The paper argues that international differences in fiscal conditions influence the relative attractiveness of locating production facilities in different countries and could prove to be a troublesome source of instability for the European economies. Even though physical capital movements tend to...

The issue of whether constraints should be placed on fiscal policies when moving to European monetary union is examined in the context of the use of fiscal policy for macroeconomic stabilization purposes. Examples of shocks hitting French and German economies are considered: an appreciation of...

This paper analyzes the financial policies pursued in the major industrial countries under the flexible exchange rate regime, and links misalignments in policies and their mixes to exchange rate variations among the major currencies. A number of indicators note that misalignments in fiscal...

The paper presents a model of fiscal dominance with borrowing constraints, and provides evidence for a large number of sub-Saharan African countries on the relative importance of fiscal and monetary determinants of inflation. Based on the dynamic response of inflation to different shocks,...

Recently, monetary authorities have increasingly focused on implementing policies to ensure price stability and strengthen central bank independence. Simultaneously, in the fiscal area, market development has allowed public debt managers to focus more on cost minimization. This “divorce” of...

The choice of assigning monetary or fiscal policy to external balance is complicated when the authorities are concerned with both the current account balance and the exchange rate. A strategy of using monetary policy to control the current account via the exchange rate may fail, because the...

The paper argues that the endogenous behavior of monetary authorities provides an important channel through which fiscal policy influences financial variables, and that growing internationalization has increased the sensitivity of financial conditions to fiscal policy. The core of the argument...

This paper reviews the pros and cons of institutionalized constraints limiting the freedom of national budgetary policies within an Economic and Monetary Union (EMU) in Europe. The issue is approached from three angles: the influence of EMU on (i) budget discipline; (ii) intergenerational equity...

This paper employs several econometric techniques to estimate the Armenian output gap. The findings indicate that the output gap is significantly positive in 2007 and 2008 and decreased dramatically in 2009. The paper uses these results to estimate a New Keynesian Phillips curve for Armenia,...

Many countries have initiated reforms in their monetary control procedures by relaxing direct controls and increasing the role of market processes. The changed approach is often inevitable when countries reform their financial systems in support of growth and adjustment. This is because reform...