Government spending on infrastructure has recently increased sharply in many emerging-market economies. This paper examines the mechanism through which public infrastructure spending affects the dynamics of the real exchange rate. Using a two-sector dependent open economy model with...

This paper studies how the effects of government spending vary with the economic environment. Using a panel of OECD countries, we identify fiscal shocks as residuals from an estimated spending rule and trace their macroeconomic impact under different conditions regarding the exchange rate...

A well-functioning public expenditure management (PEM) system is considered a critical pillar of government efficiency, on par with a low-distortion tax system and efficient tax administration. The paper discusses PEM systems in developing countries using an analytical framework based on...

Against the background of Mexico's persistently high degree of inequality, this paper analyzes the country's experience with pro-poor policies over the last decade. A number of important government initiatives, implemented since the mid-1990s, have aimed at improving distributional equity...

This paper proposes a framework for assessing fiscal sustainability in heavily indebted countries dependent on exhaustible resources, with reference to Gabon. It finds that fiscal sustainability could be achieved by: (i) developing a fiscal rule for the non-oil primary fiscal balance compatible...

This paper outlines the challenge of developing an operational macroeconomic framework in Ethiopia consistent with the large envisaged scaling up of aid to achieve the Millennium Development Goals (MDGs). This paper describes an MDG scenario that addresses both microeconomic and macroeconomic...

Under what conditions are budget institutions likely to be strengthened? We find that fiscal deficits do not help in focusing policymakers on undertaking reforms. To the contrary, the larger the deficit, the lower is the likelihood of reforms. Large deficits apparently imply strong claims on the...

A key challenge in government budgeting is to define an appropriate balance between current and capital expenditures. Budgeting for government capital investment also remains not well-integrated into the formal budget preparation process in many countries. This paper aims to provide an overview...

This paper analyzes the decision of a government facing electoral uncertainty to implement structural reforms in the presence of fiscal restraints similar to the Stability and Growth Pact. The model shows that a pact may harm structural reforms, sacrificing future growth for present stability....

In a number of oil producing countries, oil revenue accounts for the majority of government revenue, but is expected to be depleted in a relatively short time frame. Ensuring that fiscal policy is on a sustainable path is thus a high priority, but political and social adjustment costs create...