In recent years, fiscal performance in Central Europe has steadily deteriorated, in contrast to the improvement in the Baltics. This paper explores the determinants of such differences among countries slated for EU accession. Regression estimates suggest that economic and institutional...

The paper analyzes foreign exchange market volatility in four Central European EU accession countries in 2001-2003. By using a Markov regime-switching model, it identifies two regimes representing high- and low-volatility periods. The estimation results show not only that volatilities are...

This paper discusses the foundations for a medium-term fiscal framework for Bulgaria, a transition economy aspiring to join the European Union. The paper argues that a well-designed framework can help to enhance the credibility of macroeconomic policies and facilitate preparations for EU...

With the primary objective of conferring credibility on macroeconomic policies, an increasing number of advanced and emerging market economies have adopted various forms of fiscal rules (mainly balanced-budget requirements and debt limits). In contrast to previous fiscal rules, many of which...

Unlike conventional fiscal sustainability assessments, the Value-at-Risk approach developed in this paper explicitly captures the contribution of key risk variables to public sector vulnerability. In an illustrative application to Ecuador, the VaR approach confirms a significant risk of...

An overview of crisis episodes in emerging-market economies with a pegged exchange rate regime in the 1990s suggests that sizable explicit or implicit government deficits, or market perceptions of lack of fiscal sustainability, render these economies vulnerable to currency crises under high...

This paper reviews lessons in fiscal consolidation for the former Soviet Union that emerge from the experience of Central and Eastern European economies in transition. A central lesson is the need to support the macroeconomic stabilization with a front-loaded fiscal adjustment. Consistent with...

Most European economies in transition are engaged in public sector reform aimed mainly at replacing the previous fiscal system subordinated to the central plan with a system where fiscal instruments can make a distinct contribution to stabilization, equity, and efficiency. This paper examines...

We use a mean-adjusted Bayesian VAR model as an out-of-sample forecasting tool to test whether money growth Granger-causes inflation in the euro area. Based on data from 1970 to 2006 and forecasting horizons of up to 12 quarters, there is surprisingly strong evidence that including money...