politically feasible and equitable adjustment some alternatives for ecuador abstract how can a government beholden to agroexporting interests survive while carrying out a stabilization program inimical to other powerful interests how can it reduce the social costs of the program the authors review the ecuadorian experience with these dilemmas and build a real financial cge model to explore alternative approaches to stabilization made necessary by both a reduction in public foreign borrowing and a fall in world oil prices the approaches considered include exchange rate devaluation fiscal austerity directed at current or investment spending and reduced growth of money supply each approach is assessed for its effects on gdp growth on rural and urban poverty and for its political sustainability assessed by changes in utility for politically dominant rural and urban interests the results show that cutting current spending is best for restoring growth and protecting the rural poor but is politically untenable making this approach politically feasible requires complementary economic reforms to increase the flexibility of the economy and raise the share of public investment going to agriculture social programs allowing some leakages in antipoverty transfers toward politically essential nonpoor and political campaigns to increase the relative autonomy of the state lower the social rate of discount whereby the public assesses the outcome of policy and induce the public to compare policy outcomes against the counterfactual scenario of no intervention instead of pre crisis living standards

assessing the global poverty effects of antimicrobial resistance abstract as a result of antimicrobial resistance amr economies will experience an increase in mortality reduced productivity for labor and the livestock sector and increased health care costs this paper assesses the potential global poverty impacts of amr using a unique macro micro framework to estimate poverty effects of amr price wage and employment results from a dynamic multi country multi sector computable general equilibrium cge model are used in a microsimulation model that integrates household surveys from 104 countries the analysis in this paper advances other studies of amr in two ways 1 it links macro results to a microsimulation model to provide insight on poverty impacts for the world economy and countries of different income levels and 2 it uses a global multi sector model rather than an aggregate global model to generate macroeconomic results with structural details for capturing the economy wide impact within countries and the spread across countries via trade flows relative to a world without amr the progression of antimicrobial resistance is expected to make it more difficult to eliminate extreme poverty potentially adding 24 1 million people to become extremely poor of whom 18 7 million live in low income countries the expected losses during 2015 50 may sum to 85 trillion in gross domestic product and 23 trillion in global exports in present value by 2050 the global gross domestic product could deviate negatively by 3 8 percent from the baseline in the worst case scenario considered because it is a global public bad the optimal policy response will require global cooperation the poverty outcomes induced by amr in all country groups will deteriorate with short sighted isolationist policies moreover assistance from high income countries to improve the economic resiliency of lower income countries will also benefit the higher income countries and world economy in general

common trends the government s budget constraint and revenue smoothing abstract the requirement that the government s budget be balanced in present value terms is shown to be equivalent to the condition that government expenditures inclusive of interest tax receipts and seignorage be cointegrated the condition is in fact stronger requiring that the deficit inclusive of interest be stationary stationarity of the net of interest deficit is neither necessary nor sufficient for intertemporal budget balance however it does have implications for barro s tax smoothing hypothesis data for the period 1890 1986 are consistent with intertemporal budget balance but not with tax smoothing

applied general equilibrium models of taxation and international trade an introduction and survey we wish to acknowledge the help of three referees and of john pencavel on several earlier drafts as well as the assistance of the modelers whose work is referred to in the paper they corrected our lack of understanding of their work and provided many other helpful comments excellent research and bibliographical assistance have been provided by debbie fretz radwan shaban and janet stotsky helpful comments have been made by charles ballard michael boskin lans bovenberg sylvester damus harvey galper glenn harrison gordon lenjosek jack mutti serena ng t n srinivasan charles stuart and eric toder the authors also acknowledgefinancial support from the national bureau of economic research the national science foundation international business machines and the social sciences and humanities research council ottawa canada

modeling the effects of adjustment programs on income distribution abstract this paper introduces the general structure of the micro macro economywide simulation model maquette used in several case studies on the impact of adjustment policies on the distribution of income the description of the maquette emphasizes how the short and medium run effects of adjustment packages are incorporated in a general equilibrium model and explains the common structure and variants in the specification and estimation of relationships in product factor financial and foreign exchange markets simulations are used to illustrate the role of differences in assumptions about market adjustment mechanisms e g fix price or flex price closed or open financial system on the effects of adjustment policies on the distribution of income adjustment to an external shock through devaluation or through fiscal retrenchment is then contrasted for an economy with different degrees of financial and foreign trade openness the simulations show that assumptions about macroeconomic closures and behavioral parameters matter a great deal in determining the productive and distributive effects of a shock and a country s adjustment to that shock

