DOCSLIB.ORG

2298 Public Disclosure Authorized

Total Page：16

File Type：pdf, Size：1020Kb

Download full-text PDF Read full-text
2298 Public Disclosure Authorized t 4 )5 -4 9e POLICY RESEARCH WORKING PAPE R 2298 Public Disclosure Authorized Fiscal Deficits, Monetary Fiscal problems are a key factor behind the inflation Reform, and Inflation that has perststedin Eastern Stabilization in 1R*m*n*iEurope since 1989.Deficts Stabililzation in Romania need to be cut back, but by Public Disclosure Authorized how much for a given Nina Budina inflationtarget? A simple Sweder van Wijnbergen frameworklinks debt, the deficit, and inflation to assess the fiscal stance of the Romanian economy Public Disclosure Authorized Public Disclosure Authorized The World Bank Development Research Group Macroeconomics and Growth March 2000 POLICYRESEARCH WORKING PAPER 2298 Summary findings Unsustainable fiscal deficits were the chief reason for the Many of the issues in Romania are similar to tlhose in other inflation that has persisted in Eastern Europe since 1989. countries. But Romania is an interesting case because of its Deficits need to be cut back, but by how much for a history of unsuccessfulstabilization attempts. given inflation target? The authors' results suggest that fiscal problems during Budina and van Wijnbergen develop a simple 1992-94 were masked by shifting government expenses framework for debt, the deficit, and inflation to study to the books of the National Bank of Romania so that the interactions between fiscal and monetary policy in the government deficit did not fully reflect public Romania's economy. This framework can be used to 1) spending. In addition, the effects of delayed fiscal determine the financeable deficit and the required deficit adjustment were mitigated by exchange rate reduction for a given rate of output growth, inflation overvaluation and favorable debt dynamics. In the late rate, and target for debt-output ratios, and 2) to find the 1990s, however, debt dynamics worsened and the inflation rate for which no fiscal adjustment is needed. economy experienced significant real depreciation. That They use this framework to assessconsistency between exacerbated the fiscal problems and increased the fiscal inflation, monetary reform, and fiscal policy in Romania. adjustment needed to restore consistency. This paper - a product of Macroeconomics and Growth, Development Research Group - is part of a larger effort in the group to study transition economies. Copies of the paper are available free from the World Bank, 1818 H Street NW, Washington, DC 20433. Please contact Nina Budina, room MC3 -353, telephone 202-458-2045, fax 202-522-3518, email address [email protected] Research Working Papers are also posted on the Web at wvww.worldbank.org/ research/workingpapers. The authors may be contacted at nbudinaCaworldbank.org and [email protected]. March 2000. (33 pages) The Policy Research Working Paper Series disseminates the findings of work in progress to encourage the exchange of ideas about development issues.An objective ofthe series is to get the findings out quickly, even if the presentations are less than fully polished. The paperscamy the namesof the authorsand should be citedaccordingly. The findings,interpretations, and conclusionsexpressed in this paper are entirelythose of the authors.They do not necessarilyrepresent the view of the WorldBank, its ExecutiveDirectors, or the countriesthey represent. Produced by the Policy Research Dissemination Center FISCAL DEFICITS, MONETARY REFORM AND INFLATION STABILIZATIONIN ROMANIA Nina Budina' and Sweder van Wijnbergen' JEL classification codes: E63, F34, E52, E41 Key words: Fiscal deficits, Public debt, Money demand, Seigniorage 'WorLdBank, ResearchDepartment, 1818 H Street NW, WashingtonDC, USA. 2University of Amsterdam,Roeterstraat 11, 1018WB, Amsterdam,the Netherlands,LSE and CEPR. INTRODUCTION Initial declinein economic activityand sharp inflatfionincreases are well-documentedstylized facts of transition economy from Central and Eastern Europe and FormnerSoviet Union.' Blanchard (1997) discussesthe causesof the initialdrop in economicactivity and the so-calledu-shaped pattern of real GDP growth in 5 transitioneconomies. Deep drops in output andlarge inflationincreases occurred independentlyof fiscaland exchangerate policiesadopted. Changesin economicstructures, caused by transitionprocess itselfwas