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Some Thoughts on the Role of Fiscal Policy in Stabilization and Structural Adjustment in Developing Countries

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  • Buiter, Willem H.

Abstract

The paper analyzes the role of fiscal policy in the restoration of internal and external macroeconomic equilibrium and in achieving structural adjustment, i.e. major changes in the patterns of sectoral and intertemporal resource allocation. The focus is on developing and new industrial countries which are in need of both stabilization and structural adjustment. The external transfer problem and the associated internal fiscal and real resource transfer problems are analyzed with special emphasis on possible causes for the breakdown of the internal and external transfer processes. The concepts of national and public sector solvency are used to evaluate the mutual consistency and feasibility of fiscal, financial and monetary plans. Special attention is devoted to the inflation tax and to the links between the fiscal deficit and inflation.

Suggested Citation

  • Buiter, Willem H., 1988. "Some Thoughts on the Role of Fiscal Policy in Stabilization and Structural Adjustment in Developing Countries," CEPR Discussion Papers 260, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:260
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    1. Kemal Dervis & Peter A. Petri, 1987. "The Macroeconomics of Successful Development: What Are the Lessons?," NBER Chapters, in: NBER Macroeconomics Annual 1987, Volume 2, pages 211-262, National Bureau of Economic Research, Inc.
    2. Robert E. Cumby & Richard M. Levich, 1987. "On the Definition and Magnitude of Recent Capital Flight," NBER Working Papers 2275, National Bureau of Economic Research, Inc.
    3. Buiter, Willem H, 1988. "Structural and Stabilization Aspects of Fiscal and Financial Policy in the Dependent Economy," Oxford Economic Papers, Oxford University Press, vol. 40(2), pages 220-245, June.
    4. Van Wijnbergen, Sweder, 1986. "Exchange rate management and stabilization policies in developing countries," Journal of Development Economics, Elsevier, vol. 23(2), pages 227-247, October.
    5. Willem H. Buiter, 1988. "Can Public Spending Cuts be Inflationary?," NBER Working Papers 2528, National Bureau of Economic Research, Inc.
    6. Edward, Sebastian, 1986. "Are Devaluations Contractionary?," The Review of Economics and Statistics, MIT Press, vol. 68(3), pages 501-508, August.
    7. Jonathan Eaton & Mark Gersovitz & Joseph E. Stiglitz, 1991. "The Pure Theory of Country Risk," NBER Chapters, in: International Volatility and Economic Growth: The First Ten Years of The International Seminar on Macroeconomics, pages 391-435, National Bureau of Economic Research, Inc.
    8. Buiter, Willem H., 1986. "Macroeconomic Responses by Developing Countries to Changes in External Economic Conditions," CEPR Discussion Papers 93, C.E.P.R. Discussion Papers.
    9. Kletzer, Kenneth M, 1984. "Asymmetries of Information and LDC Borrowing with Sovereign Risk," Economic Journal, Royal Economic Society, vol. 94(374), pages 287-307, June.
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    Cited by:

    1. Lisa M. Schineller, 1997. "An econometric model of capital flight from developing countries," International Finance Discussion Papers 579, Board of Governors of the Federal Reserve System (U.S.).
    2. Buiter, Willem H., 1993. "Public Debt in the USA: How Much, How Bad and Who Pays?," CEPR Discussion Papers 791, C.E.P.R. Discussion Papers.
    3. Lisa M. Schineller, 1997. "A nonlinear econometric analysis of capital flight," International Finance Discussion Papers 594, Board of Governors of the Federal Reserve System (U.S.).
    4. Riccardo Faini & Jaime Melo, 1993. "Fiscal Issues in Adjustment: An Introduction," Palgrave Macmillan Books, in: Riccardo Faini & Jaime Melo (ed.), Fiscal Issues in Adjustment in Developing Countries, pages 1-19, Palgrave Macmillan.
    5. Ajay Chhibber & Mansoor Dailami, 1993. "Fiscal Policy and Private Investment in Developing Countries: Recent Evidence on Key Selected Issues," Palgrave Macmillan Books, in: Riccardo Faini & Jaime Melo (ed.), Fiscal Issues in Adjustment in Developing Countries, pages 121-150, Palgrave Macmillan.
    6. Fischer, Stanley, 1989. "The economics of the government budget constraint," Policy Research Working Paper Series 224, The World Bank.
    7. Islam, Roumeen & Wetzel, Deborah L., 1991. "The macroeconomics of public sector deficits : the case of Ghana," Policy Research Working Paper Series 672, The World Bank.
    8. Aldaba, Rafaelita M., 1994. "Foreign Direct Investment in the Philippines: A Reassessment," Research Paper Series RPS 1994-10, Philippine Institute for Development Studies.

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