endogenous government spending and ricardian equivalence many analyses of debt policy assume exogenous government expenditures instead the author uses an optimizing model in which the government endogenously selects values of taxes spending and debt to maximize welfare if demand for publicly provided goods is elastic a debt financed tax cut increases consumption because individuals rationally expect some reduced government spending in the future even though future taxes rise they do not offset the expansionary effect of the current tax cut on consumption depending on preferences the marginal propensity to consume out of tax cuts can take any value between zero and the marginal propensity out of ordinary income copyright 1992 by royal economic society

discounting in integrated assessments of climate change one of the key decisions that economists working on integrated studies of climate change face is the selection of the method of accounting for damages resulting from possible climate change across a long temporal scale and the method for the intertemporal comparison of the costs associated with possible greenhouse gas abatement strategies sensitivity tests show that the method applied and the resulting discount rate has a major impact on the optimal climate strategy the paper is intended to provide a short review of the various techniques that have been proposed and applied in various integrated models of climate change the underlying problem is as follows we can attempt to be consistent with the economic theory and empirical observations but in this case the derived discount rate will be on the order of 5 to 8 as a result even possibly significant damages from climate change turn out to be negligible when considered at their present value the artificially low discount rate based on ethical reasoning on the other hand makes our climate related decisions and resource allocations inconsistent with the majority of other public policy decisions

seigniorage operating rules and the high inflation trap there may be both a high and a low inflation equilibrium when the government finances the deficit through seigniorage under rational expectations the high inflation equilibrium is stable and the low inflation equilibrium unstable under adaptive expectations or lagged adjustment of money balances with rational expectations the low inflation equilibrium may be stable adding bond financing dual equilibria remain if the government fixes the real interest rate but a unique equilibrium is attained when the government sets a nominal anchor for the economy the existence of dual equilibria is thus a result of the government s operating rules

impact of switching production to bioenergy crops the switchgrass example this paper reports the results from simulations that evaluate the general equilibrium effects of substituting switchgrass a biomass for crude oil in usa petroleum production the new production process is less efficient and usa gdp declines slightly as switchgrass production expands usa agriculture contracts and the world price of cereals increases the world price of crude oil falls as usa import demand declines the net effect of the price and income changes is a general decline in economic welfare moreover the declines in welfare are proportionately greater for developing countries who produce small quantities of agricultural commodities whose prices increase

an analysis of the climate change architecture abstract this paper examines the complexity of the current negotiations to avert climate change under the united nations framework convention on climate change drawing on economic game theory modelling it interprets the latest developments within the international negotiations and provides a political economy analysis of the climate change architecture it places the pursuit of international co operation via the kyoto protocol s second commitment period in the context of a country s maintenance of national interest and a flexible emissions abatement strategy accepting that countries will reject an international agreement or obligation that is seen as inimical to their economic competitiveness it incorporates a new game theory model considers how learning from such models can influence agreement design and proposes a new approach from a non monotonic polluting payoff function attention is placed on enabling conditions that entice countries to ratify a climate agreement thereby encouraging participation and accelerating a near term deployment of low carbon technologies

macroeconomics financial variables and computable general equilibrium models abstract this paper surveys micro macro computable general equilibrium cge models that incorporate asset markets and product and factor markets recent models are designed to analyze the impact on economic performance and the distribution of income in developing economies of structural adjustment and stabilization programs implemented in response to macro shocks these financial cge models add a loanable funds market incorporating a variety of assets to a cge model that already incorporates flow equilibria in product and factor markets these financial models start from tradefocused cge models and also draw on earlier work with micro and macrostructuralist models in specifying the interactions between financial variables and the real side of the economy the paper also compares these models to dynamic macro models both short run adaptive models with lagged adjustment mechanisms and longer run forward looking models the paper discusses the theoretical problems such models face in reconciling micro focused cge models with macro models incorporating dynamic behavior

