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Mr. George A Mackenzie, Mr. Philip R. Gerson, and Mr. David William Harold Orsmond

Abstract

This study examines the composition of fiscal adjustment - tax and expenditure policies and administrative procedures, and some aspects of public enterprise reform - in a sample of eight countries (Bangladesh, Chile, Ghana, India, Mexico, Morocco, Senegal, and Thailand) during a period of fiscal reform (usually 1978-93), to determine whether and to what extent the fiscal reforms fostered growth during the adjustment period.

International Monetary Fund. External Relations Dept.

The IMF will continue to remind industrial countries of their responsibilities to provide more effective support to developing countries—both through higher, more predictable, and better coordinated aid and through more open trade polices, said IMF Managing Director Rodrigo de Rato on concluding a visit to Burkina Faso on September 9. This is the latest in a series of listening tours to IMF member countries undertaken by the IMF’s Managing Director to sound out governments and civil society about their priorities and main concerns. His most recent travel included stops in South America and sub-Saharan Africa.

International Monetary Fund. External Relations Dept.
For the latest thinking about the international financial system, monetary policy, economic development, poverty reduction, and other critical issues, subscribe to Finance & Development (F&D). This lively quarterly magazine brings you in-depth analyses of these and other subjects by the IMF’s own staff as well as by prominent international experts. Articles are written for lay readers who want to enrich their understanding of the workings of the global economy and the policies and activities of the IMF.
Ms. Kalpana Kochhar, Mr. Erik Offerdal, Mr. Louis Dicks-Mireaux, Mr. Mauro Mecagni, Ms. Jianping Zhou, Mr. Balázs Horváth, Mr. David John Goldsbrough, and Ms. Sharmini Coorey

Abstract

Following the severe economic shocks—a sharp deterioration in the terms of trade and higher world interest rates—of the late 1970s and early 1980s and the ensuing debt crisis, a large number of developing countries undertook adjustment policies in order to restore growth on a sustainable basis. However, the mediumterm response of growth and investment to these policies was frequently slow, even in countries that undertook significant measures. This study is born from that experience, and it aims to identify how adjustment policies could better contribute to reinvigorating growth in developing countries. The influence of macroeconomic policies and core structural reforms on the mainstays of growth—investment, saving, total factor productivity, and employment—is examined drawing upon the experience of eight developing countries. These are Bangladesh, Chile, Ghana, India, Mexico, Morocco, Senegal, and Thailand. The group was chosen to include both low- and middle-income cases as well as examples of countries that have, or have not, encountered external debt crises, and to include countries—most notably Chile and Thailand—that have achieved a markedly higher growth rate following a period of adjustment. The focus of this study is on policies and their effects rather than to estimate the independent effect of Fund-supported programs on growth. The analysis builds on separate studies prepared for many of the countries in the context of the IMF’s regular consultations with member countries, known as Article IV consultations, as well as on many other books, articles, and work in the IMF and World Bank.1 The main lessons emerging from studies other than this are summarized in Appendix I.

Ms. Kalpana Kochhar, Mr. Erik Offerdal, Mr. Louis Dicks-Mireaux, Mr. Mauro Mecagni, Ms. Jianping Zhou, Mr. Balázs Horváth, Mr. David John Goldsbrough, and Ms. Sharmini Coorey

Abstract

Under the IMF’s mandate, resolving member countries’ external financing problems must receive priority in IMF-supported programs; this objective, however, should be pursued with sensitivity toward the ultimate goal of economic policies, namely, improving living standards through higher growth. This was an important message of the last review of the conditionality attached to the use of IMF resources.4 The review found that although, on average, growth strengthened moderately over the period covered, no country shifted to a distinctly more rapid pace of growth.

Ms. Kalpana Kochhar, Mr. Erik Offerdal, Mr. Louis Dicks-Mireaux, Mr. Mauro Mecagni, Ms. Jianping Zhou, Mr. Balázs Horváth, Mr. David John Goldsbrough, and Ms. Sharmini Coorey

Abstract

This section draws upon cross-country evidence for as large a group of countries as possible, to examine some of the long-term influences on growth and the role of several policy-related variables. With the aid of a control group and econometric estimates of the long-term determinants of growth, shifts in the growth performance of the eight countries during various adjustment periods are examined. Broad conclusions are summarized here and details of the econometric exercises are discussed in Appendix II.

International Monetary Fund. Research Dept.
Research summaries on (1) public investment, and (2) bank transaction taxes; announcement of forthcoming (November 2006) Jacques Polak Seventh Annual Research Conference; country study on Italy; listing of contents of Vol. 53, No. 2 of IMF Staff Papers, summary of recently published book entitled "Divergent Paths in Post-Communist Transformation: Capitalism for All or Capitalism for the Few?"; summary of (January 2006) Warsaw Conference on European Union (EU) enlargement and related flows of labor and capital; listing of recent IMF Working Papers; and listing of visiting scholars at IMF, January-April 2006.
International Monetary Fund. Western Hemisphere Dept.
This Selected Issues paper presents a comparative analysis of the macroeconomic adjustment in Chile, Colombia, and Peru to commodity terms-of-trade shocks. The study is done in two steps: (1) an analysis of the impulse responses of key macroeconomic variables to terms-of-trade shocks and (2) an event study of the adjustment to the recent decline in commodity prices. The experiences of these countries highlight the importance of flexible exchange rates to help with the adjustment to lower commodity prices, and staying vigilant in addressing depreciation pressures on inflation through tightening monetary policies. On the fiscal front, evidence shows that greater fiscal space, like that of Chile and Peru, gives more room for accommodating terms-of-trade shocks.
International Monetary Fund. Fiscal Affairs Dept.
This Technical Assistance Report discusses measures to establish a structural balance rule and a public debt objective in Paraguay. The analysis suggests that the authorities’ structural balance formula should be more conservative and—to mitigate the risk of unwarranted expenditure growth—should assume that future structural revenues will grow at the same pace as trend GDP. Under this assumption, the structural balance rule is broadly equivalent to an expenditure rule, constraining spending to grow at trend GDP—a formula that is simpler to implement and easier to communicate to the public. Moreover, the formula should account for new revenue measures more explicitly, provided there are safeguards to ensure that they are estimated fairly.