accompaniedwith large primary fiscalimbalances throughout the region: tax revenuesdrop dramaticallyin early 1990sbecause of a decreasein both tax revenues and tax bases. Althoughthere was a substantialcut in government expenditures(most notable subsidies and public investment),social expenditureshave increased,so total expenditurecut did not match drop in tax revenues.In early 1990s,resulting budget deficitswere financedprimarily through direct centralbank creditto the governmentat bellow market interestrates 2 which resulted in accelerated money growth and inflationincreases in addition to the initial price liberalizationshocks. Budina and van Wijnbergen(1997) dscuss the role of fiscal policy in transition process and stress on the negative impact of unsustainable fiscal policies on inflation and macroeconomicstabilization. Our paper draws on the theoretical findings of Sargent and Wallace (1981) Buiter (1985) Drasen and Helpman (1990), Blanchard(1993), Van Wijnbergen(1991) Kawai and Maccini (1995) about fiscal roots of inflation and researches the implicationsof fiscal policy sustainabilityfor inflationstabilization in Romania.Many of the issuesin Romaniaare familiarfor other countriesas well.' Romania,however, is an interestingexample on its own right, because it has by now a historyof unsuccessfulinflation stabilization attempts. FollowingAnand, R. and van Wijnbergen(1989), and van Wijnbergen(1990) we develop a simpleframework on debt, deficitand inflationto study the fiscal and monetary policy interactionsfor the Romanianeconomy. We apply this frameworkto assess consistencybetween inflation,monetary reform and fiscalpolicy for the Romanianeconomy. 2 A central aim of this frameworkis to derive a measure of mediumterm consistencybetween fiscal and monetarypolicy, the required deficit reduction,representing the differencebetween funding requirementsand fundingsources, given the target debt-outputratios and the real output growth rates. We discussthe mediumterm impact of real exchangerate depreciationand delayedfiscal adjustmenton our measure of fiscal sustainability. We also discussand showthe importanceof using a proper definitionof the public sector when calculatingpublic sector deficit.Instead of concentratingon the centralgovernment budget deficit,we use the general government budget, including all the local governments' budgets and the extra- budgetary accounts, which might conceal a significant part of the governrnent expenditures. Furthermore,we are stillmissing a very important part of the public sector expendituresand revenues, such as, quasi-fiscaldeficit accumulatedin the CentralBank. Althoughfamiliar from other countries, this issue was especiallyacute in Romaniaand we show the impact of using differentconcepts of public sector deficitson the consistencybetween monetary and fiscal policies in Romania. This part of the public sector is especiallyimportant for the countries experiencingsevere fiscal restraints since the governmentsare tempted to shift some of their fiscalexpenditures to the CentralBank balancesheets. A key designfeature of this frameworkis parsimoniousdata requirements,for obviousreasons. A second necessaryfeature is the abilityto capture the type of monetaryreform transitioneconomies are going through; otherwise much of the analysiswould suffer from structural instability.The only econometricsrequired is the estimationof some components of money demand, which is becoming possiblefor most countries.The focus is on mediumrun consistencygiven a varietyof macroeconomic policy objectives.In the model the primarydeficit is taken to be a policyparameter. Debt management is summarizedby targets for the debt to GDP ratio for both foreign and domesticdebt. Implicitin this approach is the view that lenders will impose such a constraintbecause potential tax revenues, the ultimatesource from which debt willneed to be serviced,are obviouslylirnited as a share of GDP. Base money growth, for any given inflationtarget, is endogenouslydetermined by the path of the primary 3 deficit, debt policy,the real interest rate, the financialstructure and the real GDP growth rate. The model is designedto indicatewhether any given inflation(money growth) target is consistentwith the other policy parametersand structuralcharacteristics of the economy;alternatively, consistency can be imposedwhich yields the inflationrate consistentwith structuralstability, other policyvariables and the financialstructure of the economy. In what follows, Section 2 presents the analyticalframework for assessingthe link between inflationand fiscal deficits. Section 3 elaborates on calculation of the public sector deficit for the Romanianeconomy. The results of estimated asset demand equations are presented in Section 4. In Section 5 the model is put together and appliedto a series of policy issues, most of which have been mentionedin the precedingparagraphs. The last sectionconcludes. 