external debt capital flight and political risk abstract this paper explains the simultaneous occurence of large external debts private capital outflows and low domestic capital formation we consider a general equilibrium model in which two government types with conflicting distributional goals randomly alternate in office uncertainty over the fiscal policies of future governments generates capital flight and small domestic investment and induces the government to overaccumulate external debt the model also predicts that left wing governments are more inclined to restrict capital outflows than right wing governments finally we examine how political uncertainty affects the risk premium and how debt repudiation may occur after a regime change

commercial policy and the domestic carrying trade in this paper the authors examine the economic consequences of existing u s restrictions on trade in domestic water transportation cabotage services they briefly trace the history of u s policy on cabotage the authors also use an applied general equilibrium model of the united states to analyze the effects of the jones act on welfare and on production trade and employment in important upstream and downstream sectors the economic effects of u s maritime policies rank them with u s trade policies like the mfa the automobile and steel quotas of the mid 1980s and agricultural import restraints coauthors are hugh m arce kenneth a reinert and joseph e flynn

government expenditure and the dynamics of high inflation abstract this paper develops a dynamic model of inflation where the money supply is determined by the government s use of newly created money to finance its budget deficit in turn the government s deficit is influenced by past inflation rates that reduce the real value of tax receipts while the money supply and the budget deficit are modeled as endogenous government expenditure is assumed to be exogenously determined by the policymaker changes in fiscal policy are allowed by modeling expenditure as an autoregressive process subject to discrete switches in regime agents are conjectured to have access to a larger set of information than the researcher this additional information is incorporated in the rate of inflation through the agents money demand decision the econometrician constructs probability assessments concerning the regime of the spending process at every point in time and refine his her inferences by exploiting the structural relationship between inflation money growth and government expenditure

an intertemporal general equilibrium analysis of financial crowding out a policy model and an application to australia abstract this paper constructs a two period perfect foresight general equilibrium model that analyzes crowding out private investment is debt financed while government deficits are financed by money and debt the existence of equilibrium is demonstrated and the model is applied to australia for 1981 1982 the last years for which australia had a fixed exchange rate a benchmark solution is derived and two counterfactual simulations are carried out small increases in real government spending are found not to lead to crowding out while an increase in the debt financed portion of the government s budget deficit does lead to crowding out

economic convergence and climate policy abstract this paper addresses the relevance of the economic convergence hypotheses between the developing and the developed world in international greenhouse gas ghg emissions negotiations the results are based on a two region the oecd and the rest of the world row neo classical growth model with exogenous technical progress different technological diffusion patterns and a set of geophysical relationships that consider an environmental externality linked to ghg emissions a game framework is taken into account in the model to capture the strategic interactions between agents the outcome of the negotiations seems indeed to depend on the economic convergence hypotheses faster economic growth of the row countries would encourage them to further mitigate carbon emissions

the ricardian approach to budget deficits persistent budget deficits have increased economists interest in theories and evidence about fiscal policy this paper develops the ricardian approach and contrasts it with standard models the discussion considers from major theoretical objections to ricardian equivalence finite lifetimes imperfect capital markets uncertainty about future taxes and incomes and the distorting effects of taxation the paper then considers empirical evidence on interest rates consumption and saving and current account deficits the conclusion is that the ricardian approach is a useful first order approximation and that this approach will probably become the benchmark model for assessing fiscal policy this abstract was borrowed from another version of this item

international co2 emissions control an analysis using ceta abstract this paper explores issues of international cooperation in co2 emission control we consider three cases selfish in which region 1 controls optimally given its own damage costs and region 2 does not control altruistic in which region 1 controls optimally given total worldwide damage costs while region 2 does not control and optimal in which regions 1 and 2 exercise jointly optimal control of emissions and region 1 pays region 2 to participate we find that neither region gains much in the selfish case but both regions are better off in the optimal case than in the altruistic case though region 1 s benefits are negative in both these cases

on the limitations of government borrowing a framework for empiricaltesting this paper seeks to distinguish empirically between two views on the limitations of government borrowing according to one view nothing precludes the government from running a permanent budget deficit paying interest due on the growing debt load simply by issuing new debt an alternative perspective holds that creditors would be unwilling to purchase government debt unless the government made a credible commitment to balance its budget in present value terms we show that distinguishing between these possibilities is mathematically equivalent to testing whether a continuing currency inflation might be fueled by speculation alone or is instead driven solely by economic fundamentals empirical tests which have been developed for this economic question lead us to conclude that postwar u s deficits are largely consistent with the proposition that the government budget must be balanced in present value terms this abstract was borrowed from another version of this item

