Fiscal policy, public debt and monetary policy in emerging market economies
During the 1980s and 1990s, the vulnerability of EMEs was often exacerbated by high fiscal deficits, underdeveloped domestic bond markets, and large currency or maturity mismatches. In many cases, these weaknesses constrained fiscal and monetary policy choices, and responses were often procyclical. Since the beginning of 2000s, however, the policy setting has much improved. Fiscal deficits and public debt levels have declined, domestic financing has increased, and the share of foreign currency debt has fallen. What do these developments mean for monetary policy? Has the threat of fiscal dominance in EMEs lessened, just when it has grown in the advanced economies? Have EMEs been able to use fiscal and monetary policy in more countercyclical way than in the past? These questions were the focus of the 17th Annual Meeting of Deputy Governors from major EMEs held at the BIS in Basel on 16-17 February 2012. The meeting addressed three issues: (i) the fiscal constraints on monetary policy; (ii) the impact of local currency bond markets on central bank policies; and (iii) the role of central banks in public debt management. This BIS Paper volume brings together the papers prepared by the BIS staff for the meeting as well as the contributions of central banks. One major finding was that improved fiscal positions have allowed many EMEs to use countercyclical fiscal and monetary policies to stabilise their economies during the recent global financial crisis. Anchoring medium term fiscal expectations was crucial, so was greater access to domestic financing enabled by the development of the local currency bond markets. Yet these reassuring conclusions came with a number of caveats. Although fiscal dominance has fallen, contingent liabilities and the costs of ageing populations pose serious medium- to long-term risks to many EMEs. And, while government debt levels have moderated, the volume of securities issued by central banks has expanded, reflecting large-scale interventions in the foreign exchange market. The implications of these balance sheet developments for price and financial stability require careful monitoring.
|This book is provided by Bank for International Settlements in its series BIS Papers with number 67 and published in 2012.|
|Contact details of provider:|| Postal: Centralbahnplatz 2, CH - 4002 Basel|
Phone: (41) 61 - 280 80 80
Fax: (41) 61 - 280 91 00
Web page: http://www.bis.org/
More information through EDIRC
|The following chapters of this book are listed in IDEAS:|
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Frankel, Jeffrey A. & Vegh, Carlos A. & Vuletin, Guillermo, 2013.
"On graduation from fiscal procyclicality,"
Journal of Development Economics,
Elsevier, vol. 100(1), pages 32-47.
- Jeffrey A. Frankel & Carlos A. Végh & Guillermo Vuletin, 2011. "On Graduation from Fiscal Procyclicality," NBER Working Papers 17619, National Bureau of Economic Research, Inc.
- Frankel, Jeffrey A. & Vegh, Carlos A. & Vuletin, Guillermo, 2012. "On Graduation from Fiscal Procyclicality," Working Paper Series rwp12-011, Harvard University, John F. Kennedy School of Government.
- Jeffrey Frankel & Carlos A. Vegh & Guillermo Vuletin, 2012. "On Graduation from Fiscal Procyclicality," CID Working Papers 248, Center for International Development at Harvard University.
- Vulentin, Guillermo & Vegh, Carlos A & Frankel, Jeffrey A., 2012. "On Graduation from Fiscal Procyclicality," Scholarly Articles 8694931, Harvard Kennedy School of Government.
- Yavuz Arslan & Evren CeritoÄŸlu, 2013. "Quality Growth Versus Inflation in Turkey," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 49(2), pages 31-43, March.
- Yavuz Arslan & Evren Ceritoğlu, 2013. "Quality Growth Versus Inflation in Turkey," Emerging Markets Finance and Trade, M.E. Sharpe, Inc., vol. 49(2), pages 31-43, March.
- Yavuz Arslan & Evren Ceritoglu, 2011. "Quality Growth versus Inflation in Turkey," Working Papers 1121, Research and Monetary Policy Department, Central Bank of the Republic of Turkey.
- Shafik Hebous, 2011. "The Effects Of Discretionary Fiscal Policy On Macroeconomic Aggregates: A Reappraisal," Journal of Economic Surveys, Wiley Blackwell, vol. 25(4), pages 674-707, 09.
- Hebous, Shafik, 2009. "The Effects of Discretionary Fiscal Policy on Macroeconomic Aggregates: A Reappraisal," MPRA Paper 23300, University Library of Munich, Germany, revised Jun 2010.
- Hakan Kara & Fethi ÃÄÃ¼nÃ§, 2008. "Inflation Targeting and Exchange Rate Pass-Through: The Turkish Experience," Emerging Markets Finance and Trade, M.E. Sharpe, Inc., vol. 44(6), pages 52-66, November.
- Hakan Kara & Fethi ÃƒÂ–Ã„ÂŸÃƒÂ¼nÃƒÂ§, 2008. "Inflation Targeting and Exchange Rate Pass-Through: The Turkish Experience," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 44(6), pages 52-66, November.
- Ravn, Morten O & Schmitt-Grohé, Stephanie & Uribe, Martín, 2007. "Explaining the Effects of Government Spending Shocks on Consumption and the Real Exchange Rate," CEPR Discussion Papers 6541, C.E.P.R. Discussion Papers.
- Morten O. Ravn & Stephanie Schmitt-Grohé & Martín Uribe, 2007. "Explaining the Effects of Government Spending Shocks on Consumption and the Real Exchange Rate," NBER Working Papers 13328, National Bureau of Economic Research, Inc.