Fiscal and Monetary Policies in Developing Countries
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.
KeywordsBudget 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
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