4 2 AN ANALYTICALFRAMEWORK Fiscal problemsare widelyrecognized as a key factor behind persistent inflationin Eastern Europe post-1989.But little has been said beyond these generalities.Deficits need to be cut back, but how far for a given inflationtarget? What are the effects of a shifting financialstructure, the external debt managementor the exchangerate
Load more

Recommended publications
  • The Need for Monetary Reform
    AMERICAN MONETARY INSTITUTE PO BOX 601, VALATIE, NY 12184 Tel. 518-392-5387, email [email protected] http://www.monetary.org Dedicated to the independent study of monetary history, theory, and reform “Over time, whoever controls the money system controls the society.” Stephen Zarlenga, Director The Need for Monetary Reform Monetary reform is the crucial missing element needed to move humanity away from a future dominated by fraud, warfare, and ugliness toward a world of justice, sustainability and beauty. The power to create money is an awesome power - at times stronger than the Executive, Legislative and Judicial powers combined. It’s the nation’s “magic checkbook,” where checks can’t bounce. When controlled privately it can be used to gain riches. More importantly, it determines the direction of society by controlling where the money goes – what gets funded and what does not. Will it be used to build and repair vital infrastructure - as Levees to protect major cities? Or will it go into real estate speculation, creating the real estate bubble? Will it fund sustainable industries with good jobs or go into Wall Street fueling stock market bubbles? Will it be channeled into warfare, leaving a trail of death, destruction and inflation? Thus the money issuing power should never be alienated from democratically elected government and placed ambiguously into private hands as it is in America in the Federal Reserve System today. In fact, the bulk of our money supply isn’t created by our government, but by private banks when they make loans. Through the Fed’s fractional reserve process what we use for money is issued as interest-bearing debt.
    [Show full text]
  • Structural Reforms and the Exchange Rate Regime: a Panel Analysis for the World Versus OECD Countries
    IZA DP No. 1798 Structural Reforms and the Exchange Rate Regime: A Panel Analysis for the World versus OECD Countries Ansgar Belke Bernhard Herz Lukas Vogel DISCUSSION PAPER SERIES DISCUSSION PAPER October 2005 Forschungsinstitut zur Zukunft der Arbeit Institute for the Study of Labor Structural Reforms and the Exchange Rate Regime: A Panel Analysis for the World versus OECD Countries Ansgar Belke University of Hohenheim and IZA Bonn Bernhard Herz University of Bayreuth Lukas Vogel University of Bayreuth Discussion Paper No. 1798 October 2005 IZA P.O. Box 7240 53072 Bonn Germany Phone: +49-228-3894-0 Fax: +49-228-3894-180 Email: [email protected] Any opinions expressed here are those of the author(s) and not those of the institute. Research disseminated by IZA may include views on policy, but the institute itself takes no institutional policy positions. The Institute for the Study of Labor (IZA) in Bonn is a local and virtual international research center and a place of communication between science, politics and business. IZA is an independent nonprofit company supported by Deutsche Post World Net. The center is associated with the University of Bonn and offers a stimulating research environment through its research networks, research support, and visitors and doctoral programs. IZA engages in (i) original and internationally competitive research in all fields of labor economics, (ii) development of policy concepts, and (iii) dissemination of research results and concepts to the interested public. IZA Discussion Papers often represent preliminary work and are circulated to encourage discussion. Citation of such a paper should account for its provisional character.
