Well-executed high-yielding public investment programs can substantially raise output and consumption and be self-financing in the long run. Drawing on the method in Svensson and Woodford 2004 , we show that the optimal adherence to ex-ante targets is equivalent to a signal extraction problem where the central bank uses the money market information to update its estimate of the state of the economy. With coordination between monetary and fiscal policies, standard inflation targeting with flexible exchange rate becomes a more effective policy framework in terms of both stabilization and welfare performance. Natural resource revenues provide a valuable source to finance public investment in developing countries, which frequently face borrowing constraints and tax revenue mobilization problems. Under complete markets, inter-temporal substitution prevails, making the inflationary impact of international food prices proportional to the food share in consumption, which in developing economies is typically large. Our analysis additionally shows that reinvestment in road infrastructure, given the initial state of infrastructure in Niger, could help mitigate the resource curse.
Evaluation of the above alternative policy regimes and relative stability of key macroeconomic variables are conducted through an optimal Ramsey policy method. Since consumption and investment decisions are optimal, the model also serves to provide current account benchmarks norms. Implementation errors result from insufficient accommodation to money demand shocks, creating a noisy wedge between actual and intended interest rates. Consequently, investment progress can be interrupted, driving up the capital depreciation rate, undermining economic stability, and lowering the growth benefits of public investment. It also allows for flexible fiscal specifications: investment can be jointly financed by resource revenues and debt; a resource fund may be used as a buffer; and distorting fiscal adjustments are subject to feasibility constraints.
It captures pervasive problems of these countries that may be aggravated during scaling-ups, including investment inefficiency and limited absorptive capacity. Absent sterilization, a peg allows for almost full aid absorption—an increase in the current account deficit net of aid—delivering the same effects as those of a flexible regime but with a necessary increase in inflation. Under financial autarky, the income channel is dominant, and first-round effects are instead proportional to the country's food balancethe difference between the country's food endowment and its consumptionwhich in developing countries is typically small. The applications also demonstrate how the model can be used to determine the appropriate magnitude of the investment scaling-up accounting for the financing needs to sustain capital and the adequate size of a stabilization fund buffer. We find that macroeconomic effects from a resource boom typically associated with Dutch Disease effects such as a real appreciation and a fall in tradable sector production stem largely from the non-tradable component of government spending.
. However, a possible strategy would be to invest in more sophisticated refineries able to process heavy South American crudes, such as Venezuelan streams. Incomplete markets yield a combination of the two extremes. This highlights the need for a broader In spite of maintaining an oil trade deficit, the implementation of fuel saving strategies would result in economic benefits for Peru saving an accumulated of 47. The windfall gain from mining and oil revenues provides an opportunity for the country to reinvest natural resource rents, enhance economic development, and address infrastructure gaps. Revenue exhaustibility raises medium-term issues of how to sustain capital built during a windfall, while revenue volatility raises short-term concerns about macroeconomic instability. The application to an average low-income country shows that, when fiscal adjustment is implementable, a delinked public investment approach combined with the resource fund — such that government spending is a-cyclical with respect to resource revenues — can reduce macroeconomic instability relative to a spend-as-you-go approach.
These countries are looking into fossil fuel saving measures as a way to deal with increasing demands and decreasing oil production rates. Beides ist geeignet, Zweifel an der Effizienz der bestehenden institutionellen Regelungen und der Rationalität der staatlichen Planungs- und Genehmigungsentscheidungen zu nähren und deren gesellschaftliche Akzeptanz zu verringern. Building on this database, the book estimates the dynamic effects of public capital using a variety of econometric methods. The standard treatment of the transfer problem implicitly assumes spending equals absorption. Here we take a narrative approach, following Romer and Romer 1989 , and center on a significant tightening of monetary policy that took place in 2011 in four members of the East African Community: Kenya, Uganda, Tanzania and Rwanda. Finally, the sustainable-investing approach proposes a gradual scaling-up and a smooth investment path by minimizing macroeconomic volatility.
Many low-income countries continue to describe their monetary policy framework in terms of targets on monetary aggregates. Front-loaded investment programs and weak structural conditions such as low returns to public capital and poor execution of investments make the fiscal adjustment more challenging and the risks greater. Dieser Frage geht die Studie anhand empirischer Untersuchungen nach. These findings highlight the role of different policy responses, and their interaction, for the macroeconomic impact of oil proceeds. The implication is that efficiency and scarcity of public capital are likely to be inversely related across countries. However, even with the fund, ambitious frontloading public investment plans combined with more borrowing can induce debt sustainability risks, especially with declining investment efficiency or when future resource revenues turn out to be lower than expected.
First-round effects depend crucially on the asset market structure and the different transmission mechanisms they trigger. It shows how the endogenous structural transformation that results from subsistence affects the dynamics of the economy, the design of monetary policy, and the properties of inflation at different levels of development. The sustainable investing approach, which combines a stable fiscal regime with external savings, can convert resource wealth to development gains while maintaining economic stability. But the strategy may be also risky. In both sectors, private capital depreciates at an annual rate of 10 percent. Investing volatile resource revenues, however, may subject an economy to macroeconomic instability.
Dies trifft insbesondere auf Personen mit geringer Ausbildung zu. Applications to Papua New Guinea Author: Mr. To update listings or check citations waiting for approval, Shu-Chun S. You can help correct errors and omissions. We reconsider the macroeconomic implications of public investment efficiency, defined as the ratio between the actual increment to public capital and the amount spent. Major Oil-exporter countries usually have huge revenues by producing and exporting the oil barrels. The original model by Berg et.