IDEAS home Printed from https://ideas.repec.org/p/wbk/wbrwps/261.html
   My bibliography  Save this paper

Inflation, external debt, and financial sector reform : a quantitative approach to consistent fiscal policy

Author

Listed:
  • van Wijnbergen, Sweder
  • Rocha, Robert
  • Anand, Ritu

Abstract

The paper presents and applies an integrated framework to assess the consistency between fiscal deficits and other macroeconomic targets, in particular output growth and the rate of inflation. The model centers around the government budget constraint and can be used to either derive the financeable deficit given inflation targets, or to derive an equilibrium inflation rate for which no fiscal ajdustment would be necessary. The model is used to analyze the relationship between inflation, external debt and financial sector reform in Turkey. The model can also be used to see what happens if the required fiscal adjustment is postponed. The authors explore two scenarios : one in which fiscal adjustment takes place eventually, and one in which the inflation tax is used eventually to close any financing gap.

Suggested Citation

  • van Wijnbergen, Sweder & Rocha, Robert & Anand, Ritu, 1989. "Inflation, external debt, and financial sector reform : a quantitative approach to consistent fiscal policy," Policy Research Working Paper Series 261, The World Bank.
    • Handle: RePEc:wbk:wbrwps:261
    as

    Download full text from publisher

    File URL: http://www-wds.worldbank.org/external/default/WDSContentServer/WDSP/IB/1989/08/01/000009265_3960928060613/Rendered/PDF/multi0page.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Van Wijnbergen, S., 1983. "Interest rate management in LDC's," Journal of Monetary Economics, Elsevier, vol. 12(3), pages 433-452, September.
    2. Ritu Anand & Sweder van Wijnbergen, 1988. "Inflation, External Debt and Financial Sector Reform: A Quantitative Approach To Consistent Fiscal Policy With An Application to Turkey," NBER Working Papers 2731, National Bureau of Economic Research, Inc.
    3. Sweder van Wijnbergen, 1991. "Fiscal Deficits, Exchange Rate Crises and Inflation," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 58(1), pages 81-92.
    4. Allan Drazen & Elhanan Helpman, 1987. "Stabilization with Exchange Rate Management," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 102(4), pages 835-855.
    5. Melnick, Rafi & Sokoler, Meir, 1984. "The government's revenue from money creation and the inflationary effects of a decline in the rate of growth of G.N.P," Journal of Monetary Economics, Elsevier, vol. 13(2), pages 225-236, March.
    6. Cumby, Robert E. & Van Wijnbergen, Sweder, 1989. "Financial policy and speculative runs with a crawling peg: Argentina 1979-1981," Journal of International Economics, Elsevier, vol. 27(1-2), pages 111-127, August.
    7. Anand, Ritu & van Wijnbergen, Sweder, 1989. "Inflation and the Financing of Government Expenditure: An Introductory Analysis with an Application to Turkey," The World Bank Economic Review, World Bank, vol. 3(1), pages 17-38, January.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Levent, Korap, 2006. "Seigniorage revenue and Turkish economy," MPRA Paper 20106, University Library of Munich, Germany.
    2. Islam, Roumeen & Wetzel, Deborah L., 1991. "The macroeconomics of public sector deficits : the case of Ghana," Policy Research Working Paper Series 672, The World Bank.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Ritu Anand & Sweder van Wijnbergen, 1988. "Inflation, External Debt and Financial Sector Reform: A Quantitative Approach To Consistent Fiscal Policy With An Application to Turkey," NBER Working Papers 2731, National Bureau of Economic Research, Inc.
    2. Nina Budina & Sweder Van Wijnbergen, 2001. "Fiscal deficits, monetary reform and inflation stabilization in romania," Journal of Economic Policy Reform, Taylor & Francis Journals, vol. 4(3), pages 165-194.
