This paper assesses the nature of fiscal discipline under alternative exchange rate regimes. First, it shows in a simple theoretical framework that fiscal agencies under a currency union with a fixed exchange rate can have the largest incentive to overspend or ""free-ride"" (compared to those...

Although the economic growth literature has come a long way since the Solow-Swan model of the fifties, there is still considerable debate on the ""real'' or ""deep"" determinants of growth. This paper revisits the question of what is really important for strong long-term growth by using a Binary...

A growing number of countries are adopting flexible exchange rate regimes because flexibility offers more protection against external shocks and greater monetary independence. Other countries have made the transition under disorderly conditions, with the sharp depreciation of their currency...

Since 1996, the Bank of Jamaica (BoJ) has sought to limit changes in the exchange rate for the Jamaican dollar in the context of its efforts to maintain low inflation. However, with a persistently high public sector deficit, real interest rates have remained generally high, which partly explains...

Using a production function method, this paper assesses the impact of the global crisis on the potential growth of Australia and New Zealand. The two countries have not been hit hard by the global crisis, but have large net external liabilities. The paper finds that the main negative impact of...

With a fixed peg to the U.S. dollar for more than three decades, the tourism-dependent Eastern Caribbean Currency Union (ECCU) countries share a close economic relationship with the U.S. This paper analyzes the impact of the United States on ECCU business cycles and identifies possible...

This paper examines the size and source of external spillovers to Australia and New Zealand based on a structural vector autoregression (VAR) approach. It finds that during the last decade shocks from emerging Asia have become more important than those from the United States in affecting...

Facing electoral uncertainty, a government chooses its exchange regime in a trade-off among three incentives: (i) tying the hands of its opponent should it lose the election; (ii) facilitating its own future policy implementation should it win the election; and (iii) increasing its chance of...

Conventional wisdom has held that a fixed exchange rate regime induces more fiscal discipline, but Tornell and Velasco (1995, 1998) argue the opposite. Using a dynamic model with fragmented fiscal policymaking, this paper evaluates the two arguments in a single framework and shows that (1)...

This paper examines a number of structural factors affecting the external debt sustainability of HIPC completion point countries. It shows that (i) while comparing favorably with other lowincome countries, the policy and institutional frameworks of completion point countries in general are still...