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International Monetary Fund

This 2011 Article IV Consultation highlights that the difficult global economic conditions continue to hit Barbados with growth at anemic levels. The current account deficit has widened in recent times owing to higher oil and food prices. Executive Directors commended the authorities for adopting a revised Medium-Term Fiscal Strategy aimed at generating a balanced budget. They emphasized that fiscal consolidation should focus on expenditure reduction, including lowering the wage bill, reducing transfers to public enterprises, and minimizing tax exemptions.

International Monetary Fund. Western Hemisphere Dept.

Barbados’ economy is estimated to have contracted by 0.7 percent in 2013, with weakness across both the traded and non-traded sectors. The 2013 Article IV Consultation highlights that long stay tourist arrivals, which are highly dependent on the U.K. and North American markets, were down by 5.2 percent in 2013. Inflation dropped sharply to 1.9 percent by end-November, although unemployment rose to 11.7 percent. Foreign reserves declined during 2013 to close out the year at US$578 million. The financial system appears to be well capitalized, but credit quality and profitability have suffered with the prolonged downturn.

International Monetary Fund

Belize’s near-term macroeconomic prospects have improved over the past year. The main risks to growth and financial stability arise from fiscal challenges and deterioration in the global outlook. Despite data limitations that constrain the analysis, the Belize dollar appears broadly in line with fundamentals, and the external accounts are not a threat to external stability. Progress in consolidating the public sector’s financial position needs to continue. A front-loaded fiscal adjustment is necessary to lower Belize’s debt ratios and regain market access.

International Monetary Fund

A strong policy framework and improved income distribution and social outcomes have been important accomplishments in Brazil. The 2012 Article IV Consultation highlights that financial stability in Brazil has been underpinned by a strong banking system and framework for regulation and supervision. Executive Directors have commended authorities’ commitment to a strong policy framework, which has delivered a decade of macroeconomic stability and rising living standards. They have also welcomed the recent reorientation of the policy mix toward generating fiscal savings and providing monetary countercyclical support.

International Monetary Fund. Western Hemisphere Dept.

Context. A strong policy framework has allowed Colombia to begin to adjust smoothly to the large decline in oil prices since mid-2014. The current account deficit, relative to GDP, widened to historical highs with the steep drop in oil exports. In 2015, macroeconomic policies were tightened to curb the growth in domestic demand and contain inflationary pressures arising from the sharp currency depreciation. A sound financial system and resilient corporate and household balance sheets have also contributed to the smooth adjustment. Real GDP growth slowed last year but still outperformed most countries in the region. The authorities are pressing ahead with their infrastructure program and a completion of the peace process is expected later this year. Outlook and risks. Colombia is facing another large terms of trade shock in 2016, together with tightening global financial conditions. Staff projects real growth to slow further to 2.5 percent in 2016 and gradually rise toward its potential of about 4 percent a year over the medium term, supported by the government's PPP-based infrastructure program and some gradual export diversification. Risks are mainly to the downside, stemming in part from large gross external financing needs, and include bouts of global financial volatility, a protracted period of slower growth in advanced and emerging economies and a further decline in oil prices.

OLLI-PEKKA LEHMUSSAARI

Changes in saving behavior brought about by financial liberalization in the Nordic countries are examined. Although this paper suggests that there have been changes in the economic relationships in Denmark and Finland, the evidence from Norway is less conclusive, and the data do not reveal any structural change in Sweden. The results also indicate that the wealth effect has played an increasing role in household saving decisions. Since the present tax rules are biased against saving, cuts in marginal tax rates and reductions in the tax value of interest payments would be expected to increase household saving.

Jacques R. Artus

THIS PAPER presents an econometric analysis of spending by German travelers abroad and of German receipts from foreign visitors.1 Its main aim is to explain the behavior of these two variables so as to predict the effects of the revaluation of the deutsche mark in October 1969 on the foreign travel component of Germany’s balance of payments. However, this study should also be seen as a step in an attempt to derive some information on the price sensitivity of foreign travel in general. Although foreign travel plays an important role in the economy, particularly in the balance of payments, of many countries, only a few studies have been made on its responsiveness to changes in relative prices among countries. A study on the response of foreign tourist receipts to a change in exchange rate was made by Gerakis.2 However, to the knowledge of the writer, no study has been made on the price sensitivity of expenditure on foreign travel.