Front Matter

Front Matter Page

STAFF PAPERS

Bahram Nowzad, Editor

James McEuen

Assistant Editor

Editorial Committee

Bahram Nowzad, Chairman

Bijan B. Aghevli

Mohsin S. Khan

Gerard Bélanger

Malcolm D. Knight

Mario I. Blejer

Thomas M. Reichmann

W. Max Corden

M. Ranji P. Salgado

Morris Goldstein

V. Sundararajan

Peter S. Heller

Subhash M. Thakur

From the Foreword to the first issue:

Among the responsibilities of the International Monetary Fund, as set forth in the Articles of Agreement, is the obligation to “act as a center for the collection and exchange of information on monetary and financial problems,” and thereby to facilitate “the preparation of studies designed to assist members in developing policies which further the purposes of the Fund.” The publications of the Fund are one way in which this responsibility is discharged.

Through the publication of Staff Papers, the Fund is making available some of the work of members of its staff. The Fund believes that these papers will be found helpful by government officials, by professional economists, and by others concerned with monetary and financial problems. Much of what is now presented is quite provisional. On some international monetary problems, final and definitive views are scarcely to be expected in the near future, and several alternative, or even conflicting, approaches may profitably be explored. The views presented in these papers are not, therefore, to be interpreted as necessarily indicating the position of the Executive Board or of the officials of the Fund.

The authors of the papers in this issue have received considerable assistance from their colleagues on the staff of the Fund. This general statement of indebtedness may be accepted in place of a detailed list of acknowledgments.

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Front Matter Page

INTERNATIONAL MONETARY FUND

STAFF PAPERS

VOLUME 34, 1987

WASHINGTON, D.C.

EDITOR’S NOTE

The Editor invites from contributors outside the Fund brief comments (not more than 1,000 words) on published articles in Staff Papers. These comments should be addressed to the Editor, who will forward them to the author of the original article for reply. Both the comments and the reply will be considered for publication.

The term “country,” as used in this publication, may not refer to a territorial entity that is a state as understood by international law and practice; the term may also cover some territorial entities that are not states but for which statistical data are maintained and provided internationally on a separate and independent basis.

© 1987 by the International Monetary Fund

International Standard Serial Number: ISSN 0020-8027

The U.S. Library of Congress has cataloged this serial publication as follows:

International Monetary Fund

Staff papers—International Monetary Fund. v. 1– Feb. 1950–[Washington] International Monetary Fund.

v. tables, diagrs. 23 cm.

Three no. a year. 1950–1977; four no. a year. 1978–

Indexes:

Vols, 1–27, 1950–80. 1 v.

ISSN 0020-8027 = Staff papers—International Monetary Fund.

1. Foreign exchange—Periodicals. 2. Commerce—Periodicals.

3. Currency question—Periodicals.

HG3810.15 332.082 53-35483

Front Matter Page

Contents of Volume 34

Volume 34 (1987) comprises four issues, as follows:

March, pages 1–189

June, pages 191–408

September, pages 409–566

December, pages 567–71.

English, French, and Spanish summaries appear at the end of the March issue (pages 176–89); in subsequent issues the summaries have been replaced with abstracts, which can be found on the opening pages of the articles.

Authors

Blejer, Mario I., and Nissan Liviatan. Fighting Hyperinflation: Stabilization Strategies in Argentina and Israel, 1985–86 409

Blejer, Mario I., Vito Tanzi, and Mario O. Teijeiro. Inflation and the Measurement of Fiscal Deficits 711

Bond, Marian E. An Econometric Study of Primary Commodity Exports from Developing Country Regions to the World 191

Borensztein, Eduardo R. Alternative Hypotheses About the Excess Return on Dollar Assets 29

Borensztein, Eduardo R., and Michael P. Dooley. Options on Foreign Exchange and Exchange Rate Expectations 643

Bovenberg, A. Lans. Indirect Taxation in Developing Countries: A General Equilibrium Approach 333

Collyns, Charles, and Steven Dunaway. The Cost of Trade Restraints: The Case of Japanese Automobile Exports to the United States 150

Dooley, Michael P., and Eduardo R. Borensztein. Options on Foreign Exchange and Exchange Rate Expectations 643

Dooley, Michael P., Jeffrey Frankel, and Donald J. Mathieson. International Capital Mobility: What Do Saving-Investment Correlations Tell Us? 503

Dunaway, Steven, and Charles Collyns. The Cost of Trade Restraints: The Case of Japanese Automobile Exports to the United States 150

