Low levels of economic development constrain fiscal and monetary policy in several ways. Few developing countries are able to raise much direct tax revenue, and so must rely on other sources of funding, including seigniorage. Institutional constraints often lead to a high risk of hyperinflation and currency crises. Credible, effective institutions can be created with appropriate outside help, but there are few examples of this in practice.
Budget deficits Central bank independence Currency board Currency crises Developing countries Development economics Direct taxation Exchange rate peg Fiscal policy in developing countries Foreign aid Heterodox macroeconomics Inflation targeting Inflation Laffer curve Monetarism Monetary policy in developing countries Monetary unions Phillips curve Public expenditure Seigniorage Tariffs Taylor rules Time consistency
This is a preview of subscription content, log in to check access.
Agénor, P.-R., and P. Montiel. Development macroeconomics, 2nd ed. Princeton: Princeton University Press.Google Scholar
Cardoso, E. 1981. Food supply and inflation. Journal of Development Economics 8: 269–284.CrossRefGoogle Scholar
Cukierman, A., S. Webb, and B. Neyapti. 1992. Measuring the independence of central banks and its effect on policy outcomes. World Bank Economic Review 6: 353–398.CrossRefGoogle Scholar
Flood, R., and P. Garber. 1984. Collapsing exchange rate regimes: Some linear examples. Journal of International Economics 17: 1–13.CrossRefGoogle Scholar
IMF (International Monetary Fund). 1983. International financial statistics yearbook. Washington, DC: IMF.Google Scholar
IMF (International Monetary Fund). 1999. International financial statistics yearbook. Washington, DC: IMF.Google Scholar
Kydland, F., and E. Prescott. 1977. Rules rather than discretion: The inconsistency of optimal plans. Journal of Political Economy 85: 473–490.CrossRefGoogle Scholar
Montiel, P. 1989. Empirical analysis of high inflation episodes in Argentina, Brazil and Israel. IMF Staff Papers 36: 527–549.CrossRefGoogle Scholar
Obstfeld, M. 1996. Models of currency crises with self-fulfilling features. European Economic Review 40: 1037–1047.CrossRefGoogle Scholar
Taylor, J. 1993. Discretion versus policy rules in practice. Carnegie-Rochester Conference Series on Public Policy 39: 195–214.CrossRefGoogle Scholar