Debts and deficits with fragmented fiscal policymaking

Fiscal Deficits and Currency Crises

This paper investigates currency and financial crises in an optimizing general equilibrium model. It is shown that a rise in current and expected future budget deficits generates a real exchange rate appreciation and a decumulation of external assets, leading up to a currency crisis when foreign reserves approximate a critical level. Strong empirical support for our model is obtained by a probi...

The Empirical Relationship between Fiscal Deficits and Inflation (Case Study: Selected Asian Economies)

Abstract T he relationship between public sector deficits and inflation is one of the important and controversial issues in the academic literature as well as in economic policy field. On the other hand, a major objective of macroeconomic policies is to foster economic growth and to keep inflation on a low level. So keeping the price stability plays an important role in de...

Inflation Stabilization, Fiscal Deficits, and Public Debt Management in Poland

Poland edged toward hyperinflation in the latter half of 1989, but inflation fell dramatically after drastic reforms were enacted in January of 1990. We analyze the consistency between fiscal deficits and inflation targets, and we assess Poland’s domestic and foreign debt management policies and the impact of the Brady debt reduction agreement on the relationship between fiscal deficits and inf...

Dynamic Policymaking with Decay∗

It is often said that the only constant is change itself. As time passes, the population grows, new technologies are invented, and the skills, demographics, and norms of the populace evolve. These changes, whether in isolation or in aggregate, impact the effectiveness of policy. In particular, policies designed for today’s world are unlikely to provide a perfect fit tomorrow. In this paper we d...

Analysing the Sustainability of Fiscal Deficits in Developing Countries