why are stabilizations delayed when a stabilization has significant distributional implications e g tax increases to eliminate a large budget deficit socioeconomic groups may attempt to shift the burden of stabilization onto other groups the process leading to stabilization becomes a war of attrition each group attempting to wait the others out and stabilization occurring only when one group concedes and bears a disproportionate share of the burden the authors solve for the expected time of stabilization in a model of rational delay and relate it to several political and economic variables they motivate this approach and its results by comparison to historical and current episodes copyright 1991 by american economic association

budget balance through revenue or spending adjustments abstract the paper provides a historical perspective on the issue of whether budget deficits are typically eliminated by increased taxes or by reduced spending by examining u s budget data from 1792 1988 i conclude that about 50 65 of all deficits due to tax cuts and about 65 70 of all deficits due to higher government spending have been eliminated by subsequent spending cuts while the remainder was eliminated by subsequent tax increases in contrast to previous studies the empirical analysis uses error correction models in a way that the intertemporal budget constraint is imposed in the estimation stage

global models applied to agricultural and trade policies a review and assessment the continuing process of global integration bears implications for farmers and related supplying and processing industries in all parts of the world but also for the rest of the world economy an assessment of agricultural and trade policy impacts is bound to be complex and is often supported by quantitative modeling analysis this article provides an assessment of the present state of applied modelling in the area of trade and agricultural policies we provide in this paper a comparative assessment of alternative modelling approaches considering a total of 16 partial equilibrium and general equilibrium models the assessment includes theoretical modelling foundations datasets employed and institutional aspects such as model maintenance and dissemination of results a typology of models is provided by structuring the assessment along a clear set of evaluation criteria

trade reform in the partially liberalized economy of turkey recent reforms in trade policy in turkey have produced a foreign trade regime that exhibits very little antiexport bias on average a quantitative multisectoral general equilibrium model of the turkish economy shows that piecemeal trade policy reform based on first best rationales that are appropriate for highly distorted economies would not now be appropriate further tariff reductions must be coordinated with export subsidy reductions to attain significant welfare benefits the dispersion of distortions especially export subsidies is more important than their level a policy of harmonizing tariffs to the common external tariff of the european community has virtually no effect on welfare

distribution of potential gains from international environmental agreements the case of the greenhouse effect abstract international negotations between countries will be needed to reach a pareto efficient solution for global environmental problems such as the enhanced greenhouse effect we try to quantify how the potential gains derived from cooperation would be distributed among countries a weighted sum of all countries welfare functions is used as the global welfare function and three different cooperative solutions are considered thefirst best fb thenash bargaining nb and thekalai smorodinsky ks the main result obtained from the simulation of the theoretical model is that although at the world level gains from cooperation are quite similar in all three cooperative solutions distribution of these gains between countries is very different in the fb solution compared to the nb and the ks solutions

asian growth and trade poles india china and east and southeast asia summary using a global general equilibrium trade model this study analyzes the impact on developing countries of 1 the dramatic expansion of trade by india china and an integrated east and southeast e se asia trade bloc and 2 productivity growth in the region china is an integral member of the e se asia bloc with strong links through value chains and trade in intermediate inputs while india is not a part of any trade bloc the analyses consider the importance of their different degrees of integration into regional and global economies focusing on potential complementarities and competition with other developing countries

the budget process and the size of the budget the new congressional budget process provides members of congress with a new set of institutional mechanisms for making budget decisions this article addresses the question of whether or under what conditions rigid application of the new budget process modeled as first selection of the size of the budget and second its division produces smaller budgets than a piecemeal appropriations process in which the size of the budget is determined residually the theoretical result is that the new process sometimes results in relatively large budgets a testable implication of the theory is that given a choice of how stringently the budget process is to be employed members of congress jointly consider preferences and the expected outcomes under available institutional arrangements and select the arrangement usually a rule that yields the most favorable outcome empirical results from the budget process in the house from 1980 to 1983 are generally supportive of the theoretically derived hypothesis of rational choice of institutional arrangements

