central plan with a system where fiscal instruments can make a distinct contribution to stabilization, equity, and efficiency. This paper examines past progress and future tasks in major reform areas: taxation, subsidies, social security, public investment, public enterprises, government debt, and intergovernmental relations. An overview of the fiscal reform process suggests that the contraction and restructuring of government operations are not likely to materialize soon and that there is a serious risk of widening fiscal imbalances during the transition.
April 1, 1991
Collapse of a Crawling Peg Regime in the Presence of a Government Budget Constraint
Description: This study extends the research on balance-of-payments crises by investigating the dynamics of the collapse of a crawling exchange rate in the presence of an explicit link between the fiscal deficit and domestic credit. It shows that such an exchange rate regime is characterized by two potential steady-state equilibria. This introduces an ex-ante indeterminacy regarding the timing and magnitude of the speculative attack on international reserves in the event of a sustained inconsistency between the country’s fiscal and exchange rate policies. The paper discusses the conditions that would define the actual timing of the regime’s breakdown.
Notes: Also published in Staff Papers, Vol. 39, No. 1, March 1992.
April 1, 1991
Collection Lags, Fiscal Revenue and Inflationary Financing: Empirical Evidence and Analysis
Description: The paper provides empirical evidence on collection lags in major categories of government revenue and analyzes the estimated revenue-eroding effects of inflation within the standard model of inflationary finance. The evidence indicates a wide variation in collection lags among the categories of revenues. The estimated erosion of real fiscal revenue, although varied in the sample countries, appears to have substantially offset gains from the inflation tax, thereby severely restricting the use of this form of taxation in generating resources.
April 1, 1991
Market-Based Systems of Monetary Control in Developing Countries: Operating Procedures and Related Issues
Description: This paper reviews issues in the development of a market-based system of monetary control in developing countries. It focuses on the appropriate sequencing of financial reform that would facilitate the transition toward a market-based system and measures required to strengthen the effectiveness of market-based operations. The paper also assesses the effects of financial reform on the demand for money function and discusses the implications for policy formulation and implementation.
April 1, 1991
Bangladesh: Economic Reform Measures and the Poor
Description: This paper assesses the impact on the poor of the economic reforms undertaken in Bangladesh under Fund-supported structural adjustment programs. It finds that program-induced changes in production, employment, and incomes have benefitted the poor, while the adverse impact of program-induced price changes has been modest. However, as adjustment efforts are intensified under the current structural adjustment program, more pronounced short-term adverse effects might arise, requiring compensatory measures. The paper reviews special assistance programs for the poor, including those designed to mitigate the potential adverse effects of adjustment, noting that improved targeting would yield sizable fiscal savings that could be used for strengthening social programs.
April 1, 1991
Do Exchange Rates Work? Another View
Description: This paper investigates the role of exchange rates in balance of payments theories. It explores the sixteen approaches to the balance of payments, the concept of an “equilibrium” trade balance and sequential “stages” of the current account. It examines fiscal and demographic influences on the U.S. deficit. The final section considers the breakdown of the international monetary system after World Wars I and II; an evaluation of alternative proposals to correct the defects of the system; and an examination of the extent to which deficits of reserve countries have their origins in systemic problems.
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