Business and Economics > Inflation

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Mr. Serhan Cevik and Tianle Zhu
Monetary independence is at the core of the macroeconomic policy trilemma stating that an independent monetary policy, a fixed exchange rate and free movement of capital cannot exist at the same time. This study examines the relationship between monetary autonomy and inflation dynamics in a panel of Caribbean countries over the period 1980–2017. The empirical results show that monetary independence is a significant factor in determining inflation, even after controlling for macroeconomic developments. In other words, greater monetary policy independence, measured as a country’s ability to conduct its own monetary policy for domestic purposes independent of external monetary influences, leads to lower consumer price inflation. This relationship—robust to alternative specifications and estimation methodologies—has clear policy implications, especially for countries that maintain pegged exchange rates relative to the U.S. dollar with a critical bearing on monetary autonomy.
Mr. Masahiro Nozaki, Mr. Tobias Roy, Mr. Pawel Dyczewski, Mr. Bernhard Fritz-Krockow, Ms. Fanny M Torres Gavela, Mr. Gamal Z El-Masry, and Mr. Rafael A Portillo
This paper analyzes the economic growth and stability in Suriname. The paper highlights that in recent years, the outlook has turned substantively more positive. The favorable external environment and the stability-oriented policies of the Venetian administration have boosted confidence in the economy, leading to increased investment, domestic economic activity, and employment. The recent boom in commodity prices has helped boost growth, while increased gold production and investment in the mineral industry are projected to support continued growth in the coming years.
Mr. Jan Kees Martijn, Gabriel Di Bella, Mr. Shamsuddin Tareq, Mr. Benedict J. Clements, and Mr. Abebe Aemro Selassie

Abstract

Macroeconomic outcomes in low-income countries (LICs) have improved markedly in recent years, but important questions remain regarding possible adjustments in the design of IMF-supported programs in such countries. This paper draws on a review of the literature as well as the experience of 15 LICs that have attained some degree of macroeconomic stability to discuss, for example, the appropriate target range for inflation in shock-prone LICs; whether countries should use fiscal space to cut excessive tax burdens, reduce high debt levels, or raise public spending; and how the effectiveness of public expenditures can be improved.

International Monetary Fund
Considers possible adjustments in the design of Fund-supported programs, drawing on the experience of low-income countries that have successfully addressed the most apparent domestic macroeconomic imbalances.
Mr. Simon Cueva, Mr. Stephen Tokarick, Mr. Erik J. Lundback, Ms. Janet Gale Stotsky, and Mr. Samuel P. Itam

Abstract

This paper focuses on the independent states that are full members of the Caribbean Community. It provides background information on recent developments in the Caribbean region and lays out the principal policy issues that countries will need to address in the period ahead. The Caribbean countries face several common problems and must deal with similar economic policy issues. Consequently, concentrating on the regional perspective permits a comparison of the individual responses to similar problems. The regional view throws light on the countries' movement toward convergence. The economic prospects for the region are generally satisfactory over the medium term, but the projections depend importantly on the resolve of governments to pursue appropriate policies, as well as favorable developments in the rest of the world. The relatively favorable outlook for the region is not without risks, such as a slowdown in growth in the major trading partner countries or a term of trade shock.

Mr. Philippe Egoume Bossogo
This paper analyzes broad money demand (M2) in Guyana from January 1990 to September 1999; a period marked by deep transformations aimed at shifting Guyana from a centralized to a market economy. The paper develops a stable error-correction model based on a long-run cointegrating vector of money demand. The latter establishes that real money demand is determined in the long run by real income, interest rates, and the exchange rate. The results also show the existence of strong exchange rate-induced inflation anticipations that are typical to Guyana.
International Monetary Fund

Abstract

For over 10 years, the IMF has supported adjustment and reform programs in many of its low-income members through two facilities established specifically for that purpose - the Enhanced Structural Adjustment Facility (ESAF) and its precursor the Structural Adjustment Facility (SAF). By the end of 1994, 36 countries had availed themselves of these facilities, in support of 68 multi-year programs. This study summarizes the findings of a review of the experience under these programs and of economic developments in the countries that undertook them.

Mr. Sanjeev Gupta, Mrs. Claire Liuksila, Mr. Henri Lorie, Mr. Walter Mahler, and Mr. Karim A. Nashashibi

Abstract

A strengthened fiscal position is at the core of most economic adjustment programs supported by IMF lending, especially for the poorer countries that draw on the IMF's structural adjustment facilities. This paper reviews developments in 23 countries and evaluates their experience with fiscal and structural adjustment, including their efforts to design social safety nets to cushion the effects of adjustment.