    [Show full text]
  • Proposals for Monetary Reform – a Critical Assessment Focusing on Endogenous Money and Balance Mechanics
    Paper for the FMM Conference 2016: Towards Pluralism in Macroeconomics? 20 Years-Anniversary Conference of the FMM Research Network Proposals for Monetary Reform – A Critical Assessment Focusing on Endogenous Money and Balance Mechanics by Ruben Tarne International Economics (MA), Berlin School of Economics and Law Table of contents 1 Introduction ............................................................................................................. 1 2 Proposals for Monetary Reform .............................................................................. 3 2.1 Common Views of the Current Monetary System of Sovereign Money Reform Proponents and Post-Keynesians ............................................................................. 4 2.2 The Sovereign Money Approach ............................................................................. 5 2.2.1 Transaction and Investment Accounts .............................................................. 5 2.2.2 The Monetary Creation Committee .................................................................. 7 2.2.3 Monetary Policy by Monetary Targeting ......................................................... 8 3 Post-Keynesian Critique of Monetary Reform Proposals ..................................... 11 3.1 The Nature of Money ............................................................................................. 12 3.2 Emergence of Near-Monies ................................................................................... 13 3.3 Stability in a Reformed System ............................................................................
    [Show full text]
  • Monetary Reform As Incremental Innovation?
    Monetary Reform as Incremental Innovation? Joseph Huber 1 Introduction ................................................................................................. 2 Gradual transition to full reserve ................................................................. 3 Overt money finance (OMF). Issuance of sovereign money in parallel with bank money ............................................................................. 4 Sovereign money as a 'parallel currency' to bank money .................. 4 The prohibition of the sovereign from issuing sovereign money ........ 5 Sovereign e-cash ................................................................................. 6 OMF as a countercyclical stimulus ...................................................... 7 Limits to OMF ...................................................................................... 8 Plain money accounts on demand ............................................................. 10 Safe deposits on the basis of a voluntary 100% reserve ................... 10 Off-balance money accounts in addition to on-balance giro accounts ............................................................................................ 12 Conclusion: debt-free sovereign money in combination with off-balance customer money accounts ...................................................... 15 References .................................................................................................. 17 1 Chair of Economic Sociology Em, Martin Luther University, Halle an der Saale,
    [Show full text]
  • 5. Monetary Policy and Monetary Reform: Irving Fisher’S Contributions to Monetary Macroeconomics
    A Service of Leibniz-Informationszentrum econstor Wirtschaft Leibniz Information Centre Make Your Publications Visible. zbw for Economics Loef, Hans E.; Monissen, Hans G. Working Paper Monetary policy and monetary reform: Irving Fisher's contributions to monetary macroeconomics W.E.P. - Würzburg Economic Papers, No. 11 Provided in Cooperation with: University of Würzburg, Chair for Monetary Policy and International Economics Suggested Citation: Loef, Hans E.; Monissen, Hans G. (1999) : Monetary policy and monetary reform: Irving Fisher's contributions to monetary macroeconomics, W.E.P. - Würzburg Economic Papers, No. 11, University of Würzburg, Department of Economics, Würzburg This Version is available at: http://hdl.handle.net/10419/48451 Standard-Nutzungsbedingungen: Terms of use: Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Documents in EconStor may be saved and copied for your Zwecken und zum Privatgebrauch gespeichert und kopiert werden. personal and scholarly purposes. Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle You are not to copy documents for public or commercial Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich purposes, to exhibit the documents publicly, to make them machen, vertreiben oder anderweitig nutzen. publicly available on the internet, or to distribute or otherwise use the documents in public. Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, If the documents have been made available under an Open gelten abweichend von diesen Nutzungsbedingungen die in der dort Content Licence (especially Creative Commons Licences), you genannten Lizenz gewährten Nutzungsrechte. may exercise further usage rights as specified in the indicated licence. www.econstor.eu W. E. P. Würzburg Economic Papers Nr.
