The analysis in this paper suggests that the large fiscal deficits that Pakistan has experienced over most of the period since 1970 led to some crowding out of private investment, resulting in slower output growth than would otherwise have been observed. Past fiscal deficits have also resulted...

Standard theory shows that sterilized foreign exchange interventions do not affect equilibrium prices and quantities, and that domestic and foreign currency denominated bonds are perfect substitutes. This paper shows that when fiscal policy is not sufficiently flexible in response to spending...

This paper highlights the importance of debt composition in setting optimal fiscal and monetary policy over short-run business cycles and in the long run. Nominal debt as state-contingent debt can be a significant policy tool to reduce the volatility of distortionary government policy, thereby...

This paper examines the impact of a monetary policy shock on output, prices, and the nominal effective exchange rate for Kenya using data during 1997–2005. Based on techniques commonly used in the vector autoregression literature, the main results suggest that an exogenous increase in the...

Africa lags behind other regions in attracting foreign direct investment (FDI). In some circumstances, there are obvious explanations for the absence of FDI, such as a high incidence of war. In this paper, we examine the role that monetary and exchange rate policy may have played in explaining...

This paper provides comprehensive empirical evidence that supports the predictions of Sargent and Wallace's (1981) "unpleasant monetarist arithmetic" that an increase in public debt is typically inflationary in countries with large public debt. Drawing on an extensive panel dataset, we find that...

Is it beneficial for a country's currency to be used internationally? And, if so, can we quantify the benefit? Since the emergence of the euro, there has been great interest in the consequences of a transfer of the US dollar's premier international role to the euro. Building on recent...

The purpose of this paper is to present a model that circumvents the requirement of explicitly setting a period in which the fiscal budget is to be balanced, yet implies that increases in the growth of public debt are bound to increase inflation when there is no perceived commitment to reduce...

Much recent analysis of international monetary and fiscal policy issues, such as the choice of an exchange-rate regime or the design of a policy coordination scheme, has been conducted by stochastic simulations with multicountry econometric models. In these studies, it has become standard...

This paper discusses the case for a money pillar in the European Central Bank's (ECB) monetary policy strategy. Time-series evidence for industrial countries based on frequency-domain and unobserved-components analysis suggests that money can play a useful role in gauging and constraining...