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Mr. Stephen Tokarick
This paper uses a computable general equilibrium model of the economy of Trinidad and Tobago to assess the effects of trade liberalization and terms-of-trade shocks on the real exchange rate and the overall fiscal position of the government. The model is also used to evaluate the implications of alternative tax policies designed to offset the increase in the budget deficit of the central government that results from both types of external sector shocks.
Ian W.H. Parry, Mr. Chandara Veung, and Mr. Dirk Heine
This paper calculates, for the top twenty emitting countries, how much pricing of carbon dioxide (CO2) emissions is in their own national interests due to domestic co-benefits (leaving aside the global climate benefits). On average, nationally efficient prices are substantial, $57.5 per ton of CO2 (for year 2010), reflecting primarily health co-benefits from reduced air pollution at coal plants and, in some cases, reductions in automobile externalities (net of fuel taxes/subsidies). Pricing co-benefits reduces CO2 emissions from the top twenty emitters by 13.5 percent (a 10.8 percent reduction in global emissions). However, co-benefits vary dramatically across countries (e.g., with population exposure to pollution) and differentiated pricing of CO2 emissions therefore yields higher net benefits (by 23 percent) than uniform pricing. Importantly, the efficiency case for pricing carbon’s co-benefits hinges critically on (i) weak prospects for internalizing other externalities through other pricing instruments and (ii) productive use of carbon pricing revenues.
Mr. Stephen Tokarick

This paper uses a computable general equilibrium model of the economy of Trinidad and Tobago to assess the effects of trade liberalization and terms-of-trade shocks on the real exchange rate and the overall fiscal position of the government. The model is also used to evaluate the implications of alternative tax policies designed to offset the increase in the budget deficit of the central government that results from both types of external sector shocks.

International Monetary Fund. Research Dept.
In this issue, authors from the IMF and from Argentine institutions team up to review how different banks behaved and were hurt during the country's crisis. Atsushi Iimi looks at how countries can escape from the resource curse in a comparative analysis that focuses on Botswana. John Cady and Jesus Gonzalez-Garcia examine the relationship between exchange rate volatility and the transparency of reserves. The issue also includes a comprehensive index of all Volume 54 papers by author, title, subject, and JEL classification.
International Monetary Fund. Research Dept.
The determinants of current account imbalances under floating exchange rates are analyzed. The analysis provides a framework within which the sources of. and the remedies for, the current account imbalances between the United States, Japan, and the Federal Republic of Germany can be discussed. The effects of various government policies are emphasized, in particular the differences between expenditure-changing and expenditure-switching policies. Short-run and long-run considerations are investigated, as well as the role played by expectations and price-level dynamics.
Mr. Arto Kovanen

-wide inflation and money growth obtained statistically significant estimates, but the cross-price effect from changes in the price of local rice is insignificant in the estimation. For imported rice, the results are consistent with the presence of large λ and λ j . Table 4. Substitution Effect Between Local and Imported Rice, 1999M12–2003M4 Estimate Standard Error (Dependent variable is the price of local rice) Change in the price of imported rice ( t ) 0.67 0.33* Sigma 0.10 R 2 0.10 Log

Mr. José Saúl Lizondo and Mr. Peter J Montiel

) that is, uncovered interest parity holds continuously. Under these conditions, a previously unanticipated current devaluation has no effect on the domestic nominal interest rate. This is the assumption in the models of Turnovsky (1981) , Burton (1983) , and Montiel (1986) . The effects of an anticipated future devaluation are straightforward. In the case of imperfect substitutes, this is represented by an increase in E ^ ¯ in equation (28), with E held constant. The domestic nominal interest rate will rise. If the own-price effect H 1 exceeds the cross-price

Mr. Liam P. Ebrill

). The determination of t 3 , the optimal tax rate on financial savings, is of greater interest for this paper. The magnitude (and sign) of t 3 as is clear from equation (b), are influenced by a number of factors in addition to own- and cross-price elasticities. These factors are all a function of the preexisting distortions, θ ¯ 3 and θ ¯ 4 . The term in θ ¯ 4 is obvious. To the extent that the cross-price effect between C 3 and C 4 is nonzero, any change in the price of C 3 will interact with the pre-existing distortion on C 4 . This interaction should