International Monetary Fund. Western Hemisphere Dept.
Fiscal policy in Haiti should be oriented toward more developmental objectives. Steps have been taken in sustaining inclusiveness; however, the current taxation and expenditure frameworks do not completely fulfill the necessary requirements for these objectives. Inefficient public investment and lack of transparency have resulted in lower growth, lower fiscal revenue, and higher costs as well as macroeconomic imbalances, limited competitiveness, and slow economic integration. The country should take advantage of the available financial assistance and step up efforts to improve public investment quality.
This Selected Issues paper analyzes Haiti’s external competitiveness. The analysis shows that the country has been experiencing equilibrium real exchange rate appreciation pressures, which have originated more recently from the rising inflow of transfers. The paper discusses avenues for further developing Haiti’s monetary policy framework to help consolidate a stable low-inflation environment and support deepening domestic financial markets. The analysis suggests that Haiti’s monetary policy regime could be strengthened through a two-step approach. The paper also focuses on options to increase domestic revenues as a means of funding priority expenditures.
Dollarization of liabilities (DL) has emerged as a key factor in explaining the vulnerability of emerging markets to financial and currency crises. "Usual suspects" of causing DL comprise "fatalistic" determinants such as a long history of unsound macroeconomic policies and development and institutional factors, aided by moral hazard opportunities related to government guarantees. This paper assesses empirically the relevance of these factors relative to alternative explanations. Based on a sample of Latin American countries, we find that ongoing central bank intervention in the foreign exchange market, relative market power of borrowers, and financial penetration are at least as important in explaining DL.