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The authors would like to thank Tamim Bayoumi, Andrea Schaechter, and Athanasios Vamvakidis for helpful suggestions and clarifications on an earlier draft.
Our sample includes all countries that pass this threshold for which data are available. All data are taken from the IMF’s International Financial Statistics and World Economic Outlook database, except for the data on external official financing, which is obtained from the World Bank’s World Development Indicator database. Baumann (2000), Fischer, Sahay, and Végh (2002), and Reinhart and Savastano (2003), among others, provide selective reviews of high and hyperinflation periods.
In Central and Eastern European and FSU countries, the period of high inflation was related mainly to the transition to a market-oriented economy and the initial price liberalization.
Serbia’s inflation peaked at a monthly rate of 175,093 percent in the period February 1993–January 1994, but is not included in this sample due to the lack of data.
In Figure 2, t=0 is the year of the inflation peak, t−5 the fifth year before the peak, and t+5 the fifth year after the peak, etc.
For a more detailed discussion of sequencing issues, see, for example, Nsouli, Rached, and Funke (2005).
Needless to say that such an effort involves some judgment calls. The ranking refers to the starting point of reforms. Different reform steps may overlap. If one specific ranking is found in more than half of the cases in the sample, this ranking is established to be “most common”. If the distribution of rankings within our sample is more widespread, the three most frequently found rankings are provided in Table 2.
The sample in Tsibouris et al. (2006) covers 165 countries from 1971 through 2001 and indicates a median tightening of the primary fiscal balance of about 12.5 percentage points of GDP (and a range of 6.3-29.9 percentage points of GDP) in one year.
The extent of fiscal adjustment may be understated in the sample, to the extent that the fiscal data did not systematically include the quasi-fiscal activity of the central bank and other public entities, which in many cases was sharply reduced during stabilization.
Interest payments include the effects of inflation. The adjusted financing requirement gives an indication of the overall deficit that must be financed by creating money or issuing domestic treasury bills; external financing of public sector deficits is limited in Zimbabwe.
It is the new flows of activity previously done by the RBZ (or any other such entity) that need to be transferred, not the stock of losses from past QFAs. Unrealized exchange losses can remain in the RBZ’s balance sheet until recapitalization following stabilization.
Government revenue ratios have been relatively high in Zimbabwe (around 30-52 percent in 2004-06). Hence the tightening needs to come mainly from reductions in expenditure which are very large in relation to GDP. Adjusted primary expenditure is estimated to have amounted to some 75 percent of GDP in 2006, of which non-interest QFAs of the RBZ amounted to some 27 percent of GDP. Zimbabwe’s high government wage bill may reflect excessively large numbers of workers rather than an excessively high level of real wages
“Operation Murambatsvina” is the government campaign that demolished unauthorized dwellings and structures across the country in 2005. The U.N. estimates that some 700,000 people lost their home or source of livelihood, or both, and that a further 2.4 million people were indirectly affected in varying degrees.
Defined as “Official development assistance and official aid” in the World Development Indicators (World Bank).
Some transition economies drew small amounts under the Systemic Transformation Facility (STF), which was not formally a Fund arrangement.