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Mr. George A Mackenzie and Mr. Peter Stella

The quasi-fiscal activities of a central bank stem from its roles as regulator of the exchange system and regulator of the financial system. The QFA of other PFIs takes the form of interventions in the financial markets. QFAs Associated with the Exchange System QFAs associated with the exchange system can be divided into two groups: those that result from the use of MERs, and those that result from the assumption of exchange risk by the central bank (see Table 1 ). Operations such as required import deposits can be assimilated to the first group because

Mr. George A Mackenzie and Mr. Peter Stella

Central banks and other public financial institutions (PFIs) play an important role as agents of fiscal policy in many IMF member countries. Their activities in this guise can affect the overall public sector balance (the balance of both the nonfinancial and the financial public sectors), without affecting the budget deficit as conventionally measured. These activities, which are often referred to as quasi-fiscal operations or activities (QFAs), may also have important allocative effects. 1 Moreover, they entail an increase in the effective role and size of

Mr. George A Mackenzie and Mr. Peter Stella

sense of the range of QFAs in which central banks and other PFIs engage. Table 1 . A Schematic Typology of Quasi-Fiscal Activities Timing of Impact on Cash Position 1 Ease of Quantifiability Operations related to the exchange system MERs I Variable; easiest with single preferential rate Import deposits I Variable Deposits on foreign asset purchases I Variable Exchange rate guarantees D Variable Subsidized exchange risk insurance D Variable Operations related to the financial