Trade liberalization in developing countries is frequently opposed on the grounds that, because i... more Trade liberalization in developing countries is frequently opposed on the grounds that, because it is likely to cause a deterioration in the external balance, it may not be a viable policy option for countries facing foreign exchange constraints. Recent literature suggests, however, an ambiguous relationship between tariff changes and the current account. This paper shows that if liberalization involves reducing tariffs on imported intermediate inputs (a reform that has figured prominently in developing countries), then the current account may improve or deteriorate, depending on the level of initial trade distortions and the structure of the economy.
An intertemporal optimizing model of a small open economy is used to analyze how terms of trade c... more An intertemporal optimizing model of a small open economy is used to analyze how terms of trade changes affect real exchange rates and the trade balance. Temporary current,(expected) future, and permanent changes in the terms of trade are considered. ...
Abstract: This paper examines the macroeconomic impact of tariffs. Existing theoretical models do... more Abstract: This paper examines the macroeconomic impact of tariffs. Existing theoretical models do not provide clear-cut predictions concerning the co-movement between unilateral tariff changes and a set of macroeconomic variables consisting of the real exchange rate, the trade balance, and the level of output. Three different data sets are found to be consistent with the hypothesis that tariffs have no statistically significant impact on the trade balance, the real exchange rate, or the level of output.
Many arguments that have been advanced in favor of maintaining capital control within the EEC hav... more Many arguments that have been advanced in favor of maintaining capital control within the EEC have not paid sufficient attention to the welfare consequences of this type of market intervention. Our paper provides a simple, optimizing framework in which the welfare consequences of capital controls can be assessed. Two main issues are considered. First, how do capital controls affect the adjustment of macroeconomic variables to real disturbances?
Africa has more countries than any other continent, and hence the largest number of potential mon... more Africa has more countries than any other continent, and hence the largest number of potential monetary and exchange rate arrangements. This paper looks at whether the existing highly fractured monetary arrangements in Sub-Saharan Africa correspond to what might be expected from the theory of optimum currency areas. This is done by analyzing both the size and correlation of real disturbances across countries and the level of intraregional trade. The results indicate little evidence that Sub-Saharan African countries would benefit in the near future from larger currency unions.
Raising real interest rates has been cited as a way to increase private saving, and thus provide ... more Raising real interest rates has been cited as a way to increase private saving, and thus provide the resources for growth. But this may not be a viable approach in the poorest developing countries in which most people live at subsistence level. In these situations, consumption is not very responsive to fluctuations in real interest rates and financial liberalization my not be the catalyst to higher higher saving rates.
El aumento de las tasas de interes reales suele mencionarse como una forma de incrementar el ahor... more El aumento de las tasas de interes reales suele mencionarse como una forma de incrementar el ahorro privado y proporcionar asi recursos para el crecimiento. Sin embargo, es posible que este no sea un enfoque viable en los paises en desarrollo mas pobres, donde la mayoria de la gente vive al nivel de subsistencia.
The views expressed in this Working Paper are those of the author(s) and do not necessarily repre... more The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate. This paper looks at fiscal solvency and public debt sustainability in both emerging market and advanced countries. Evidence of fiscal solvency, in the form of a robust positive conditional relationship between public debt and the primary fiscal balance, is established in both groups of countries. Evidence of fiscal solvency is much weaker, however, at high debt levels. These findings suggest that many industrial and emerging market economies, including several where fiscal solvency has been the subject of recent debates, appear to conduct fiscal policy responsibly. Yet our results cannot reject the hypothesis of fiscal insolvency in groups of countries with high debt ratios.
