Proceedings of a Seminar

Macroeconomics and the Environment

Proceedings of a Seminar

May 1995


Ved P. Gandhi

International Monetary Fund


© 1996 International Monetary Fund

Design and production: IMF Graphics Section

Library of Congress Cataloging-in Publication Data

Macroeconomics and the environment / edited by Ved P. Gandhi

p. cm.

Includes bibiographical references.

ISBN 1-55775-536-1

1. Environmental economics—Congresses. 2. Macroeconomics—Congresses. 3. Economic policy—Congresses. I. Gandhi, Ved P. (Ved Parkash) II. International Monetary Fund. HC79.E5M323 1996 333.7—dc20



Price: $22.50

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  • Preface

  • 1. Macroeconomics and the Environment: Summary and Conclusions

    • Ved P. Gandhi

  • 2. Welcoming Remarks

    • Margaret Kelly

  • Session 1. Analytics

  • 3. How Macroeconomic Policies Affect the Environment: What Do We Know?

    • Ved P. Gandhi and Ronald T. McMorran

  • 4. Macroeconomic Policies and the Environment

    • Stein Hansen

    • Discussion

      • Discussant’s Comments

        • Andrew Steer

    • Other Discussion

  • 5. How the Environment Affects the Macroeconomy

    • David Pearce and Kirk Hamilton

    • Discussion

      • Discussant’s Comments

        • Kirit Parikh

      • Other Discussion

  • Session 2. Integration of Economic and Environmental Accounts

  • 6. Environmental Accounting: A Framework for Assessment and Policy Integration

    • Peter Bartelmus

  • 7. National Accounts and the Environment

    • Adriaan M. Bloem and Ethan Weisman

    • Discussion

      • Discussant’s Comments

        • Michael Ward

      • Other Discussion

  • Session 3. Experience

  • 8. Macroeconomics and the Environment: Norwegian Experience

    • Knut H. Alfsen

    • Discussion

      • Discussant’s Comments

        • Peter Clark

      • Other Discussion

  • 9. Economy-Wide Policies and the Environment: Developing Countries

    • Mohan Munasinghe and Wilfrido Cruz

    • Discussion

      • Discussant’s Comments

        • Cielito Habito

      • Other Discussion

  • Session 4. Looking Ahead

  • 10. What Is Reasonable to Expect of the IMF on the Environment?

    • Stanley Fischer

  • 11. Panel Discussion

    • David Pearce

    • Cielito Habito

    • Andrew Steer

    • Ved P. Gandhi

    • Other Discussion

  • 12. Concluding Remarks

    • Vito Tanzi

  • Participants


The International Monetary Fund (henceforth, the Fund) staff’s official interest in the environment, and the issues relating to it, began in early 1991. At that time, the Executive Board asked the staff to study the interactions between macroeconomics and the environment and, wherever important, keep them in mind when conducting policy dialogues with Fund member countries. An early search of the available literature revealed that, while environmental economics was a reasonably well-developed discipline, little work had been done on the impact of macroeconomic policies on the environment and the impact of environmental policies on the macroeconomy.

In order to improve its understanding of the interrelationships between macroeconomics and the environment, the Fund held its first seminar in May 1993, inviting many nongovernmental organizations (NGOs) dealing with the environment to share with it their views and concerns. At a second seminar, held in May 1995, recognized experts shared with Fund staff the results of their thinking and research on the interrelationships between macroeconomics and the environment. This volume contains the papers and proceedings of this second seminar.

The seminar was held with four specific objectives in mind: (1) to make the Fund staff aware of the current research on macroeconomics and the environment; (2) to present work being done on the environment by Fund staff in support of the mandate and primary functions of the organization; (3) to assess the feasibility of integrating macroeconomic and environmental policy formulation in the Fund’s member countries at different stages of development; and (4) to identify the main elements of work that the Fund staff should undertake in the future, including finding ways of incorporating environmental concerns into the staff’s policy dialogue with national authorities whenever warranted and desired by the authorities.

The seminar was held over a two-day period (May 10–11, 1995), and participants included experts from academic and research institutions, NGOs, the World Bank, and the Fund (including representatives from Executive Directors’ offices, as well as staff economists working on operations, policy development, and research). The participants were welcomed by the Deputy Director of the External Relations Department, Margaret Kelly, who provided the welcoming remarks, and the seminar was closed by the Director of the Fiscal Affairs Department, Vito Tanzi, who offered the concluding remarks. In between, participants had open, frank, and intensive discussions on the interplay between macroeconomics and the environment. These discussions were enriched by many constructive and provocative comments from the floor. The First Deputy Managing Director of the Fund, Stanley Fischer, gave a luncheon speech entitled “What Is Reasonable to Expect of the IMF on the Environment?”

In preparing this volume, much gratitude is owed to outside experts, including paper writers (Knut Alfsen, Peter Bartelmus, Wilfrido Cruz, Kirk Hamilton, Stein Hansen, Mohan Munasinghe, and David Pearce), discussants (Cielito Habito, Kirit Parikh, Andrew Steer, and Michael Ward), and others who participated actively from the floor (Phil Bagnoli, Herman Daly, Salah El Serafy, Ian Johnson, Jim MacNeill, and David Reed). From the Fund, active participation was provided by the paper writers (Adriaan Bloem, Ved Gandhi, Ronald McMorran, and Ethan Weisman), session chairs, moderators, and discussants (Peter Clark, Mohammed El-Erian, Margaret Kelly, Naheed Kirmani, Malcolm Knight, and Vito Tanzi), and others who made useful contributions from the floor (Benedicte Christensen, Paul Cotterell, Nuri Erbas, David Nellor, Ganga Ramdas, and Emilio Sacerdoti).

Many Fund staff members helped in organizing the seminar (here Laura Wallace, David Nellor, and Ronald McMorran need special mention) while others (including Dale Chua) assisted during the seminar. The recorded proceedings were ably transcribed by Audrey Gross, Tammie Leedham, and Meike Gretemann. Ms. Gretemann also typed the first draft of the manuscript while Ms. Nezha Karkas helped with all later drafts and David Driscoll provided expert editorial assistance.

The editor is particularly thankful to all the people named above who have contributed significantly to the successful conduct of the seminar and producing this volume in record time.