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Mr. Itai Agur, Mr. Damien Capelle, Mr. Giovanni Dell'Ariccia, and Mr. Damiano Sandri
This paper reviews the theoretical arguments in favor and against MF and presents an empirical assessment of the risks that it may pose for inflation.
International Monetary Fund

policy measures, year-end preliminary estimates show that reserve losses were contained and the growth of net domestic assets of the central bank was significantly curtailed. 8. In view of the corrective actions taken, the authorities are requesting waivers of nonobservance of end-September 2011 assessment criteria related to net domestic assets and net international reserves. 9. On the structural front, program performance was strong with five out of seven benchmarks set for the review being met, including the signing of memoranda on fiscal and monetary

Joseph Kakoza

-East African trade has thus been very substantial compared with, say, intra-African trade as a whole (which is less than 10 per cent of total African trade). Of course, the common tariff and the trade preferences built upon it, do not alone explain the growth of this trade. Other factors, such as geographical proximity, efficient common services and communications systems, fiscal and monetary coordination, have been influential in this growth. It has been estimated that a number of commodities, comprising at least one half of the total intra-Community exports, would have

International Monetary Fund

critical lesson learned from the previous PRSP, during which fiscal indiscipline and loose monetary policies undermined PRSP implementation. The experiences of the first PRSP are particularly relevant because the strategic orientation of the second PRSP is largely similar to the first one. It will be critical to continue strengthening public expenditure management, internal controls of CBG, and fiscal and monetary coordination in order to prevent macroeconomic slippages. The other major risks are the low capacity of the public sector, and governance shortcomings. These

International Monetary Fund. Asia and Pacific Dept

cover the higher interest payments. This would increase the amount of outstanding government debt and hence lead to a rise in the price level as the public tries to sell excess bonds. In contrast, under a Ricardian fiscal policy (also commonly labeled “passive” fiscal policy) this would not happen as the rise in the debt service burden would be paid by higher future primary surpluses and not through additional debt. 6. Two stable regimes of fiscal and monetary coordination emerge from the FTPL . 9 If the central bank aggressively fights weak inflation by lowering

International Monetary Fund
This Joint Staff Advisory Note discusses the Poverty Reduction Strategy Paper (PRSP) for The Gambia. The Gambian authorities have prepared their second PRSP covering the years 2007 to 2011. The PRSP supports greater decentralization and expansion of social development funds to better target public services for the poor. Given that there has been limited progress in implementing the Local Government Act in 2002, the IMF staff recommends the preparation of a country-owned implementation plan and a sensitization program that would create momentum.
Guy Debelle

, “Fiscal and Monetary Co-ordination: A Differential Game Approach,” Journal of Applied Econometrics ( April-June , 1989 ), pp. 161 - 79 . Rogoff , Kenneth , “The Optimal Degree of Commitment to an Intermediate Monetary Target,” Quarterly Journal of Economics , Vol. 100 ( 1985 ), pp. 1169 - 189 . Sargent , Thomas , and Neil Wallace , “Some Unpleasant Monetarist Arithmetic,” Federal Reserve Bank of Minneapolis, Quarterly Review ( Fall , 1981 ), pp. 1 - 17 . Selody , Jack , “The Goal of Price Stability: A Review of the

Mr. Robin Brooks and Mr. Marco Del Negro
The degree of comovement across national stock markets has increased dramatically since the mid-1990s. This has overturned a stylized fact in the international portfolio diversification literature that diversifying across countries is more effective for risk reduction than diversifying across industries. We investigate if this rise in comovement is a permanent phenomenon driven by greater economic and financial integration, or a temporary effect associated with the recent stock market bubble. At the global level, our results point to the bubble. At a regional level, we find evidence of a significant rise in market integration within Europe, possibly a reflection of institutional changes such as the EMU.
Mr. Robin Brooks and Mr. Marco Del Negro

sectors. We see this result as evidence that stock markets in Western Europe have become more integrated in the course of the 1990s, possibly a reflection of the rise in fiscal and monetary coordination following the Maastricht Treaty as well as the economic impact of the European Union (EU). Consistent with our a priori notion that economic and financial integration has advanced more in Europe than elsewhere, we find no evidence in other regions, notably the Americas or the Far East, that the balance between country and industry effects has shifted conclusively in

Guy Debelle
This paper extends the analysis of central bank independence to a model in which there is more than one policymaker. It shows that the degree of central bank independence as generally defined in the existing theoretical literature is only one of the influences on macroeconomic performance. The objectives of the fiscal authority, the commitment mechanisms available to the authorities and the nature of the policy game play a key role in determining the inflation rate and output in the economy. Furthermore, the model can be solved for the optimal degree of inflation aversion of the central bank. , a Working Paper and the authors) would welcome any comments on the present text Citations should refer to a Working Paper of the International Monetary Fund, mentioning the authors), and the date of issuance. The views expressed are those of the author(s) and do not necessarily represent those of the Fund.