Debt-financed fiscal stimulus programmes directly stimulate aggregate demand through government expenditure or tax cuts, but their effectiveness is highly dependent on direct crowding out of private sector expenditure, spillover effects to the...
Monetary policy affects the real economy through various channels, including the interest rate, exchange rate, credit, and asset price channels. The credit channel has recently received considerable attention. Small firms are more sensitive to...
This paper estimates the output cost of fighting inflation—the sacrifice ratio—for the South African economy using quarterly data spanning the period 1998Q1–2019Q3. To compute the sacrifice ratio, the structural vector autoregressive model developed...
This paper examines the relationship between monetary policy and wealth inequality in South Africa. We employed a unique database of tax administrative data which allowed us to account for individual heterogeneity. These tax data span from 2011 to...
This study considers the implications of alternative monetary policy regimes to deal with a laissez-faire fiscal policy rule, where the government completely spends resource revenue windfall contemporaneously. A three sector dynamic stochastic...
Several countries in Africa – including Ghana, Kenya, Mozambique, Tanzania, and Uganda - have recently discovered large oil and gas or other mineral...
In the last twenty years, Brazil has undergone several attempts of improving sustainable growth through stabilization programmes, and more recently, structural reforms in line with the Washington Consensus Agenda. The results, however, have been...
This study examines the implications of alternative monetary policy regimes to deal with resource revenue shocks when fiscal policy is laissez-faire—that is, when the government spends all resource revenue windfalls contemporaneously. A three-sector...
We consider an overlapping generations model with two production factors and two types of agents in the presence of financial intermediation and its application to the Russian default of August 1998. The paper focuses on the analysis of the...
This paper represents a first attempt to study China’s business cycles using a formal analytical framework, namely, a structural VAR model. It is found that: (a) demand shocks were the dominant source of macroeconomic fluctuations, but supply shocks...
Monetary policy is believed to have a disproportionate effect on firms, depending on their size. Financially constrained firms with limited access to capital markets are expected to be more sensitive to changes in interest rates; this is...
We construct a structural macroeconometric model for member states of the West African Economic and Monetary Union. Fitting this model to annual and quarterly time series data allows us to identify the channels through which macroeconomic innovation...
In this paper we fit a VECM in output and prices to data from ten countries of the CFA Franc Zone. This model allows for various cross-country interactions in both the short run and the long run. The VECM parameters are used to estimate persistence...
This paper examines to what extent the central bank for the West African Economic and Monetary Union (BCEAO) has used interest rate policy in response to domestic economic developments. We show that while in the long run the BCEAO matches changes in...
L’objectif de cet étude est d’analyser l’état de la convergence dans l’UEMOA, de 1980 à 2001, à travers les critères de convergence définis dans son pacte de convergence. On utilise l’approche méthodologique de Haldane et Hall (1991) pour appréhender...
This paper examines whether the BCEAO has made use of the various policy instruments at its disposal for steering credit in the individual CFA zone member countries to complement interest rate policy at the zone level. We estimate whether private...
The paper determines an analytical framework defining the choice of an optimal exchange rate regime for a typical CFA country. The policymakers behave strategically to decide to adopt alternative exchange rate regime by minimizing their loss function...
The West African Economic and Monetary Union (UEMOA) has a history of monetary stability and low inflation. Nevertheless, there is substantial variation in relative prices within some UEMOA countries, in particular in the price of food relative to...
In this study, we provide a comprehensive estimation of the contemporary Phillips curve relationship in the South African economy using a novel deep learning technique. Our approach incorporates multiple measures of economic slack/tightness and...
Given the rise in the government debt level in recent times, this paper aims to examine the effect of an increase in government size on risk premium and its transmission in the economy. We jointly identify the term spread shock (originating at the...
In monetary policy communication, every word carries weight. Consider this scenario: the South African Reserve Bank (SARB) articulates its stance to...
Members of the CFA-zone enjoy currency convertibility, fiscal and monetary policies which are more prudent than SSA as a whole, and a large amount of financial and technical assistance. These advantages do not appear, however, to have resulted in...
This Policy Arena examines some of the development challenges faced by SIDS. It brings together a collection of papers arising from the UNU-WIDER project Fragility and Development. These investigations were presented at the UNU-WIDER project meeting...
