Monetary and Fiscal Policy Design Issues in
Low-Income Countries

Prepared by the Policy Development and Review Department and the Fiscal Affairs Department
In consultation with other departments

August 8, 2005

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  1. Introduction
  2. Stylized Facts of PRGF-Supported Programs in Mature Stabilizers
  3. Monetary Policy Issues in PRGF-Supported Programs
    1. Inflation and Economic Growth
    2. Financial Programming
    3. Is Private Sector Credit Being Crowded Out?
  4. Fiscal Policy Issues in PRGF-Supported Programs
    1. The Fiscal Stance and Economic Growth in Mature Stabilizers
    2. Public Expenditure
    3. Tax Policy
  5. Conclusion

1. Why the “Mature Stabilizer” Moniker?
2. Targets and Projections in IMF-supported Programs
3. Social and Poverty-Reducing Spending
4. Seigniorage Income
5. Monetary Programming in Fund Program Design
6. De Facto Exchange Regimes (2001)
7. The Treatment of Concessional Loans in Fiscal Accounts
8. Public Debt Sustainability: The Case of Ethiopia
9. Absorptive Capacity Constraints and Policies to Ameliorate Them

1. Economic and Social Indicators in PRGF-eligible and Other Developing Countries
2. Inflation Targets in Original PRGF-supported Programs
3. Inflation Targets in Consecutive Program Updates
4. Fiscal Targets and Performance in Mature Stabilizers
5. Empirical Studies on “kinks” in the Relationship Between Inflation and Growth
6. Monetary Projections and Projection Deviations
7. NPV of Public Sector Debt for Selected Mature Stabilizer Countries
8. Evolution of the Revenue Structure in the Mature Stabilizer Sample
9. Selected VAT and CIT Indicators

1. Expenditure Targets in PRGF Programs, 2000-2003
2. Revenue Targets in PRGF Programs, 2000-2003
3. External Development Indicators in the Mature Stabilizers
4. Actual and Debt Stabilizing Current Account Balances
5. Deviation from Previous Year Projections for CPI and Broad Money Growth
6. Projected and Actual Percentage Change in Velocity
7. Projected and Actual Percentage Change in the Reserve Money Multiplier
8. Deviations from the Programmed Levels of NDA and NFA
9. Exchange-Rate Variability and Deviations from Previous-Year Broad Money Projection

I. The Accuracy of Consecutive Updates of Monetary Projections
II. The Efficiency of Monetary Projections
III. Measuring the Fiscal Stance and Accounting Issues
IV. NPV of Debt-Stabilizing Primary Balances
V. References