    3. Piersanti, Giovanni, 2012. "The Macroeconomic Theory of Exchange Rate Crises," OUP Catalogue, Oxford University Press, number 9780199653126.
    4. Salem Kanoun, 2012. "Linkages Between Fiscal Debt Sustainability, Growth And Poverty: An Application To Tunisia," Book Chapters, in: João Sousa Andrade & Marta C. N. Simões & Ivan Stosic & Dejan Eric & Hasan Hanic (ed.), Managing Structural Changes - Trends and Requirements, edition 1, volume 1, chapter 12, pages 214-249, Institute of Economic Sciences.
    5. Helpman, Elhanan & Leiderman, Leonardo, 1991. "Exchange Rate Systems: New Perspectives," Foerder Institute for Economic Research Working Papers 275504, Tel-Aviv University > Foerder Institute for Economic Research.
    6. Craig Burnside & Martin Eichenbaum & Sergio Rebelo, 2001. "Prospective Deficits and the Asian Currency Crisis," Journal of Political Economy, University of Chicago Press, vol. 109(6), pages 1155-1197, December.
    7. Burnside, Craig & Eichenbaum, Martin & Rebelo, Sergio, 2006. "Government finance in the wake of currency crises," Journal of Monetary Economics, Elsevier, vol. 53(3), pages 401-440, April.
    8. Flood, Robert P. & Jeanne, Olivier, 2005. "An interest rate defense of a fixed exchange rate?," Journal of International Economics, Elsevier, vol. 66(2), pages 471-484, July.
    9. Polackova, Hana & Shatalov, Sergei & Zlaoui, Leila, 2000. "Managing fiscal risk in Bulgaria," Sede de la CEPAL en Santiago (Estudios e Investigaciones) 34723, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL).
    10. Shigeto Kitano, 2005. "The Government's Foreign Debt in the Argentine Crisis," Review of Development Economics, Wiley Blackwell, vol. 9(3), pages 368-379, August.
    11. Bandiera, Luca & Budina, Nina & Klijn, Michel & van Wijnbergen, Sweder, 2007. "The"how to"of fiscal sustainability : a technical manual for using the fiscal sustainability tool," Policy Research Working Paper Series 4170, The World Bank.
    12. van Wijnbergen, Sweder & Budina, Nina, 2001. "Inflation Stabilization, Fiscal Deficits, and Public Debt Management in Poland," Journal of Comparative Economics, Elsevier, vol. 29(2), pages 293-309, June.
    13. Burnside, Craig, 2004. "Currency crises and contingent liabilities," Journal of International Economics, Elsevier, vol. 62(1), pages 25-52, January.
    14. Kindy R. Sjahrir, 2018. "Fiscal Constraints in the Financial System Stability Framework for Indonesian Data," Working Papers in Economics and Development Studies (WoPEDS) 201803, Department of Economics, Padjadjaran University, revised Dec 2018.
    15. Daniel, Betty C, 2001. "A Fiscal Theory of Currency Crises," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 42(4), pages 969-988, November.
    16. Budina, Nina & van Wijnbergen, Sweder, 2007. "Quantitative approaches to fiscal sustainability analysis : a new World Bank tool applied to Turkey," Policy Research Working Paper Series 4169, The World Bank.
    17. Ryota Nakatani, 2017. "External Adjustment in a Resource-Rich Economy: The Case of Papua New Guinea," IMF Working Papers 2017/267, International Monetary Fund.
    18. Eijffinger Sylvester C. W. & Goderis Benedikt, 2007. "Currency Crises, Monetary Policy and Corporate Balance Sheets," German Economic Review, De Gruyter, vol. 8(3), pages 309-343, August.
    19. Stijn Claessens & M. Ayhan Kose, 2013. "Financial Crises: Explanations, Types and Implications," CAMA Working Papers 2013-06, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
    20. Buiter, Willem H., 1996. "Aspects of Fiscal Performance in some Transition Economies under Fund-supported Programs," CEPR Discussion Papers 1535, C.E.P.R. Discussion Papers.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:wbk:wbrwps:261. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Roula I. Yazigi (email available below). General contact details of provider: https://edirc.repec.org/data/dvewbus.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.