Frankel, Jeffrey, Michael P. Dooley, and Donald J. Mathieson. International Capital Mobility: What Do Saving-Investment Correlations Tell Us? 503

Frenkel, Jacob A., and Assaf Razin. The Mundell-Fleming Model a Quarter Century Later: A Unified Exposition 567

Gros, Daniel. Protectionism in a Framework with Intra-Industry Trade 86

Gros, Daniel. The Effectiveness of Capital Controls: Implications for Monetary Autonomy in the Presence of Incomplete Market Separation 621

Halter, William A., and Richard Hemming. The Impact of Demographic Change on Social Security Financing 471

Hemming, Richard, and William A. Halter. The Impact of Demographic Change on Social Security Financing 471

Isard, Peter. Lessons from Empirical Models of Exchange Rates 1

Ize, Alain, and Guillermo Ortiz. Fiscal Rigidities, Public Debt, and Capital Flight 311

Johnson, Omotunde E.G. Trade Tax and Exchange Rate Coordination in the Context of Border Trading: A Theoretical Analysis 548

Kähkönen, Juha. Liberalization Policies and Welfare in a Financially Repressed Economy 531

Kanbur, S.M. Ravi. Measurement and Alleviation of Poverty: With an Application to the Effects of Macroeconomic Adjustment 60

Khan, Mohsin S., and Peter J. Montiel. Real Exchange Rate Dynamics in a Small, Primary-Exporting Country 681

Liviatan, Nissan, and Mario I. Blejer. Fighting Hyperinflation: Stabilization Strategies in Argentina and Israel, 1985–86 409

Mathieson, Donald J., Michael P. Dooley, and Jeffrey Frankel. International Capital Mobility: What Do Saving-Investment Correlations Tell Us? 503

Montiel, Peter J., Output and Unanticipated Money in the Dependent Economy Model 228

Montiel, Peter J., and Iqbal Zaidi. Cross-Regime Tests of the Lucas Supply Function in Developing Countries 760

Montiel, Peter J., and Mohsin S. Khan. Real Exchange Rate Dynamics in a Small, Primary-Producing Country 681

Mueller, Dennis C. The Growth of Government: A Public Choice Perspective 115

Ortiz, Guillermo, and Alain Ize. Fiscal Rigidities, Public Debt, and Capital Flight 311

Perraudin, W.R.M. Inflation and Portfolio Choice 739

Razin, Assaf, and Jacob A. Frenkel. The Mundell-Fleming Model a Quarter Century Later: A Unified Exposition 567

Rojas-Suarez, Liliana. Devaluation and Monetary Policy in Developing Countries: A General Equilibrium Model for Economies Facing Financial Constraints 439

Spaventa, Luigi. The Growth of Public Debt: Sustainability, Fiscal Rules, and Monetary Rules 374

Spiro, Peter S. The Elusive Effect of Fiscal Deficits on Interest Rates: Comment on Tanzi 400

Sundararajan, V. The Debt-Equity Ratio of Firms and the Effectiveness of Interest Rate Policy: Analysis with a Dynamic Model of Saving, Investment, and Growth in Korea 260

Tanzi, Vito. The Effect of Fiscal Deficits on Interest Rates: Reply to Spiro 404

Tanzi, Vito, Mario I. Blejer, and Mario O. Teijeiro. Inflation and the Measurement of Fiscal Deficits 711

Teijeiro, Mario O., Vito Tanzi, and Mario I. Blejer. Inflation and the Measurement of Fiscal Deficits 711

Zaidi, Iqbal, and Peter J. Montiel. Cross-Regime Tests of the Lucas Supply Function in Developing Countries 760

Titles

Alternative Hypotheses About the Excess Return on Dollar Assets. By Eduardo R. Borensztein 29

The Cost of Trade Restraints: The Case of Japanese Automobile Exports to the United States. By Charles Collyns and Steven Dunaway 150

Cross-Regime Tests of the Lucas Supply Function in Developing Countries. By Peter J. Montiel and Iqbal Zaidi 760

The Debt-Equity Ratio of Firms and the Effectiveness of Interest Rate Policy: Analysis with a Dynamic Model of Saving, Investment, and Growth in Korea. By V. Sundararajan 260

Devaluation and Monetary Policy in Developing Countries: A General Equilibrium Model for Economies Facing Financial Constraints. By Liliana Rojas-Suarez 439

An Econometric Study of Primary Commodity Exports from Developing Country Regions to the World. By Marian E. Bond 191

The Effectiveness of Capital Controls: Implications for Monetary Autonomy in the Presence of Incomplete Market Separation. By Daniel Gros 621