product differentiation and the treatment of foreign trade in computable general equilibrium models of small economies this paper examines the treatment of exports and imports and external closure rules adopted in recent single country computable general equilibrium models of small economies the paper presents a simple one sector analytic model which captures the major features of the multi sector counterpart used in applied models the paper derives graphical and algebraic solutions to the model and shows that unlike some earlier external closures this one gives rise to a well behaved price taking economy the model is also useful to illustrate the role of elasticities in popular trade theoretic models that include traded and non traded goods

assessing the impacts of china s environmental tax using a dynamic computable general equilibrium model abstract since 2018 china has put into practice the new environmental protection tax law which levies taxes on non greenhouse pollutants with stringent standards to fully study the socioeconomic and environmental impacts of this policy this paper establishes a dynamic country level compute general equilibrium cge model with the electricity sector disaggregated into 5 technologies and 19 major taxable pollutants included five scenarios are developed including the baseline scenario bau the low environmental tax scenario lowet the high environmental tax scenario highet the low environmental tax and low carbon tax scenario lowetc and the high environmental tax and high carbon tax scenario highetc the simulation results show that the environmental tax could help reduce emissions of most kinds of pollutants but bring negative effects on the gross domestic product gdp compared to the bau scenario the gdp loss by 2030 would be 0 10 0 21 0 32 and 0 67 in the lowet highet lowetc and highetc scenarios the emission of sulphur dioxide so2 will decrease by 3 55 7 15 6 70 and 13 01 and the emission of carbon dioxide co2 will be reduced by 2 21 4 62 8 91 and 16 77 the result also shows that the heavy polluted sectors and energy intensive sectors will suffer higher output loss while the clean energy sectors and service sector will experience an increase in the output in the policy scenarios

bilateral free trade agreements and customs unions the impact of the eu republic of south africa free trade agreement on botswana the eu has indicated that after 2008 its trade relationships with developing countries will be dominated by the development of preferential trade agreements although not a consequence of the cotonou agreement the free trade agreement between the eu and the republic of south africa eu rsa fta is clearly one of the first fruits of this approach to trade relationships however there is no evidence that the design of the eu rsa fta incorporated a comprehensive general equilibrium evaluation of the agreement for either the signatories or the other southern african nations the analyses reported here indicate that while the eu rsa fta may substantially benefit the signatories there are appreciable negative impacts for other states especially the rsa s immediate neighbours moreover the reluctance of the eu to fully liberalise trade in food and agriculture commodities results in a major reduction in the benefits for the rsa without ameliorating substantively the adverse implications for other nations

the relative inefficiency of quotas the cheese case the nonequivalence of tariffs and quotas under a wide variety of circumstances is well established in economic theory this study considers heterogeneity as a source of nonequivalence and demonstrates its practical importance where restriction is inevitable the bias of economists in favor of price instruments is not thoroughly grounded this study should help provide a foundation the point of departure from the equivalence model is differentiation of products

poverty and macroeconomic policy in malaysia 1979 1987 abstract exploring the effects on malaysia s poor of the early 1980s recession and the mid 1980s adjustment demery and demery use an applied general equilibrium model to asses three counterfactual policy packages against the chosen package the first package assumes an earlier preemptive adjustment to see whether delaying the decision to accept the economic and political consequences of adjustment made matters worse for poor households the second assumes milder fiscal restraint timed with the actual restraint but a bolder devaluation of the ringgit to see whether it might have been possible to speed the recovery without increasing the adverse effects on the poor the third assumes stiffer taxes to raise revenue and correct the public deficits that the milder restraint of the second package could not only the third package comes close to achieving the actual outcome but at the cost of hurting the poor as happens with the first two packages the government s chosen policies for cutting and switching expenditures and devaluing the exchange rate thus did much to protect the poor the slowdown in poverty alleviation in the mid 1980s was the result of the recession not of the adjustment policies the government had few alternatives to restore the macroeconomic balances as effectively without making matters even worse for the poor

fiscal reaction under endogenous structural changes in brazil abstract regarding the importance of fiscal policy in smoothing the impact of shocks such as the international financial and economic crises the paper analyzes the sustainability of the brazilian fiscal policy by taking into consideration the possibility of multiple endogenous structural breaks on the coefficients of government reaction function from monthly data in the period 1991 2008 tests on the reliable estimates dictate the occurrence of structural change in may 1994 and another in february 2003 there has been a situation of fiscal solvency in brazil but only from may 1994 the hitherto innocuous actions of government to formulate policies on public debt turn out to be significant as it rose twofold after february 2003 this reinforces the existence of a more flexible alternative to implement strategic policy in brazil if an eventual alternative for increasing public spending is a way of hindering the effects of international financial crises without compromising the fiscal targets

