Government Role and the Efficiency of Policy Instruments

IMF Working Papers, October 1, 1995

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Government Role and the Efficiency of Policy Instruments

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Bibliographic details

• Authors: Vito Tanzi
• Published: October 1, 1995
• Series: IMF Working Papers
• DOI: https://doi.org/10.5089/9781451852349.001

Summary

• Comparisons about the role of the government in an economy are usually made by reference to the share of tax revenue or of public expenditure in gross domestic product.
• Governments often use other tools for pursuing their objectives; the paper discusses these other tools, shows the extent to which they can replace the traditional fiscal instruments, and assesses their quantitative importance.
• Various highly speculative hypotheses are advanced about the role of these other tools in countries at different levels of development.

Major themes and analysis

• Alternative instruments to traditional fiscal tools:
  • The paper identifies and discusses nontraditional tools governments use to pursue objectives beyond tax revenue and public expenditure.
  • It assesses the extent to which these other tools can substitute for traditional fiscal instruments.
  • Quantitative importance of these other tools is evaluated (details and estimates are in the full working paper).
• Cross-country and development-level hypotheses:
  • The paper advances various highly speculative hypotheses about how the role of these other tools differs across countries at different levels of development.
• Relation to public sector concepts:
  • Topics discussed relate to Central banks, Economic sectors, Expenditure, Foreign exchange, Public sector, Quasi-fiscal operations, Revenue administration.

Key findings and emphases

• Emphasis on measurement beyond standard metrics:
  • Standard comparisons based on tax revenue or public expenditure shares in GDP can miss other significant government activities.
• Quantitative assessment objective:
  • The author aims to show the extent and quantitative importance of nontraditional government tools relative to fiscal instruments.
• Speculative nature of some conclusions:
  • The paper explicitly advances "highly speculative hypotheses" rather than definitive assertions for cross-country differences.

Policy implications and recommendations

• Consider broader measurement of government role:
  • Policymakers and analysts should consider nontraditional instruments when evaluating the government's economic role and designing reforms.
• Analyze substitution possibilities:
  • Assess whether alternative tools can effectively replace traditional fiscal instruments in achieving policy objectives.
• Tailor analysis to development level:
  • Policy assessment should account for differences in how nontraditional tools operate across countries at different development stages.

Publication and metadata

• Author: Vito Tanzi
• Date: October 1, 1995
• Series: Working Paper No. 1995/100
• Issue: 100
• Volume: 1995
• Pages: 22
• DOI: https://doi.org/10.5089/9781451852349.001
• Stock No: WPIEA1001995
• ISBN: 9781451852349
• ISSN: 1018-5941
• Subject: Central banks; Economic sectors; Expenditure; Foreign exchange; Public sector; Quasi-fiscal operations; Revenue administration
• Keywords: country; Eastern Europe; government; government failure; government goal; government objective; government role; minimalist state; Public sector; Quasi-fiscal operations; reform of the State; role of the government; WP

Content based on "Government Role and the Efficiency of Policy Instruments", IMF Working Papers, Vito Tanzi, October 1, 1995.