The Effect of Fiscal Deficits on Interest Rates: Reply to Spiro. By Vito Tanzi 404

The Elusive Effect of Fiscal Deficits on Interest Rates: Comment on Tanzi. By Peter S. Spiro 400

Fighting Hyperinflation: Stabilization Strategies in Argentina and Israel, 1985–86. By Mario I. Blejer and Nissan Liviatan 409

Fiscal Rigidities, Public Debt, and Capital Flight. By Alain Ize and Guillermo Ortiz 311

The Growth of Government: A Public Choice Perspective. By Dennis C. Mueller 115

The Growth of Public Debt: Sustainability, Fiscal Rules, and Monetary Rules. By Luigi Spaventa 374

The Impact of Demographic Change on Social Security Financing. By William A. Halter and Richard Hemming 471

Indirect Taxation in Developing Countries: A General Equilibrium Approach. By A. Lans Bovenberg 333

Inflation and Portfolio Choice. By W.R.M. Perraudin 739

Inflation and the Measurement of Fiscal Deficits. By Vito Tanzi, Mario I. Blejer. and Mario O. Teijeiro 711

International Capital Mobility: What Do Saving-Investment Correlations Tell Us? By Michael P. Dooley, Jeffrey Frankel, and Donald J. Mathieson 503

Lessons from Empirical Models of Exchange Rates. By Peter Isard 1

Liberalization Policies and Welfare in a Financially Repressed Economy. By Juha Kahkonen 531

Measurement and Alleviation of Poverty: With an Application to the Effects of Macroeconomic Adjustment. By S.M. Ravi Kanbur 60

The Mundell-Fleming Model a Quarter Century Later: A Unified Exposition. By Jacob A. Frenkel and Assaf Razin 567

Options on Foreign Exchange and Exchange Rate Expectations. By Eduardo R. Borensztein and Michael P. Dooley 643

Output and Unanticipated Money in the Dependent Economy Model. By Peter J. Montiel 228

Protectionism in a Framework with Intra-Industry Trade. By Daniel Gros 86

Real Exchange Rate Dynamics in a Small, Primary-Producing Country. By Mohsin S. Khan and Peter J. Montiel 381

Trade Tax and Exchange Rate Coordination in the Context of Border Trading: A Theoretical Analysis. By Omotunde E.G. Johnson 548

Subject Index

To facilitate electronic storage and retrieval of bibliographic data, with Volume 34 Staff Papers has adopted the subject classification scheme of the Economic Literature Index, developed by the Journal of Economic Literature and the Index of Economic Articles.1

0230 Macroeconomic Theory

  • Devaluation and Monetary Policy in Developing Countries: A General Equilibrium Model for Economies Facing Financial Constraints. By Liliana Rojas-Suarez 439

  • 0232 Theory of Aggregate Demand; Consumption

    • Inflation and the Measurement of Fiscal Deficits. By Vito Tanzi, Mario I. Blejer, and Mario O. Teijeiro 711

0250 Social Choice

  • The Growth of Government: A Public Choice Perspective. By Dennis C. Mueller 115

1120 Economic Development Models and Theories

  • Devaluation and Monetary Policy in Developing Countries: A General Equilibrium Model for Economies Facing Financial Constraints. By Liliana Rojas-Suarez 439

  • Liberalization Policies and Welfare in a Financially Repressed Economy. By Juha Kahkonen 531

1210 Economic Studies of Developing Countries

  • An Econometric Study of Primary Commodity Exports from Developing Country Regions to the World. By Marian E. Bond 191

  • Devaluation and Monetary Policy in Developing Countries: A General Equilibrium Mode! for Economies Facing Financial Constraints. By Liliana Rojas-Suarez 439

  • Cross-Regime Tests of the Lucas Supply Function in Developing Countries. By Peter J. Montiel and Iqbal Zaidi 760

  • 1211 Comparative Country Studies

    • Fighting Hyperinflation: Stabilization Strategies in Argentina and Israel, 1985–86. By Mario I. Blejer and Nissan Liviatan 409

  • 1214 Asian Countries

    • The Debt-Equity Ratio of Firms and the Effectiveness of Interest Rate Policy: Analysis with a Dynamic Model of Saving, Investment, and Growth in Korea. By V. Sundararajan 260

  • 1215 African Countries

    • Trade Tax and Exchange Rate Coordination in the Context of Border Trading: A Theoretical Analysis. By Omotunde E.G. Johnson 548

