Working Paper: CEPR ID: DP1535
Authors: Willem H. Buiter
Abstract: This paper contains a selective review of some of the key fiscal issues faced by transition economies. The twelve countries that provide the empirical background for this study have all been under Fund programmes for at least some of the time since they initiated their transitions from plan to market. The focus of the paper is on medium- and long-term fiscal issues, such as government solvency and the evaluation of the sustainability of the government?s fiscal-financial-monetary programme. The purpose of the paper is to assist the design and implementation of future Fund programmes and to improve the quality of the debate about the design and conduct of fiscal policy in transition economies generally.The outline of the paper is as follows. Following the introduction, which contains a brief discussion of the roles of the Fund, Section II sets out a framework for evaluating the sustainability of the fiscal-financial-monetary programme of the state. Section III contains some numerical material on public debt, deficits (including quasi-fiscal deficits) and monetary financing or seigniorage. Section IV discusses eight specific budgetary issues I consider to be of special relevance to transition economies. Section V concludes by summarizing the lessons from this study in a number of propositions.
Keywords: transition economies; fiscal policy; monetary policy; international monetary fund
JEL Codes: E41; E58; E62; F34; H11
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| fiscal deficits (H68) | government insolvency (H12) |
| government insolvency (H12) | borrowing or printing money (E51) |
| borrowing (G51) | financial crowding out (E62) |
| reliance on seigniorage (E42) | declining real revenues (H29) |
| poor fiscal policy design (E62) | weakened tax revenues (H29) |