    [Show full text]
  • The Emergence of Central Banking in Latin America In
    1 Carlos Marichal and Daniel Díaz Fuentes, (1999), "The Emergence of Central Banking in Latin America in the early 20th Century", in Carl Holtfrerich y Jaime Reis (eds.), The Emergence of Central Banking from 1918 to the Present, Ashgate and EBAH, pp. 279-322. THE EMERGENCE OF CENTRAL BANKS IN LATIN AMERICA: ARE EVOLUTIONARY MODELS APPLICABLE 1 Carlos Marichal (El Colegio de México) The present paper is a preliminary effort to contribute to the debate on the comparative study of the origins of central banking in Latin America (especially in Argentina, Brazil and Mexico) with emphasis on an institutional framework analysis.2 The paper also attempts to link some of these problems with the discussion among economic historians on the origins and evolution of central banking in Europe from the 19th century, most notably 1 The present paper is the first part of a joint communication with Daniel Díaz Fuentes to be presented at the EABH Congress in Lisbon in May, 1996. Daniel Díaz is preparing the second part of the paper on the complex process of establishment of central banks in the 1920s and 1930s, with special reference to the cases of Mexico (1925), Argentina (1935), and the long delay in the case of Brazil, where a central bank was not set up until 1965. 2 The most important recent work developing this comparative framework is Drake (1989). 2 as developed on a comparative basis by Charles Goodhart and by historians of the early history of central banks in other European countries.3 I propose that the antecedents and early history of central banking in Latin America are distinct and that it is misleading to think strictly in terms of evolutionary models both with respect to the origins of these banks as well as to their initial operations in the 1920s and 1930s.
    [Show full text]
  • When the Periphery Became More Central: from Colonial Pact to Liberal Nationalism in Brazil and Mexico, 1800-1914 Steven Topik
    When the Periphery Became More Central: From Colonial Pact to Liberal Nationalism in Brazil and Mexico, 1800-1914 Steven Topik Introduction The Global Economic History Network has concentrated on examining the “Great Divergence” between Europe and Asia, but recognizes that the Americas also played a major role in the development of the world economy. Ken Pomeranz noted, as had Adam Smith, David Ricardo, and Karl Marx before him, the role of the Americas in supplying the silver and gold that Europeans used to purchase Asian luxury goods.1 Smith wrote about the great importance of colonies2. Marx and Engels, writing almost a century later, noted: "The discovery of America, the rounding of the Cape, opened up fresh ground for the rising bourgeoisie. The East-Indian and Chinese markets, the colonisation of America [north and south] trade with the colonies, ... gave to commerce, to navigation, to industry, an impulse never before known. "3 Many students of the world economy date the beginning of the world economy from the European “discovery” or “encounter” of the “New World”) 4 1 Ken Pomeranz, The Great Divergence , Princeton: Princeton University Press, 2000:264- 285) 2 Adam Smith in An Inquiry into the Nature and Causes of the Wealth of Nations (1776, rpt. Regnery Publishing, Washington DC, 1998) noted (p. 643) “The colony of a civilized nation which takes possession, either of a waste country or of one so thinly inhabited, that the natives easily give place to the new settlers, advances more rapidly to wealth and greatness than any other human society.” The Americas by supplying silver and “by opening a new and inexhaustible market to all the commodities of Europe, it gave occasion to new divisions of labour and improvements of art….The productive power of labour was improved.” p.
    [Show full text]
  • The Ends of Four Big Inflations
    This PDF is a selection from an out-of-print volume from the National Bureau of Economic Research Volume Title: Inflation: Causes and Effects Volume Author/Editor: Robert E. Hall Volume Publisher: University of Chicago Press Volume ISBN: 0-226-31323-9 Volume URL: http://www.nber.org/books/hall82-1 Publication Date: 1982 Chapter Title: The Ends of Four Big Inflations Chapter Author: Thomas J. Sargent Chapter URL: http://www.nber.org/chapters/c11452 Chapter pages in book: (p. 41 - 98) The Ends of Four Big Inflations Thomas J. Sargent 2.1 Introduction Since the middle 1960s, many Western economies have experienced persistent and growing rates of inflation. Some prominent economists and statesmen have become convinced that this inflation has a stubborn, self-sustaining momentum and that either it simply is not susceptible to cure by conventional measures of monetary and fiscal restraint or, in terms of the consequent widespread and sustained unemployment, the cost of eradicating inflation by monetary and fiscal measures would be prohibitively high. It is often claimed that there is an underlying rate of inflation which responds slowly, if at all, to restrictive monetary and fiscal measures.1 Evidently, this underlying rate of inflation is the rate of inflation that firms and workers have come to expect will prevail in the future. There is momentum in this process because firms and workers supposedly form their expectations by extrapolating past rates of inflation into the future. If this is true, the years from the middle 1960s to the early 1980s have left firms and workers with a legacy of high expected rates of inflation which promise to respond only slowly, if at all, to restrictive monetary and fiscal policy actions.
