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Valentina Flamini and Mauricio Soto
Following a benchmarking exercise, we estimate the spending required to reach satisfactory progress in the Sustainable Development Goals in the health, education, and infrastructure sectors in Brazil. We find that there is room for savings in education (up to 1.5 percentage point of GDP) and health (up to 2.5 percentage points of GDP) without compromising the quality of services but additional investments for over 3 percent of GDP per year are needed to close large infrastructure gaps in roads, water, and electricity by 2030. Brazil can do more with less, but increasing efficiency of public spending will require substantial reforms.
International Monetary Fund. European Dept.

stance this year. The model-advised medium-term consolidation helps to bring debt down by around 10 percent of GDP relative to its 2019 level, at a moderate and temporary output cost, whereas the benefits of lower debt in terms of lower risk premium and higher capacity to offset shocks are permanent. Figure 1. Belgium: Fiscal Tightening to Restore Fiscal Buffers 12. The overall fiscal effort required to achieve the recommended medium-term structural adjustment is around 2 ½ percent pf GDP . The baseline staff projection suggests that in the absence of

Mr. David Cook and Woon Gyu Choi
This paper examines empirically U.S. broad money demand emphasizing the role of financial market risk. We find that money demand rises with the liquidity risk of stock markets or the credit risk of corporate bond markets. After controlling for the effect of financial market risk, money demand becomes relatively stable over the last 35 years. At the sectoral level, household money holdings continue to be stable in a traditional model controlling for a decline in transactions costs for investing in mutual funds in the early 1990s. In contrast, business money holdings have been consistently (positively) associated with credit risk.
International Monetary Fund. European Dept.
This Selected Issues paper analyzes Belgium’s fiscal stance using a structural stochastic model. This note uses a theoretical model that explicitly accounts for the trade-offs between the short-term cost of fiscal tightening and the long-term gains associated with higher fiscal buffers. This paper shows that once the current crisis is over, rebuilding fiscal buffers is essential to helping Belgium confront the next shock from a stronger fiscal position. Overall, this illustrates a major motivation for a credible medium-term fiscal consolidation strategy. When a government reduces debt, it increases its capacity to react to shocks later. This entails a short-term cost that is, in the case of Belgium, worth the effort as this capacity to smooth future shocks increases future welfare. In addition, a large capacity to react with fiscal policy reduces the risk of long-lasting effects of a large crisis. Historical data show that in the past, the Belgium government’s reaction to the cycle was limited to a single event. By contrast, if Belgium could firmly anchor public debt on a downward path, future governments would be able to offset downturns while keeping debt sustainability concerns under control.
International Monetary Fund

, on a risk-adjusted basis, the net worth of Ecuador’s public sector in 2000, was estimated as a negative value of 21 billion US dollars (or 132 percent pf GDP in 2000) with 5 percent probability. 5 The increase in this variable captures the fact that historically expenditures have been somewhat pro-cyclical in the downturns (i.e., real expenditures contracted under adverse economic conditions). 6 Cashin et al. (2002) show that oil prices tend to follow a random walk pattern. 7 In the case of Ecuador, in addition to the other three variables, it is

Valentina Flamini, Mauricio Soto, and Mr. Antonio Spilimbergo

principle, if reallocation of public spending were possible, savings from higher efficiency in the health and education sectors could unlock financing for infrastructure investment. As the fiscal savings from these sectors would more than offset the annual spending needs in infrastructure (namely road), the overall cost of reaching the SDGs by 2030 would amount to a negative 0.5 percent pf GDP annually, compared to 4 percent of GDP in other emerging economies, and 15 percent of GDP in low income and developing countries ( Figure 13 ). However, rigidities in the Brazil

Mr. Natan P. Epstein and Corrado Macchiarelli
The paper develops a methodology based on the production-function approach to estimate potential output of the Polish economy. The paper concentrates on obtaining a robust estimate of the labor input by deriving Poland's natural rate of unemployment. The estimated unemployment gap is found to track well pressures on resource constraints. Moreover, the overall results show that, prior to the recent global financial crisis, Poland's output and employment were both growing above potential. The production function is also used to derive medium-term projections of the output gap. According to our methodology, in the aftermath of the global crisis, Poland is not expected to experience a sizable and persistent negative output gap.
Mr. Evan C Tanner and Mr. Kevin J Carey

periods, the mean debt ratio b 100 drops further still to about 43 percent. And, PR provides less debt volatility relative to TS (but not DT ). However, for cases where permanent shocks are more important (higher q ), the precautionary regime PR implies a relatively larger “cushion.” Hence, for the 20-period simulation ( Table 2 ), under the PR regime, the 75 th and 90 th percentiles for b J are 52 percent and 57 percent pf GDP respectively (as opposed to 55 percent and 59 percent of GDP under the TS regime). Likewise, for the 100-period simulation

International Monetary Fund. Middle East and Central Asia Dept.

billion. On the other hand, other investments turned positive US$28 billion, as the government drew down foreign deposits to finance the budget deficit. Overall, financial outflows were somewhat larger than the current account surplus, leading to a decline in CBK foreign exchange reserves (by US$4 billion to US$28.3 billion). Contribution to Current Account, 2010-2015 (Percent pf GDP) Contribution to Financial Account, 2010-2015 (Percent pf GDP) The level of CBK’s foreign exchange reserves has remained consistent with the IMF’s standard reserve

International Monetary Fund

for agriculture and key infrastructure, bear fruit. 11. The fiscal impact of the hurricane would be largely on the expenditure side . Revenue performance has been unexpectedly strong, as the surge in imports due in part to reconstruction has kept tax revenue on target. The additional spending needed for the rehabilitation of infrastructure (roads, bridges, and seawalls) and to provide assistance to those who suffered abrupt loss of earnings is estimated at 2½ percent pf GDP. 3 This is after expected reallocation of expenditure already in the FY 2007/08 budget. 4