How small should an economy ' s fiscal deficit be? - a monetary programming approach

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How small should an economy's fiscal deficit be? - a monetary programming approach, Volume 1

Author:	Beckerman, Paul;	Collection Title:	Policy, Reasearch working paper ; no. WPS 2308
Date Stored:	2001/04/25	Document Date:	2000/03/31
Document Type:	Policy Research Working Paper	Language:	English
Major Sector:	(Historic)Economic Policy	Report Number:	WPS2308
Sub Sectors:	Macro/Non-Trade	SubTopics:	Environmental Economics & Policies; International Terrorism & Counterterrorism; Economic Theory & Research; Payment Systems & Infrastructure; Economic Stabilization; Macroeconomic Management; Banks & Banking Reform
Volume No:	1

Summary: The author describes a spread-sheet planning model to help determine the government deficit consistent with a policymaker's "vector" of principal macroeconomic objectives (including real GDP growth, inflation, exchange rate, and international reserve accumulation). The model focuses on the monetary accounts, applying balance-of-payments forecasts formulated separately, but based on the same macroeconomic objectives. The model is a consistency exercise, intended as part of a broader consistency exercise for a given macro-economy. It offers one more perspective on the question of how large a government deficit should be - a perspective that can be used in conjunction with others. For each forecast period, the model determines consistent period-end and period-average stocks for the economy's outstanding central bank assets, and liabilities and, government obligations. I applies forecasting assumptions about interest rates to forecast central bank profit-and-loss flows, and takes account of these in determining the overall flow of resources that would be available to finance the government deficit. An annex describes a (purely illustrative) simulation carried out during 1999 for Ecuador.


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	PDF 35 pages	WPS2308	0.24

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