This paper introduces concepts of public sector balance sheet (PSBS) strength, taking into account different aspects of what governments own in addition to what they owe. It develops measures of PSBS strength and investigates their macroeconomic implications. Empirical estimations show that in their pricing of sovereign bonds, financial markets account for government assets and net worth in addition to their liabilities. Furthermore, economies with stronger public sector balance sheets experience shallower recessions and recover faster in the aftermath of economic downturns. This faster return to growth can be explained by the greater space for countercyclical fiscal policy in countries with stronger balance sheets.
International Monetary Fund. Western Hemisphere Dept.
This article is an analytical report of the economic developments of Costa Rica. The economy showed rapid growth in the aftermath of the global crisis with low inflation; but for further stable growth, certain policy frameworks and reforms need to be reinforced. The fiscal stance should be made tighter to mitigate risks of inflation and external imbalances. Interest rates and exchange rates must be increased, and monetary policy should be tightened for price stability. The Executive Board welcomes these measures for structural potential growth.
Jamaica has been stuck in a cycle of low growth and high debt dynamics. It has been severely impacted by the global economic slowdown, and finances have deteriorated. Jamaica’s objective of virtually eliminating the overall public sector deficit is appropriate. Embedding the medium-term fiscal consolidation effort in a comprehensive set of fiscal structural reforms is the key. Strengthening regulatory and supervisory frameworks along with legislative and structural reforms will reduce systemic risks to the financial system. The proposed program carries risks but these risks are manageable.
Jamaica faced intense macroeconomic imbalances that threatened its macroeconomic stability. Executive Directors emphasized the need for credible policy actions and strong fiscal adjustment to reduce imbalances and lower vulnerability. They welcomed the strong fiscal adjustment in the budget and encouraged the Bank of Jamaica to reorient monetary policy. They stressed the need for a policy mix that would restore macroeconomic stability, achieve higher growth, lower external imbalances, and emphasized for anti-crime measures, infrastructure building, and sector-specific policies to promote growth.
The study on selected issues first focuses on business fixed investment, then analyzes the profitability of Germany’s banking sector and looks at restructuring options, and finally, examines the international dimensions of Germany’s financial sector. The paper reviews the various ways in which public policy could contribute to restructuring, drawing on the experiences of other countries that have had large public banking sectors. There is no evidence that either recent tax reforms or weak U.S. growth has had a significant independent impact on investment.
Uruguay's performance under the Stand-By Arrangement (SBA) has been favorable, and commendable progress has been achieved in containing the crisis and stabilizing the economy. Executive Directors welcomed this development, and stressed the need to implement policies in the fiscal, banking, and structural areas. They commended the floating exchange rate regime, and the efforts of political and legal institutions in dealing with the financial crisis. They agreed that Uruguay has successfully completed the third review under the SBA, and approved waiver.
In recent years, the IMF has released a growing number of reports and other documents covering economic and financial developments and trends in member countries. Each report, prepared by a staff team after discussions with government officials, is published at the option of the member country.
This paper reviews economic developments in Costa Rica during 1995–97. Costa Rica faced a slump in economic activity in 1995–96 following a sharp deterioration in the public finances and higher inflation associated with the 1993–94 political–economic cycle. To avert a balance-of-payments crisis in early 1995, the authorities increased interest rates, imposed temporary import surcharges, and raised excise taxes, while tightening expenditure and shifting some outlays to 1996. The economy went into a recession in 1996, with private investment declining for a third consecutive year.