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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
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    References listed on IDEAS

    as
    1. 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.
    2. Van Wijnbergen, S., 1983. "Interest rate management in LDC's," Journal of Monetary Economics, Elsevier, vol. 12(3), pages 433-452, September.
    3. 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.
    4. Sweder van Wijnbergen, 1991. "Fiscal Deficits, Exchange Rate Crises and Inflation," Review of Economic Studies, Oxford University Press, vol. 58(1), pages 81-92.
    5. Anand, Ritu & van Wijnbergen, Sweder, 1989. "Inflation and the Financing of Government Expenditure: An Introductory Analysis with an Application to Turkey," World Bank Economic Review, World Bank Group, vol. 3(1), pages 17-38, January.
    6. Allan Drazen & Elhanan Helpman, 1987. "Stabilization with Exchange Rate Management," The Quarterly Journal of Economics, Oxford University Press, vol. 102(4), pages 835-855.
    Full references (including those not matched with items on IDEAS)

    Citations

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    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.

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