    [Show full text]
  • Monetary Reform, Central Banks and Digital Currencies
    Department Discussion Paper DDP1805 ISSN 1914-2838 MONETARY REFORM, CENTRAL BANKS AND DIGITAL CURRENCIES Sheila Dow Department of Economics, University of Victoria Victoria, B.C., Canada V8W 2Y2 June, 2018 Abstract The modern debate about monetary reform has taken on a new twist with the development of distributed ledger payments technology employing private digital currencies. In order to consider the appropriate state response, we go back to first principles of money and finance and the case for financial regulation: to ensure provision of a safe money asset and a stable supply of credit within an inherently unstable financial system. We consider calls to privatise money or to restrict money issue to the state against the background of the increasing marketisation of the financial sector and money itself. Following an analysis of private digital currencies, we then consider proposals for state issue of digital currency. It is concluded that the focus of attention should instead be on updating of regulation, not only to encompass digital currencies, but also to address other innovations in the financial sector which generate credit and liquidity, in order to meet the needs of the real economy. Keywords: digital currencies, central banks, financial instability, financial regulation JEL Classifications: E3, E5, G1 Author contact: Sheila Dow, Dept. of Economics, University of Victoria, P.O. Box 1700, STN CSC, Victoria, B.C., Canada V8W 2Y2, E-mail: [email protected]. 1 Monetary Reform, Central Banks and Digital Currencies1 Introduction How does innovation in digital currencies affect the ability of the financial system to perform its socially-useful functions, and what should be the state’s response?2 The first of these functions is to provide a safe money asset as the basis for contracts as well as payments, and as store of value to hold when returns on alternative assets are uncertain.
    [Show full text]
  • A TRACT on MONETARY REFORM MACMILLAN and CO., Limited LONDON • BOMBAY • CALCUTTA • MADRAS MELBOURNE
    NUNC COGNOSCO EX PARTE TRENT UNIVERSITY LIBRARY if BY THE SAME AUTHOR INDIAN CURRENCY AND FINANCE. 7s. 6d. net. THE ECONOMIC CONSEQUENCES OF THE PEACE. 8s. 6d. net. A REVISION OF THE TREATY. 7s. 6d. net. A TREATISE ON PROBABILITY. 18s. net. A TREATISE ON MONEY. A TRACT ON MONETARY REFORM MACMILLAN AND CO., Limited LONDON • BOMBAY • CALCUTTA • MADRAS MELBOURNE THE MACMILLAN COMPANY NEW YORK • BOSTON • CHICAGO DALLAS • SAN FRANCISCO THE MACMILLAN CO. OF CANADA, Ltd. TORONTO A TRACT ON MONETARY REFORM BV JOHN MAYNARD KEYNES FELLOW OF KING'S COLLEGE, CAMBRIDGE MACMILLAN AND CO., LIMITED ST. MARTIN’S STREET, LONDON 1929 \\(~5 COPYRIGHT First Edition 19*3 Reprinted 1924. >929 PRINTED IN GREAT BRITAIN PREFACE We leave Saving to the private investor, and we encourage him to place his savings mainly in titles to money. We leave the responsibility for setting Production in motion to the business man, who is mainly influenced by the profits which he expects to accrue to himself in terms of money. Those who are not in favour of drastic changes in the existing organisation of society believe that these arrange¬ ments, being in accord with human nature, have great advantages. But they cannot work properly if the money, which they assume as a stable measuring- rod, is undependable. Unemployment, the precarious life of the worker, the disappointment of expectation, the sudden loss of savings, the excessive windfalls to individuals, the speculator, the profiteer—all pro¬ ceed, in large measure, from the instability of the standard of value. It is often supposed that the costs of production are threefold, corresponding to the rewards of labour, enterprise, and accumulation.
