Alfredo Cuevas

Pension Regimes and Saving

Public pension systems around the world have been criticized in recent years for some serious flaws, including the excessive burden they impose on the public finances and their depressing impact on saving rates. This study analyzes the impact of pension systems and pension reform on saving, paying particular attention to the impact of the introduction of defined-contribution plans like that of Chile. It also surveys the literature on the impact of pension regimes on saving, discusses some recent reforms, and addresses the role of private pension plans.

Fiscal Sustainability and the Fiscal Reaction Function for South Africa

How does the South African government react to changes in its debt position? In investigating the question, this paper estimates fiscal reaction functions using various methods (OLS, VAR, TAR, GMM, State-Space modelling and VECM). The paper finds that since 1946 the South African government has ran a sustainable fiscal policy, by reducing the primary deficit or increasing the surplus in response to rising debt. Looking ahead, the paper considers the use of fiscal reaction functions to forecast the debt/GDP ratio and gauging the likelihood of achieving policy goals with the aid of probabilistic simulations and fan charts.

Reforming Intergovernmental Fiscal Relations in Argentina

Argentina has committed itself to a reform of its revenue-sharing system. This paper examines this system and the issues involved in its redesign, and discusses the pros and cons of various options with a view to specifying a preferred approach.

Pension Reform and the Fiscal Policy Stance

The increased budget deficit caused by the privatization of a public pension plan does not imply a relaxation of the stance of fiscal policy. The reforms impact on the fiscal stance and national saving depends primarily on its effect on the sum of explicit and implicit public debt and on the post-reform payroll tax and private system contribution rates. However, the precise impact of reform also depends on such influences as the relationship between the rates of interest on implicit and explicit public debt. There may be circumstances in which pension privatization, if not offset by fiscal consolidation, will loosen the fiscal stance.

Pension Privatization and Country Risk

This paper explores how privatizing a pension system can affect sovereign credit risk. For this purpose, it analyzes the importance that rating agencies give to implicit pension debt (IPD) in their assessments of sovereign creditworthiness. We find that rating agencies generally do not seem to give much weight to IPD, focusing instead on explicit public debt. However, by channeling pension contributions away from the government and creating a deficit of resources to cover the current pension liabilities during the reforms transition period, a pension privatization reform may transform IPD into explicit public debt, adversely affecting a sovereigns perceived creditworthiness, thus increasing its risk premium. In this light, accompanying pension reform with efforts to offset its transition costs through fiscal adjustment would help preserve a countrys credit rating.

Monetary Policy and Relative Price Shocks in South Africa and Other Inflation Targeters

When faced with a relative price shock, monetary authorities often aim to contain its second round effects on inflation while accepting first round effects. We analyze the experience of South Africa and other inflation targeters to explore whether and when this policy prescription implies changing the monetary policy stance. Inflation targeting central banks differ on how aggressively they typically react to relative price shocks, reflecting differences in resilience of underlying inflation to such shocks. An examination of individual policy decisions reveals the importance of the broader economic context in framing the responses to relative price shocks.

Fiscal Challenges of Population Aging in Brazil

In recent decades, population has been aging fast in Brazil while old age pensions and healthrelated spending have increased. As the population ages, the spending trend threaten to reach unsustainable levels absent reforms. Increasing the retirement age is key, but by itself will not provide sufficient savings to close the pension system financing gap, and reforms reducing replacement rates are necessary. In the area of health, there is scope for improving expenditure efficiency by strengthening outpatient care and regional networks, and developing clinical guidelines for cost-effective treatments and drugs. Reforms are urgent, so that they can be gradual.

Determinants of Infrastructure and Its Financing

Abstract Adequate infrastructure is a critical input for growth and development in all countries, and especially in emerging and developing countries. This article 1 1 The views expressed in this article are those of the authors and do not necessarily represent the views of the IMF, its Executive Board, or IMF management. examines the factors that have underpinned the stock of infrastructure across countries, including in Latin America and the Caribbean. We find that public finance and private sector participation both contribute to improving the stock of infrastructure. The impact of public finance depends on how capital investment is financed to meet the government’s budget constraint. Total domestic finance of infrastructure depends, in turn, on domestic financial depth and links to the rest of the world through trade and foreign investment.

The Effects of Annual Inflation Targets on the Conduct of Monetary Policy During the Disinflation Process in Mexico

We study the effects of the inflation targets established for December of each year on the conduct of monetary policy. The hypothesis tested postulates that the annual inflation targets could have produced some seasonality in the operation of the overnight interbank funds market in which the government funding rate is determined. To test this hypothesis a series of Taylor rules are estimated using linear and nonlinear methods. The results show that the inflation targets established for the end of year have special importance in the determination of the interest rate during the middle months of each year, and in the last quarter the focus of attention shifts to the target corresponding to December of the next year. Also, the results suggest that during the disinflation period, the short term interest rate has shown less inertia and more intense reactions to inflationary pressures during the central months of each year.

Short- and Long-Term Poverty and Social Policy in a 'Snakes and Ladders' Model of Growth

Throughout the world, the great popularity of programs to protect those who may fall into poverty stands in contrast with the weakness of policies aimed at helping individuals who are already poor to overcome long-term poverty. In the paper, an OLG model with persistent poverty and limited social mobility is used to explore some of the reasons for the different success rates of these two types of policies, as well as the gains that can be expected from these and other policies in terms of economic growth. The popularity of social insurance schemes may be due to their relative ex-ante fairness, while the reluctance of societies to support effective policies to reduce long-term poverty may be explained by the redistributive bias of these policies, especially in the short term. However, the failure to attack long-term poverty can reduce long-run growth.