government budget deficits and trade deficits are present value constraints satisfied in long term data abstract we test whether long term data from the u s and u k are consistent with the intertemporal government budget constraint and external borrowing constraint both individually and simultaneously a very strong test is provided by our focus on whether the present value constraints pvcs continue to hold despite unusual events such as wars that cause a structural break in the short run dynamic behavior of the variables we find that the pvcs hold over the whole sample period the data also indicate that the pvcs continue to hold following events that cause a structural break in the short run dynamics

on some properties of a trade closure widely used in numerical modelling abstract armington trade models with price taking behaviour and cet and ces functions may have perverse offer curves and nash equilibria in tariff games may not exist in the two country case

oil price shocks and policy responses in the post reform chinese economy this study analyses the impact of the 1986 oil price shock on china and the policy options for accommodating the shock a computable general equilibrium model is used to capture the complex interactions in the chinese economy in response to the shock interpreted in the theoretical framework of the booming sector model the results of the model provide insights on both the real and monetary effects of the shock and suggest that a combination of policy instruments such as a cut in real absorption depreciation of the official exchange rate and tight monetary control are required to facilitate adjustment

seasonal rural labor markets and their relevance to policy analyses in developing countries abstract seasonality is a salient feature of rural livelihoods and particularly within agriculture the demand for labor varies with the seasons and weather in low income countries agriculture employs almost two thirds of the labor force and incomes from labor are a major determinant of welfare therefore an appropriate model representation of rural labor markets is critical when analyzing agricultural and food policies economy wide models are commonly used for ex ante policy analysis but have so far ignored the influence of seasonality implicitly assuming separability of seasonal labor demand and supply this study relaxes that assumption using a computable general equilibrium cge model calibrated to the bhutanese economy as an illustrative case using model setups with and without seasonal labor markets a cereal export ban of india is simulated leading to higher import prices for bhutan results demonstrate that neglecting the influence of seasons on rural labor markets systematically biases model results assuming homogeneity of labor units i e allowing substitution across seasons understates the impacts of policy changes on rural wage rates distorts households labor leisure trade off decisions and overstates agricultural supply response given the widespread use of economy wide models the results are important for understanding the implications of domestic and global policy changes for agriculture and welfare in developing economies

estimating a fiscal reaction function the case of debt sustainability in brazil this article reviews recent trends in fiscal performance in brazil estimates fiscal reaction functions for the consolidated public sector and different levels of government and tests for the sustainability of the public debt dynamics the empirical analysis based on monthly data for the period 1995 2004 suggests that all levels of government react strongly to changes in indebtedness by adjusting their primary budget surplus targets in addition the central government appears to follow a spend and tax policy changes in revenue are affected strongly by expenditure about two thirds of changes in primary spending are offset by higher revenue over the longer term institutions are also found to matter for fiscal sustainability the responsiveness of the sub national fiscal stance to indebtedness as well as that of central government revenue to changes in primary spending appears to have become stronger after 1998 when ceilings on indebtedness were introduced

export supply capacity and relative prices in the neoclassical approach to specifying an export supply equation relative prices and capacity are assumed to play a crucial role in domestic firms decisions to supply exports in the keynesian approach the willingness of domestic firms to supply foreign markets is considered to be largely a function of domestic demand pressure keynesian analyses do not allow for the impact of relative prices this paper blends the two approaches in a model in which a firm is assumed to choose first the level of productive capacity and then one period later to determine production and allocation between foreign and domestic markets on the basis of realized prices demand conditions and installed capacity the conclusion both prices and capacity are significant determinants of export supply

macroeconomic adjustment and income distribution alternative models applied to two economies abstract to analyze the impact of alternative macroeconomic adjustment mechanisms on the distribution of income in developing countries we construct a cge model that is general enough to incorporate neoclassical neo keynesian and a variety of structuralist macro closure rules the model is applied to two economies brazil and korea with alternative macro closures both for savings investment and for the balance of trade we find that 1 the size distribution of income is largely insensitive to macro closure rules 2 the functional distribution is very sensitive to macro closure rules and 3 the balance of trade closure is at least as important in determining distributional outcomes as the savings investment closure