    [Show full text]
  • THE ECONOMIC CONSEQUENCES of FINANCIAL REGIMES: a NEW LOOK at the BANKING POLICIES of MEXICO and BRAZIL, 1890-1910 América Latina En La Historia Económica
    América Latina en la Historia Económica. Revista de Investigación ISSN: 1405-2253 [email protected] Instituto de Investigaciones Dr. José María Luis Mora México Gerber, James; Passananti, Thomas THE ECONOMIC CONSEQUENCES OF FINANCIAL REGIMES: A NEW LOOK AT THE BANKING POLICIES OF MEXICO AND BRAZIL, 1890-1910 América Latina en la Historia Económica. Revista de Investigación, vol. 22, núm. 1, enero-abril, 2015, pp. 35-58 Instituto de Investigaciones Dr. José María Luis Mora Distrito Federal, México Available in: http://www.redalyc.org/articulo.oa?id=279133751002 How to cite Complete issue Scientific Information System More information about this article Network of Scientific Journals from Latin America, the Caribbean, Spain and Portugal Journal's homepage in redalyc.org Non-profit academic project, developed under the open access initiative THE ECONOMIC CONSEQUENCES OF FINANCIAL REGIMES: A NEW LOOK AT THE BANKING POLICIES OF MEXICO AND BRAZIL, 1890-1910 CONSECUENCIAS ECONÓMICAS DE LOS REGÍMENES FINANCIEROS: UNA NUEVA PERSPECTIVA DE LAS POLÍTICAS BANCARIAS DE MÉXICO Y BRASIL, 1890-1910 James Gerber and Thomas Passananti San Diego State University, San Diego, Estados Unidos de América [email protected]; [email protected] Abstract. This paper compares the consequences of different financial policies adopted in Mexico and Brazil in the decades before World War I. In the 1890s, the national governments of Mexico and Brazil pursued strikingly different policies toward banking regulation. In Brazil, after the fall of the monarchy, authorities briefly experimented with financial liberalization. In Mexico, in the same era, public officials created a banking system with more constraints and regulations. We compare the costs and benefits to the financial systems and the macroeconomic effects of these different banking regimes, thereby revisiting two classic concerns of financial historians, the costs of financial fragility versus the benefits of financial liberalization.
    [Show full text]
  • Money Issuance
    Money Issuance Alternative Monetary Systems A report commissioned by the Icelandic Prime Minister’s Office kpmg.is KPMG Contacts: Svanbjörn Thoroddsen Partner +354 545 6220 [email protected] Sigurvin B. Sigurjónsson Manager +354 545 6112 [email protected] This report is commissioned by the Icelandic Prime Minister’s Office. KPMG makes no representation or warranty, expressed or implied, as to the accuracy, reasonableness or completeness of the infor- mation contained in this document. KPMG expressly disclaims any and all liability for any information contained in, or errors in or omissions from this document or based on or relating to the readers’ use of the information contained within it. Details of our principal information sources are set out within the report and we have satisfied ourselves, so far as possible, that the information presented in our report is consistent with other information which was made available to us during the course of our work. We have not, however, sought to establish the reliability of the information. Alternative Monetary Systems | 3 Contents Terms and definitions .......................................................................................... 4 Executive summary .............................................................................................. 5 Introduction ................................................................................................................. 6 Fundamentals of Monetary Systems ................................ 7 Fundamentals of monetary systems ......................................................
    [Show full text]