Gerd Schwartz

Currency substitution: The recent experience of Bolivia

This paper analyzes the determinants of currency substitution in Bolivia in the period following the 1984/85 hyperinflation. We find that expected exchange rate depreciation and actual interest rate differentials between boliviano and dollar deposits in the Bolivian banking system are statistically significant determinants of the degree of currency substitution. However, the explanatory power of these variables is low compared to variables that measure the degree of inertia in the currency substitution process. Thus, further reductions in inflation or higher interest rates for boliviano bank deposits are likely to have but a small effect on dollarization.

Women, Work, and the Economy:Macroeconomic Gains from Gender Equity

The proposed SDN discusses the specific macro-critical aspects of women’s participation in the labor market and the constraints that prevent women from developing their full economic potential. Building on earlier Fund analysis, work undertaken by other organizations and academic research, the SDN presents possible policies to overcome these obstacles in different types of countries.

Public investment and public-private partnerships : addressing infrastructure challenges and managing fiscal risks

Preface Foreword T.Ter-Minassian Introduction G.Schwartz, A.Corbacho & K.Funke PART I: PUBLIC INVESTMENT AND FISCAL POLICY IN EUROPE Public Capital and Economic Growth: Key Issues for Europe J.de Haan, W.Romp & J.-E.Sturm A Primer on Public Investment in Europe E.Peree & T.Valila Challenges for Public Investment in New EU Member States A.Jev?ak & F.Keereman Budgeting of Public Investments E.Tandberg Comments on Part I C.Kamps Comments on Part I C.Rosenberg PART II: FISCAL RISKS FROM PPPs PPPs and Fiscal Risks: Should Governments Worry? A.Corbacho & G.Schwartz Controlling Spending Commitments in PPPs T.Irwin PPPs and Fiscal Risks: Experience of Portugal R.S.Monteiro Comments on Part II G.Kiss Comments on Part II M.Mrsnik PART III: THE INSTITUTIONAL ENVIRONMENT FOR PPPs The OECD Principles for Private Sector Participation in Infrastructure H.Christiansen Legal Regimes for PPPs in Central and Eastern Europe A.Zverev Combining PPPs with EU Grants H.Goldsmith Managing PFI Projects in the United Kingdom E.Farquharson Negotiating and Renegotiating PPPs and Concessions L.A.Andres & J.L.Guasch Comments on Part III D.Bergvall PART IV: PPP ACCOUNTING, REPORTING AND AUDITING PPPs: Some Accounting and Reporting Issues R.Hemming IPSASB: Service Concession Arrangements M.Hathorn Accounting for PPPs: The Eurostat Approach P.de Rougemont Framework for PPP Audits in the United Kingdom P.Leahy PPP Audits in Portugal F.Machado Hungarys Audit Experience with PPPs G.Bager Comments on Part IV K.Seregelyes Comments on Part IV J.Ramallo-Massanet

Economic Determinants of Government Subsidies

The paper studies the economic determinants of government subsidies using panel data for 40 countries over 18 years (from 1975 to 1992) and finds that individual country-specific factors play a sizeable role in determining government subsidies. But it also suggests several characteristics—a small government, a small external current account deficit, and a productive structure geared more toward services and agriculture than manufacturing—may make it easier to keep subsidy expenditures down. The paper also suggests that globalization and the associated increase in openness are not impediments to reducing subsidies. In itself, an IMF-supported adjustment program is found not to be a significant determinant of government subsidy expenditures.

The Distributional Effects of Public Expenditure

It is commonly agreed that economic policies, including budgetary policies, can have potentially strong distributional effects. Traditional economic analysis held that economic policies affected the income distribution primarily through their impact on the rate of growth. More recently, it has come to be recognised that qualitative aspects of economic growth are probably more important than the rate of growth itself. While recent research has confirmed the potential role of expenditure policies as a redistributive tool, it has also shown that redistribution does not necessarily have to come at the expense of economic growth and efficiency. Although there are substantial analytical and technical problems to be faced in the design of equitable and cost-effective public expenditure programmes, unfavourable distributional outcomes of these programmes can usually be traced more to political and institutional pressures than to purely technical factors. Copyright 2000 by Blackwell Publishers Ltd

Mexico: Experiences with Pro-Poor Expenditure Policies

Against the background of Mexicos persistently high degree of inequality, this paper analyzes the countrys experience with pro-poor policies over the last decade. A number of important government initiatives, implemented since the mid-1990s, have aimed at improving distributional equity through pro-poor expenditure programs, while at the same time seeking to increase the efficiency of public spending. This paper reviews these initiatives and outlines some additional policy options.

PPPs and Fiscal Risks: Should Governments Worry?

Public-private partnerships (PPPs) offer new opportunities to develop public infrastructure, but also bring in substantial fiscal risks. By involving management and innovation from the private sector, PPPs offer the promise of greater efficiency, better quality, and lower-cost services than traditional public procurement. However, PPPs also involve new and significant fiscal risks and can be used to bypass spending controls and move public investment off budget and debt off the government balance sheet. In fact, whether or not PPPs have achieved their efficiency objectives in practice remains an open question, although there is mounting evidence of fiscal risks associated with PPPs. Therefore, governments need to be proactive in managing these fiscal risks.

Fiscal Management of Scaled-Up Aid

This paper discusses the role of fiscal policy and fiscal institutions in managing scaled-up aid. In an environment of volatile scaled-up aid, fiscal policy formulation should be anchored in medium-term frameworks, incorporating a longer-term view of potential resource availability and spending plans. There is merit in smoothing expenditures over time so that all programs are adequately funded. The paper argues that wage-bill ceilings should be used in Fund-supported programs only in exceptional cases. The paper also discusses basic reforms for strengthening public financial management systems for effective utilization of scaled-up aid flows.

The Role of Fiscal Policy in Sustainable Stabilization: Evidence from Latin America

This paper reviews the role of fiscal policy in a number of stabilization programs in Latin America since the early 1980s. The paper highlights the importance of sustainable fiscal adjustment in stabilization efforts, and discusses the main issues that arise in this context. By reviewing the Latin American experience, it is argued that responsibility for failed stabilization attempts can be traced to four main factors: inconsistent policy mixes; excessive reliance on temporary factors of improvement in the fiscal accounts; failure to implement fundamental fiscal reforms; and lack of complementary structural reforms.

Aid Scaling Up: Do Wage Bill Ceilings Stand in the Way?

This paper assesses whether the scaling up of aid and the resulting increase in government spending that is needed to meet the Millennium Development Goals (MDGs) would be hampered by wage bill ceilings that are often part of government programs supported by the IMF`s Poverty Reduction and Growth Facility (PRGF). Based on country case studies for 2003-05, the paper suggests that, in the past, wage bill ceilings have not restricted the use of available donor funds. Yet the paper offers a number of suggestions for further enhancing the flexibility of wage bill conditionality in PRGF-supported programs to respond to higher aid flows that may result in the future.