1330 General Economic Outlook

  • 1331 Stabilization Theories and Policies

    • Output and Unanticipated Money in the Dependent Economy Model. By Peter J. Montiel 228

    • Fighting Hyperinflation: Stabilization Strategies in Argentina and Israel, 1985–86. By Mario I. Blejer and Nissan Liviatan 409

    • Devaluation and Monetary Policy in Developing Countries: A General Equilibrium Model for Economies Facing Financial Constraints. By Liliana Rojas-Suarez 439

    • Cross-Regime Tests of the Lucas Supply Function in Developing Countries. By Peter J. Montiel and Iqbal Zaidi 760

1340 Inflation and Deflation

  • Inflation and Portfolio Choice. By W.R.M. Perraudin 739

  • Inflation and the Measurement of Fiscal Deficits. By Vito Tanzi, Mario I. Blejer, and Mario I. Teijeiro 711

  • 1342 Inflation Theories, Studies Illustrating Inflation Theories

  • Fighting Hyperinflation: Stabilization Strategies in Argentina and Israel, 1985–86. By Mario I. Blejer and Nissan Liviatan 409

2110 Econometric and Statistical Methods and Models

  • An Econometic Study of Primary Commodity Exports from Developing Country Regions to the World. By Marian E. Bond 191

  • Output and Unanticipated Money in the Dependent Economy Model. By Peter J. Montiel 228

  • Cross-Regime Tests of the Lucas Supply Function in Developing Countries. By Peter J. Montiel and Iqbal Zaidi 760

  • 2116 Time Series and Spectral Analysis

    • Options on Foreign Exchange and Exchange Rate Expectations. By Eduardo R. Borensztein and Michael P. Dooley 643

2230 Financial Accounts; Financial Statistics, Empirical Analysis of Capital Adequacy

  • Inflation and the Measurement of Fiscal Deficits. By Vito Tanzi, Mario I. Blejer, and Mario O. Teijeiro 711

3100 Domestic Monetary and Fiscal Theory and Institutions

  • Inflation and the Measurement of Fiscal Deficits. By Vito Tanzi, Mario I. Blejer, and Mario O. Teijeiro 711

3110 Domestic Monetary and Financial Theory and Policy

  • Fiscal Rigidities, Public Debt, and Capital Flight. By Alain Ize and Guillermo Ortiz311

  • 3116 Monetary Policy (Including All Central Banking Topics)

    • The Debt-Equity Ratio of Firms and the Effectiveness of Interest Rate Policy: Analysis with a Dynamic Model of Saving, Investment, and Growth in Korea. By V. Sundararajan 260

3130 Capital Markets

  • Alternative Hypotheses About the Excess Return on Dollar Assets. By Eduardo R. Borensztein 29

  • Fiscal Rigidities, Public Debt, and Capital Flight. By Alain Ize and Guillermo Ortiz311

  • International Capital Mobility: What Do Saving-Investment Correlations Tell Us? By Michael P. Dooley, Jeffrey Frankel, and Donald J. Mathieson 503

  • The Effectiveness of Capital Controls: Implications for Monetary Autonomy in the Presence of Incomplete Market Separation. By Daniel Gros 621

  • Inflation and the Measurement of Fiscal Deficits. By Vito Tanzi, Mario I. Blejer, and Mario O. Teijeiro 711

  • 3131 Capital Markets, Theory (Including Portfolio Selection)

    • Inflation and Portfolio Choice. By W.R.M. Perraudin. 739

3200 Fiscal Theory and Policy; Public Finance

  • The Growth of Government: A Public Choice Perspective. By Dennis C. Mueller 115

  • The Growth of Public Debt: Sustainability, Fiscal Rules, and Monetary Rules. By Luigi Spaventa 374

  • The Elusive Effect of Fiscal Deficits on Interest Rates: Comment on Tanzi. By Peter S. Spiro 400

  • The Effect of Fiscal Deficits on Interest Rates: Reply to Spiro. By Vito Tanzi 404

  • Inflation and the Measurement of Fiscal Deficits. By Vito Tanzi, Mario I. Blejer, and Mario O. Teijeiro 711

3220 National Government Expenditures and Budgeting

  • 3221 National Government Expenditures

    • The Impact of Demographic Change on Social Security Financing. By William A. Halter and Richard Hemming 471

  • 3228 National Government Debt Management

    • Fiscal Rigidities, Public Debt, and Capital Flight. By Alain Ize and Guillermo Ortiz311

    • The Growth of Public Debt: Sustainability, Fiscal Rules, and Monetary Rules. By Luigi Spaventa. 374

