In pursuing a steady-state reserve target, policymakers in small open economies can resort to devaluation or to temporary increases in public saving. This paper contrasts the dynamic implications of these alternative policies in a model with optimizing agents who possess perfect foresight. In...

It is well known that in a small open economy where there is perfect substitutability between domestic and foreign assets and costless portfolio adjustment, the monetary authorities cannot control the money supply, but can influence the balance of payments through the use of domestic credit. It...

Islam proposes the replacement of an interest-based financial system with one which operates on the basis of risk and profit sharing. Using a general equilibrium model, this paper investigates some open-economy implications of the adoption of Islamic banking for growth and stabilization of the...

Chapter 1 argues that fiscal policy should remain nimble and strengthen its medium-term frameworks, as countries face highly uncertain and differentiated prospects. Vaccination has saved lives and is helping fuel a nascent recovery, but risks are elevated amidst new virus variants, high debt,...

Fiscal rules are being increasingly used by both emerging and developed economies. This paper analyzes two alternative fiscal policy rules in terms of their impact on debt sustainability: a rule that fixes the ratio of primary surplus to GDP (""fixed surplus rule"") and one that sets the primary...

This paper presents perhaps the most viable approach for the design of an instrument of government finance (and monetary management) in an Islamic economy where conventional transactions based on an ex-ante promise of a risk-free rate of return are forbidden. Resources to finance government...

This note reflects macroeconomic and fiscal forecasts presented with the April 2009 World Economic Outlook, as well as information on fiscal stimulus and financial and industrial sector support gathered through mid-May. It follows the request by G-20 leaders for the Fund to assess regularly the...

This paper examines the relationship between fiscal policy and the current account, drawing on a larger country sample than in previous studies and using panel regressions, vector autoregressions, and an analysis of large fiscal and external adjustments. On average, a strengthening in the fiscal...

This paper examines the methodological issues arising in the measurement of the distributional impact of tax and expenditure policies, with emphasis on the problems related to the measurement of the impact of adjustment programs on the welfare of the poor. Both conceptual and empirical...

The paper distinguishes between three different channels through which fiscal policy changes may be transmitted to exchange rates. Based on both the balance of payments identity and empirical observations, it is argued that trade balances and exchange rates may be quite responsive to changes in...