This selected issues paper on Indonesia was prepared by a staff team of the International Monetary Fund as background documentation for the periodic consultation with the member country. It is based on the information available at the time it was completed on August 21, 2012. The views expressed in this document are those of the staff team and do not necessarily reflect the views of the government of Indonesia or the Executive Board of the IMF.
This paper presents findings of the Fourth Review Under the Extended Credit Facility Arrangement for Burkina Faso. Near-term policy discussions focused on specifying 2012 financing needs arising from the shocks to help prevent crowding out the authorities’ development program—Strategy for Accelerated Growth and Sustainable Development. The authorities have implemented decisive adjustment measures, without which financing needs would be much higher. Program performance was strong in 2011, despite domestic social unrest and political turmoil in neighboring Côte d’Ivoire. All quantitative performance criteria and all indicative targets were met.
This paper analyzes the workings and effectiveness of the monetary transmission mechanism in Papua New Guinea. The paper is organized as follows: it describes the current institutional structure in Papua New Guinea; interest rate is discussed; the evidence from vector autoregression analysis on the relationship between monetary policy variables and output and prices is considered; finally, implications are included. The Bank of Papua New Guinea (BPNG) uses a reserve money framework to conduct monetary policy operations. A macroeconomic balance approach estimates the REER, which simultaneously achieves internal and external balance.
This paper analyzes the efforts taken to create fiscal space for the implementation of the fifth national development plan and the risk associated with it, examines the role of monetary policy in determining inflation, and discusses policy options to achieve low inflation. It also identifies areas where reform strategy needs more attention and suggests that reforms of financial system regulation need to be accelerated to ensure stability of the system. It analyzes traditional reserve adequacy measures, and finds looming power crisis as an obstacle to growth.
The paper discusses key findings of the Fourth Review Under the Poverty Reduction and Growth Facility (PRGF) for the Kyrgyz Republic. Output is rebounding and inflation remains subdued. However, most end-December 2006 and end-March 2007 structural benchmarks have been missed, partly because of political tensions that slowed the legislature. The 2007 program, which targets 6½ percent output growth and 5 percent inflation, caps the fiscal deficit at 3.1 percent of GDP and maintains a prudent monetary policy. The government plans to implement delayed structural measures under the program, and strengthen external debt management.
This paper examines and tests the existence of political budget cycles in Papua New Guinea during the period 1988–2004. Several factors point to the existence of political budget cycles in Papua New Guinea. The paper provides an overview of the political business cycle literature, and Papua New Guinea’s political structure and processes. It also describes the data set and the empirical methods used to test for the presence of election-influenced spending, and presents the results of a time-series analysis.
Mr. Bennett W Sutton, Mrs. Genevieve M Lindow, Maria Isabel Serra, Mr. Gustavo Ramirez, and Maria Fernanda Pazmino
This paper presents empirical evidence on convergence of per capita output for regions within six large middle-income Latin American countries: Argentina, Brazil, Chile, Colombia, Mexico, and Peru. It explores the role played by several exogenous sectoral shocks and differences in steady states within each country. It finds that poor and rich regions within each country converged at very low rates over the past three decades. It also finds evidence of regional "convergence clubs" within Brazil and Peru- the estimated speeds of convergence for these countries more than double after controlling for different subnational levels of steady state. For the latter countries and Chile, convergence is also higher after controlling for sector-specific shocks. Finally, results show that national disparities in per capita output increased temporarily after each country pursued trade liberalization.
This Selected Issues paper and Statistical Appendix analyzes economic developments over the past decade in the Central African Republic (CAR). It examines the regional integration efforts of the CAR in the context of the Central African Economic and Monetary Community (CEMAC). The paper presents an overview of the CEMAC customs union reform, and investigates the status of the implementation of the CEMAC trade reform in the CAR. The paper also evaluates the impact of the regional trade reform on the CAR’s trade performance, based on trade developments in the CAR during 1994–2002.
This paper provides an overview of diamond mining in sub-Saharan African countries, and explores the reasons for substantial differences in their tax rates and fiscal revenues from the sector, which mainly arise from differences in the incentives for smuggling. In a theoretical model, we show that optimal diamond tax rates increase with the degree of competition among diamond buyers, as well as with the corporate share of diamond production, which is confirmed by the data. We then discuss policies to increase revenue, including by enhancing mining productivity, stimulating the exploration of new areas, reducing barriers to entry, and attracting investment into value-adding downstream operations.
This Selected Economic Issues paper examines economic development in South Africa during 1995–96. The paper highlights that in 1995, the economy of South Africa grew by 3.3 percent, the third consecutive year of economic growth, and it is expected to grow between 3½ and 4 percent in 1996. Some aspects of the unemployment problem are addressed in this paper. The paper also focuses on the implications for policy of the steps taken in 1994 and 1995 to establish an outward-oriented economy, after many years of effective autarky.