Two methods of calculating the value-added tax (VAT) base, using production and consumption data, respectively, have been applied in different countries to estimate VAT revenue. It is not apparent that these methods should produce the same result for a particular country because each method...

This paper discusses the macroeconomic implications of trade reform in the presence of capital account restrictions. The latter is modelled by recognizing prior constraints on free currency convertibility that are imposed via the use of a multiple exchange rate system. The results of the...

Standard real models predict that a permanent increase in oil prices would result in a current account surplus. This is due to the fact that investment falls while saving remains unchanged. This paper shows that if currency substitution is introduced into the analysis, the same shock could cause...

A small macroeconomic model based on familiar theoretical considerations is developed and estimated using data from 31 developing countries. Efficient estimation techniques are used to control for country heterogeneity under the assumption of rational expectations. The estimates and the test...

A common proposal designed to deal with the developing countries’ debt problem is that there be set up some kind of “international debt facility” which would buy up debt at a discount and then write down its contractual value, hence providing debt relief. There are three main parties to...

The earmarking (or setting aside) of revenues from various taxes for specific types of expenditure is a much maligned fiscal practice. The paper examines a number of theoretical arguments and institutional circumstances under which earmarking (even widespread earmarking) may be welfare...

This paper studies the implications of the imperfect credibility of an exchange rate target zone on the term structure of forward premia. The relationship between spot and forward exchange rates of different maturities reflects the possibility of repeated realignments of the exchange rate band....

This paper analyzes the optimal rate of monetary expansion when government resorts to inflationary finance to generate additional investment for enhancing growth. If there are lags in tax collection, an increase in inflation erodes real fiscal revenue, thereby worsening the current balance while...

This paper describes a simulation model that can serve as a basis for a developing country growth-oriented adjustment program. The model has been designed to provide explicit links between fiscal, monetary and exchange rate policies and major macroeconomic variables. While the model is applied...