Working Papers
1990
December 1, 1990
Financial Market Constraints and Private Investment in a Developing Country
Description: Firms in developing countries that seek outside financing for investment must often choose their debt-equity combinations in the face of financial market constraints on debt service, on outside equity financing, and on internal finance (endowments). Inefficiencies in the allocation of available finance and in the equity-debt choices that can ensue can be prevented by appropriate policy measures to improve information on profitable investment opportunities and about firms; to directly strengthen financial intermediation; and to support appropriate credit guarantee schemes.
December 1, 1990
Financial Sector Reform and Central Banking in Centrally Planned Economies
Description: This paper reviews key areas of central banking reform in a sample of centrally planned economies undergoing transition to market-based systems. The discussion draws mainly on the experiences of four countries, Hungary, Poland, Czechoslovakia, and China. Significant efforts have been made, or are under consideration, in all countries to develop a more efficient framework for monetary management, and to provide greater autonomy to central banks in macro stabilization policies. These objectives call for a coordinated approach to strengthening a wide range of central banking functions simultaneously, and require that a core mass of supporting financial sector reforms be implemented to ensure effective transformation and stabilization with minimal transitional costs.
December 1, 1990
Money Supply and Interest Rate Policy in a New-Keynesian Framework
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.
December 1, 1990
Long-Run Purchasing Power Parity and the Dollar-Sterling Exchange Rate in the 1920's
Description: This paper replies to Ahking’s (1990) re-examination of Taylor and McMahon’s (1988) analysis of long-run purchasing power parity in the 1920s. We demonstrate that Ahking’s conclusions are only partially correct and reestablish our conclusion that, a form of long-run purchasing-power parity did in fact hold for dollar-sterling during this period. The new results are also employed to gauge the degree of overvaluation of sterling relative to the imposed prewar parity of $4.86 upon its return to gold and for 12 months afterwards.
December 1, 1990
Capital Mobility in Developing Countries: M386Some Empirical Tests
Description: The degree of capital mobility in developing economies is seldom estimated, even though it is widely recognized to be an important element in determining the effects of stabilization policies. Instead, an economy is assumed to be open or closed mainly on grounds of analytical convenience. This paper develops a simple approach to modelling and measuring the degree of financial openness which is applicable to developing economies. Empirical estimation using data from a large number of developing countries suggests that the effective degree of capital mobility in such economies may be higher than is commonly assumed.
December 1, 1990
Time Varying Risk Premia in Futures Markets
Description: This paper undertakes an econometric investigation into the presence of risk premium in commodity futures markets. The statistical tests are derived from a formal model of asset pricing and are applied to futures prices in a variety of commodity markets. The results suggest that for several commodities there is evidence of a time varying risk premium, particularly in futures contracts maturing six months ahead. The implications of the study for the efficiency of the futures markets and the costs of using these markets for hedging are also noted.
December 1, 1990
Management of the Nominal Public Debt Theory and Applications
Description: Optimal management of the public debt is explored in a context where economic policy is continuously revised because, when the public debt is non—indexed, policy—makers are tempted to use inflation in order to reduce the real value of the public debt. The model’s implications are explored following two approaches. First, the effects of various exogenous disturbances are examined by means of numerical simulations. Secondly, the analysis explores—for Italy, Ireland, and the United States—if the model’s implications concerning the maturity structure of government debt are consistent with actual experience.
December 1, 1990
Output, Employment and Financial Sanctions in South Africa
Description: The effects of the marked slowdown in the growth of the capital stock in South Africa since 1985, associated with political uncertainty and financial sanctions, and future growth prospects are quantified using a modified version of the Lewis development model. This is done by estimating production functions for the nonprimary and mining sectors of the South African economy involving skilled (white) labor, unskilled (nonwhite) labor and capital. It is concluded that each 1 percent change in the growth rata of the capital stock leads to at 0.8 percent change in output growth, and hence the fall in investment since 1985 has lead to significant falls in growth, employment and real wages.
December 1, 1990
Real Interest Rate Targeting: An Example From Brazil
Description: This paper examines a real interest rate targeting procedure based on lagged inflation similar to the policy followed by the Brazilian monetary authorities during the period November 1986 to December 1988, focusing on the issue of the determinacy of the price level. For the specific model examined, the analysis suggests that such a targeting procedure would not suffer from the frequently noted defect of nominal interest rate targeting rules of leaving the conditional expectation of the next period price level undetermined.
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