This Focus is devoted to small islands' development challenges, specifically relating to the achievement of economic growth, and draws on five papers arising from the UNU-WIDER 'Fragility and Development' research project meeting held in Fiji in...
This paper analyses three major problems of the current international monetary system: the asymmetric-adjustment problem, dependence on the monetary policy of the main reserve-issuing country, and the large demand for self-insurance by developing...
Following on WIDER's work on Development Finance which has involved three projects since 2002, a development conference on 'Aid: Principles, Policies and Performance' was organized in June 2006. Aid is one of the most challenging development issues...
Tony Addison 'Birds of a feather flock together', the old saying goes. So too do investors. Today, those investment birds are a depressed lot. The...
The 14-member Franc Zone in West and Central Africa represents the largest monetary union in the southern hemisphere, predating the European Monetary Union by decades. With monetary unions planned for other parts of Africa in the near future...
The volume Institutional Change and Economic Development fills some important gaps in our understanding of the relationship between institutional changes and economic development. It does so by developing new discourses on the 'technology of...
We have now witnessed more than half a decade of relatively heavy capital inflows to a large group of highly heterogeneous developing countries and economies in transition in Asia, Eastern Europe, the Former Soviet Union, Latin America, and parts of...
India’s capital account displays a sharp swing in external financing from official assistance to private capital transfers in the 1990s. This paper examines the implications of this transition for the country. An analysis of the private resource...
This paper analyses the rationale of interventions in foreign exchange markets in Sub- Saharan Africa and reviews exchange rate theory and balance of payments management and its application to African countries. It analyses the liberalization of...
This paper studies the evolution of Venezuelan inequality since 1970. It finds a striking increase in Venezuelan inequality that has been due mainly to the rise in capital's share of GDP. It shows that the increase can be traced back to the coupling...
Recent financial crises, whose effects have been particularly severe in developing countries, have led to a wide-ranging debate on international financial reform. This debate has had to confront the implications of the huge growth of international...
This paper analyzes the short-term effects of foreign capital flows on aggregate demand in Mexico: their magnitude, transmission channels, and the possible influence of the country’s choice of exchange rate regime. The study is motivated by the...
An interesting theory of transition must give a convincing account of structural adjustment and supply side improvement. In this paper, I discuss the incentives for government to undertake costly supply side improvement and how these relate to...
The emergence of the euro as a key currency, perhaps eventually rivalling the US dollar in importance, may have important macroeconomic implications for industrial as well as developing economies in the years ahead. This paper focuses on two related...
We analyse the prospects for greater monetary integration in Africa, in the wake of EMU. We argue that the structural characteristics of African economies are quite different to the EMU members but that much can be gained from monetary cooperation...
Tony Addison The present currency turmoil is both a symptom and a cause of profound changes now underway in the global economy. In part 1 of this two...
Tony Addison With six months remaining till the end of 2011, it’s time to take a peek into the near future. What can we expect? John Kenneth Galbraith...
Part of Book Resetting the International Monetary (Non)System
The paper compares the Russian transition with the Chinese reforms. The concept and implications of 'transition' differ from those of 'reform'. Transition in its systemic understanding is considered as a change of the system, a shift to a new one...
The proposition that inflation expectations can be extracted as inflation predictions from the government bond yield curve has been tested, with partially positive results, using data from the United States and European countries. Despite the...
This paper analyses in depth the causes of the Mexican peso crisis, so as to learn relevant lessons for similar crisis occurring in other developing or transitional economies. The study follows a relatively chronological order, examining first the...
This paper investigates whether a Taylor rule accurately describes the South African Reserve Bank’s reaction function in setting interest rates using quarterly data, covering the period since inflation targeting was formally adopted in 2000. The...
For many emerging market economies, over reliance on monetary policy may bring worse macro results, when compared to a more balanced framework of countercyclical fiscal and monetary policy. The use of countercyclical fiscal policy requires as a...
The paper deals with changes in the regulation and supervision of the Latin American financial sector in the aftermath of the ‘Tequila Crisis’ of 1994–95. While it finds that both have improved, regulation and supervision cannot resolve all problems...