3230 National Taxation and Subsidies

  • Indirect Taxation in Developing Countries: A General Equilibrium Approach. By A. Lans Bovenberg 333

  • Trade Tax and Exchange Rate Coordination in the Context of Border Trading: A Theoretical Analysis. By Omotunde E.G. Johnson 548

4110 International Trade Theory

  • 4113 Theory of Protection

    • Protectionism in a Framework with Intra-Industry Trade. By Daniel Gros 86

  • 4114 Theory of International Trade and Economic Development

    • Liberalization Policies and Welfare in a Financially Repressed Economy. By Juha Kähkönen 531

4200 Trade Relations; Commercial Policy; International Economic Integration

  • Trade Tax and Exchange Rate Coordination in the Context of Border Trading: A Theoretical Analysis. By Omotunde E.G. Johnson 548

4210 Trade Relations

  • An Econometric Study of Primary Commodity Exports from Developing Country Regions to the World. By Marian E. Bond 191

4220 Commercial Policy and Trade Regulations; Empirical Studies

  • The Cost of Trade Restraints: The Case of Japanese Automobile Exports to the United States. By Charles Collyns and Steven Dunaway 150

  • The Effectiveness of Capital Controls: Implications for Monetary Autonomy in the Presence of Incomplete Market Separation. By Daniel Gros 621

4230 Economic Integration

  • 4232 Theory of Economic Integration

    • Liberalization Policies and Welfare in a Financially Repressed Economy. By Juha Kahkonen 531

4300 Balance of Payments, International Finance

  • An Econometric Study of Primary Commodity Exports from Developing Country Regions to the World. By Marian E. Bond 191

4310 Balance of Payments; Mechanisms of Adjustment; Exchange Rates

  • Alternative Hypotheses About the Excess Return on Dollar Assets. By Eduardo R. Borensztein 29

  • Measurement and Alleviation of Poverty: With an Application to the Effects of Macroeconomic Adjustment. By S.M. Ravi Kanbur 60

  • The Mundell-Fleming Model a Quarter Century Later: A Unified Exposition. By Jacob A. Frenkel and Assaf Razin 567

  • Real Exchange Rate Dynamics in a Small, Primary-Producing Country. By Mohsin S. Khan and Peter J. Montiel 681

  • 4314 Exchange Rates and Markets

    • Lessons from Empirical Models of Exchange Rates. By Peter Isard 1

    • Options on Foreign Exchange and Exchange Rate Expectations. By Eduardo P. Borensztein and Michael P. Dooley 643

    • The Effectiveness of Capital Controls: Implications for Monetary Autonomy in the Presence of Incomplete Market Separation. By Daniel Gros 621

4410 Theory of International Investment and Long-Term Capital Movements

  • 4412 International Investment and Capital Markets—International Investment and Long-Term Capital Movements, Studies

    • International Capital Mobility: What Do Saving-Investment Correlations Tell Us? By Michael P. Dooley, Jeffrey Frankel, and Donald J. Mathieson 503

5140 Goals and Objectives of Firms

  • The Debt-Equity Ratio of Firms and the Effectiveness of Interest Rate Policy: Analysis with a Dynamic Model of Saving, Investment, and Growth in Korea. By V. Sundararajan 260

6100 Industrial Organization and Public Policy

  • The Debt-Equity Ratio of Firms and the Effectiveness of Interest Rate Policy: Analysis with a Dynamic Model of Saving, Investment, and Growth in Korea. By V. Sundararajan 260

7110 Agricultural Supply and Demand Analysis

  • An Econometric Study of Primary Commodity Exports from Developing Country Regions to the World. By Marian E. Bond 191

8410 Demographic Economics

  • The Impact of Demographic Change on Social Security Financing. By William A. Halter and Richard Hemming 471

9140 Economics of Poverty

  • Measurement and Alleviation of Poverty: With an Application to the Effects of Macroeconomic Adjustment. By S.M. Ravi Kanbur 60

9150 Social Security, Public Superannuation and Survivors Benefits

  • The Impact of Demographic Change on Social Security Financing. By William A. Halter and Richard Hemming 471

9180 Economics of Aging

  • The Impact of Demographic Change on Social Security Financing. By William A. Halter and Richard Hemming 471

9210 Consumer Economics; Levels and Standards of Living

  • Inflation and Portfolio Choice. By W.R.M. Perraudin 739

Front Matter Page

INTERNATIONAL MONETARY FUND

STAFF PAPERS

Vol. 34 No. 4 DECEMBER 1987