adjustment incomes and poverty in morocco abstract although fiscal and balance of payments problems began in 1976 morocco did not introduce its stabilization program until 1983 the combination of a short term stabilization program devaluations reductions in public investment and slower growth in domestic credit and government employment and medium term structural adjustment measures liberalizing trade agriculture and financial markets reduced internal and external deficits while maintaining economic growth and preventing an increase in poverty model simulations of three alternative approaches show that the macroeconomic policy adopted could have been better but only slightly they also show that the timing of the program was suited to the exogenous shocks morocco faced and helped to keep the social costs of adjustment low although additional macroeconomic measures and higher direct taxes on high income households could have reduced them even further

quantifying the impact of services liberalization in a developing country the authors consider how service liberalization differs from goods liberalization in terms of welfare the level and composition of output and factor prices within a developing economy in this case tunisia despite recent movements toward liberalization tunisian service sectors remain largely closed to foreign participation and are provided at high cost relative to many developing nations the authors develop a computable general equilibrium cge model of the tunisian economy with multiple products and services and three trading partners they model goods liberalization as the unilateral removal of product tariffs restraints on services trade involve both restrictions on cross border supply mode 1 in the gats and on foreign ownership through foreign direct investment mode 3 in the gats the former are modeled as tariff equivalent price wedges while the latter are comprised of both monopoly rent distortions arising from imperfect competition among domestic producers and inefficiency costs arising from a failure of domestic service providers to adopt least cost practices they find that goods trade liberalization yields a gain in aggregate welfare and reorients production toward sectors of benchmark comparative advantage however a reduction of services barriers in a way that permits greater competition through foreign direct investment generates larger welfare gains service liberalization also requires lower adjustment costs measured in terms of sectoral movement of workers than does goods trade liberalization and it tends to increase economic activity in all sectors and raise the real returns to both capital and labor the overall welfare gains of comprehensive service liberalization amount to more than 5 percent of initial consumption the bulk of these gains come from opening markets for finance business services and telecommunications because these are key inputs into all sectors of the economy their liberalization cuts costs and drives larger efficiency gains overall the results point to the potential importance of deregulating services provision for economic development

public debt sustainability and endogenous seigniorage in brazil time series evidence from 1947 1992 abstract in this paper we investigate three central issues in public finance first was the path of public debt sustainable during 1947 1992 second how has the government balanced the budget after shocks to either revenues or expenditures were observed third are expenditures exogenous the results show that i debt is sustainable in econometric tests with the budget being balanced almost entirely through changes in taxes regardless of the cause of the initial imbalance expenditures are weakly exogenous ii the behavior of a rational brazilian consumer may be consistent with ricardian equivalence iii seigniorage revenues are critical in restoring intertemporal budget equilibrium

debt ceiling and fiscal sustainability in brazil a quantile autoregression approach abstract in this paper we investigate fiscal sustainability by using a quantile autoregression qar model we propose a novel methodology to separate periods of nonstationarity from stationary ones allowing us to identify various trajectories of public debt that are compatible with fiscal sustainability we use such trajectories to construct a debt ceiling that is the largest value of public debt that does not jeopardize long run fiscal sustainability we make an out of sample forecast of such a ceiling and show how it could be used by policy makers interested in keeping the public debt on a sustainable path we illustrate the applicability of our results using brazilian data

limited liability wealth differences and tenancy contracts in agrarian economies abstract an explanation is provided for two observations concerning variations in the choice of tenants and their welfare differences in tenants wealth imply corresponding differences in liability when default is possible on fixed rental commitments in this context the inability of landlords to specify their tenants effort lead to effort choices that vary with the type of contract offered the selection of tenants and the contract terms they receive thus depend on wealth with wealthier tenants being preferred and receiving fixed rent contracts these results also predict that wealthier tenants earn higher profits on their leased plots

external shocks purchasing power parity and the equilibrium real exchange rate two approaches are commonly used to determine the equilibrium real exchange rate in a country after external shocks purchasing power parity ppp calculations and the salter swan tradables nontradables model there are theoretical and empirical problems with both approaches and tensions between them in this article the authors resolve these theoretical and empirical difficulties by presenting a model which is a generalization of the salter swan model and which incorporates imperfect substitutes for both imports and exports within the framework of this model the definition of the real exchange rate is consistent both with that of the ppp approach and with that of the salter swan model suitably extended the model however is capable of capturing a richer set of phenomena including terms of trade shocks and changes in foreign capital inflows it also provides a practical way to estimate changes in the equilibrium real exchange rate requiring little more information than is required to do ppp calculations the results are consistent with those of multisector computable general equilibrum models which generalize the trade specification of the small model