The paper considers the macroeconomic impact of shocks to agricultural output and of negative and positive price shocks. It is shown that negative price shocks have particularly large externalities: it is estimated that the overall impact of these...
by Charles Wyplosz With all the hype in Europe and on financial markets worldwide, what does the birth of the euro mean for the developing and...
by David FieldingMonetary Union in AfricaIn the last ten years, there has been much debate about the economic impact of monetary union, in which...
Three major phases of economic policy can be distinguished between 1980 and 1985: from 1980 to 1982, when the government reacted to deteriorating external conditions (the debt crisis and world recession) by liberalizing imports, relaxing fiscal...
Tanzania has not yet successfully had an IMF standby arrangement that ran its course, although several programmes have been implemented at various points in time. These programmes combined demand restraint and structural adjustment with the help of...
India's first two bouts of orthodox stabilization policy following independence were quite different. The first, prompted by a prolonged drought at home and the wars with China in 1962 and Pakistan in 1965, was relatively mild in form. The rupee was...
Argentina has had successive stabs at stabilization since the mid-1970s. Throughout most of this time it has had to wrestle with acute problems of hyperinflation, capital flight, rising external debt, a stop-go pattern of output, and for a long time...
Brazil has undergone three stabilization programmes since 1980: without the IMF in 1981-82; with the IMF in 1983-84, and the Cruzado Plan of 1986. The first two could be said to have been more orthodox in character, given the political and social...
This study assesses the fiscal and monetary management challenges that can be associated with large inflows of foreign aid. It provides a brief overview of the literature on Dutch Disease (DD) as applied to mineral wealth and then assesses the...
Part of Book Wider Perspectives on Global Development
Part of Journal Special Issue Symposium on Spatial Inequality in Latin America
Part of Journal Special Issue Symposium on Spatial Inequality in Latin America
This volume explores the various linkages between financial development, institutions, growth and poverty reduction in low-income and transition countries. It is the result of a two-year research project undertaken by UNU-WIDER, and the strong range...
Exploring the effects of the post-1989 developments in Eastern and Central Europe on the social and economic position of the women of the region, Valentine Moghadam explains how the economic crisis and subsequent development, social breakdown, and...
Part of Book The Impact of EMU on Europe and the Developing Countries
Part of Book Inflation Stabilization
Rampant inflation is a major economic problem in many of the less developed countries; two out of three attempts to stabilize these economies fail. Inflation Stabilization provides a valuable description and a critical analysis of the disinflation...
Part of Journal Special Issue Impact of the Liberalization of the Exchange Rate and Financial Markets in Sub-Saharan Africa
Part of Journal Special Issue The CFA Franc Zone 10 Years After Devaluation
Part of Book Governing Globalization
Part of Book Financial Openness and National Autonomy
This paper aims at providing new evidence over the effect of conventional monetary policy shocks on wage inequality through the earnings heterogeneity channel under the inflation-targeting regime implemented in South Africa since 2000.The empirical...
This paper reviews South Africa’s monetary policy since 2007 and makes recommendations towards improving the inflation-targeting framework currently in place. Following a surge in inflation into double digits in 2007/08, the South African Reserve...
The issue of institutional development has come to prominence during the last decade or so. During this period, even the IMF and the World Bank, which used to treat institutions as mere 'details', have come to emphasize the role of institutions in...
Part of Journal Special Issue Development Aid
Part of Journal Special Issue Development Aid
The bulk of recent literature on foreign exchange interventions has overlooked the potential interdependencies that may exist between these operations and the conduct of monetary policy. This is the case even under inflation targeting and especially...
During the Asian crisis, intermediate exchange rate regimes vanished. It has been argued that those regimes were no longer useful and only the extremes remained valid. The paper analyses three foreign exchange regimes: Argentina (pegged), Chile (band...
This paper investigates the macroeconomic challenges created by a surge in aid inflows. It develops an analytical framework for examining possible policy responses to increased aid, in terms of absorption and spending of aid—where the central bank...
Most small island economies or ‘microstates’ have distinctly different characteristics from larger developing economies. They are more open and vulnerable to external and environmental shocks, resulting in high output volatility. Most of them also...
We examine the properties of alternative monetary policy rules in response to large aid surges in low-income countries characterized by incomplete capital market integration and currency substitution. Using a dynamic stochastic general equilibrium...
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