Los funcionarios públicos suelen tener dos incentivos ingratos: dar una excesiva atención a los e... more Los funcionarios públicos suelen tener dos incentivos ingratos: dar una excesiva atención a los escenarios más desfavorables y desestimarlos totalmente. A veces, sus posibilidades electorales o su popularidad general dependen de uno o de otro". Cass R. sunstein, Worst-Case Scenarios
Trade liberalization in developing countries is frequently opposed on the grounds that, because i... more Trade liberalization in developing countries is frequently opposed on the grounds that, because it is likely to cause a deterioration in the external balance, it may not be a viable policy option for countries facing foreign exchange constraints. Recent literature suggests, however, an ambiguous relationship between tariff changes and the current account. This paper shows that if liberalization involves reducing tariffs on imported intermediate inputs (a reform that has figured prominently in developing countries), then the current account may improve or deteriorate, depending on the level of initial trade distortions and the structure of the economy.
An intertemporal optimizing model of a small open economy is used to analyze how terms of trade c... more An intertemporal optimizing model of a small open economy is used to analyze how terms of trade changes affect real exchange rates and the trade balance. Temporary current,(expected) future, and permanent changes in the terms of trade are considered. ...
Abstract: This paper examines the macroeconomic impact of tariffs. Existing theoretical models do... more Abstract: This paper examines the macroeconomic impact of tariffs. Existing theoretical models do not provide clear-cut predictions concerning the co-movement between unilateral tariff changes and a set of macroeconomic variables consisting of the real exchange rate, the trade balance, and the level of output. Three different data sets are found to be consistent with the hypothesis that tariffs have no statistically significant impact on the trade balance, the real exchange rate, or the level of output.
Many arguments that have been advanced in favor of maintaining capital control within the EEC hav... more Many arguments that have been advanced in favor of maintaining capital control within the EEC have not paid sufficient attention to the welfare consequences of this type of market intervention. Our paper provides a simple, optimizing framework in which the welfare consequences of capital controls can be assessed. Two main issues are considered. First, how do capital controls affect the adjustment of macroeconomic variables to real disturbances?
Africa has more countries than any other continent, and hence the largest number of potential mon... more Africa has more countries than any other continent, and hence the largest number of potential monetary and exchange rate arrangements. This paper looks at whether the existing highly fractured monetary arrangements in Sub-Saharan Africa correspond to what might be expected from the theory of optimum currency areas. This is done by analyzing both the size and correlation of real disturbances across countries and the level of intraregional trade. The results indicate little evidence that Sub-Saharan African countries would benefit in the near future from larger currency unions.
Raising real interest rates has been cited as a way to increase private saving, and thus provide ... more Raising real interest rates has been cited as a way to increase private saving, and thus provide the resources for growth. But this may not be a viable approach in the poorest developing countries in which most people live at subsistence level. In these situations, consumption is not very responsive to fluctuations in real interest rates and financial liberalization my not be the catalyst to higher higher saving rates.
El aumento de las tasas de interes reales suele mencionarse como una forma de incrementar el ahor... more El aumento de las tasas de interes reales suele mencionarse como una forma de incrementar el ahorro privado y proporcionar asi recursos para el crecimiento. Sin embargo, es posible que este no sea un enfoque viable en los paises en desarrollo mas pobres, donde la mayoria de la gente vive al nivel de subsistencia.
The views expressed in this Working Paper are those of the author(s) and do not necessarily repre... more The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate. This paper looks at fiscal solvency and public debt sustainability in both emerging market and advanced countries. Evidence of fiscal solvency, in the form of a robust positive conditional relationship between public debt and the primary fiscal balance, is established in both groups of countries. Evidence of fiscal solvency is much weaker, however, at high debt levels. These findings suggest that many industrial and emerging market economies, including several where fiscal solvency has been the subject of recent debates, appear to conduct fiscal policy responsibly. Yet our results cannot reject the hypothesis of fiscal insolvency in groups of countries with high debt ratios.
Los funcionarios públicos suelen tener dos incentivos ingratos: dar una excesiva atención a los e... more Los funcionarios públicos suelen tener dos incentivos ingratos: dar una excesiva atención a los escenarios más desfavorables y desestimarlos totalmente. A veces, sus posibilidades electorales o su popularidad general dependen de uno o de otro". Cass R. sunstein, Worst-Case Scenarios
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