external sector closing rules in applied general equilibrium models abstract this paper examines formulations of external sector behavior adopted in some of the recent applied general equilibrium models in many cases these models are constructed for single economies and the model builder attempts to use a convenient external sector specification to close the model issues and difficulties with export demand and import supply functions for foreigners which satisfy trade balance and the modeling of small economy price taking behavior are explored

political and monetary institutions and public financial policies in the industrial countries institutions and policies vittorio grilli donato masciandaro and guido tabellini why do countries as similar as the industrialized oecd countries go through such different experience in terms of public deficits and debts or in terms of inflation the answer cannot come from macroeconomic policy responses to different disturbances nor from the principles of optimal taxation but rather from politics this article focuses on the role that particular institutions exert in providing constraints and incentives which shape the actions of policymakers the electoral process and political traditions affect the ability of governments to deal with deficits and mounting debts what seems to matter most it is found is the effect of the durability of governments governments with short horizons act myopically and never quite tackle the hard choices such governments typically exist in countries with an electoral system favouring many small political parties central bank independence promotes low inflation with no apparent costs in terms of real economic performance irrespective of the political institutions in fact there is no link between monetary and fiscal discipline these findings carry powerful implications for countries facing high indebtedness or stubborn inflation but also for the construction of the european economic and monetary union

a regional dynamic general equilibrium model of alternative climate change strategies outcomes and noncooperative equilibria this study finds that cooperative policies show much higher levels of emissions reductions than do noncooperative strategies that there are substantial differences in the levels of controls in both the cooperative and the noncooperative policies among different countries and that high income countries may be the major losers from cooperation jel h41 q4 q2 q20

adjustment with a fixed exchange rate cameroon cote d ivoire and senegal as members of the cfa franc zone cameroom cote d ivoire and senegal cannot use the nominal exchange rate as a tool of macroeconomic adjustment this article considers these countries responses to the commodity and oil price shocks of the 1970s in light of this and other institutional constraints using a two sector model it shows that there exist instruments that in principle permit the real exchange rate depreciation necessary for adjusting to macroeconomic imbalances the authors interpret the very different adjustment experiences of the three countries despite their common economic structure and institutional setting in terms of different uses of these instruments alternative assumptions about the labour market leave the qualitative nature of the results unaltered statistical analysis of data from the three countries confirms the model s linking of the current account and real exchange rate with the instruments of adjustment

global models of trade in agriculture and related environmental modelling a review and assessment the continuing process of global integration bears implications for farmers and related supplying and processing industries in all parts of the world but also for the rest of the world economy an assessment of agricultural and trade policy impacts is bound to be complex and is often supported by quantitative modeling analysis this article provides an assessment of the present state of applied modelling in the area of trade and agricultural policies we provide in this paper a comparative assessment of alternative modelling approaches considering a total of 16 partial equilibrium and general equilibrium models the assessment includes theoretical modelling foundations datasets employed and institutional aspects such as model maintenance and dissemination of results a typology of models is provided by structuring the assessment along a clear set of evaluation criteria

adjustment growth and income distribution in indonesia during the decade of the 1970s and until 1982 the growth performance of the indonesian economy was very good with gdp growing at 7 2 percent per annum oil exports provided the major engine of growth for the entire economy during that period in addition within agriculture growth was fueled by the boom in paddy production which converted indonesia from the largest rice importing country in the world to virtual self sufficiency by the mid 1980s paddy production increased at an annual rate of 7 1 percent between 1978 80 and 1983 4 the two oil price booms of 1973 and more particularly 1979 fueled a major expansion of the economy which lasted until the crisis the predominant role of the oil sector is clearly revealed by recalling that earnings from crude oil and petroleum products accounted for two thirds of all export earnings one fourth of total gnp and 70 percent of government domestic revenues in 1982 oil prices peaked in 1982 and revenues from this sector started to contract reducing drastically the basis and prospects for economic growth