Macroeconomics of Fiscal Policy in Developing Countries
ANU Working Paper
53 Pages Posted: 24 Feb 2001
Date Written: February 2001
Abstract
This paper considers some aspects of the effects of fiscal policy on macroeconomic adjustment in developing countries. First, the paper reviews the notion of the fiscal deficit in the particular context of developing countries. It then spells out the conditions under which the internal and external debts are sustainable and points out the role of the "twin deficits". The paper then presents some evidence on the sustainability of the internal and external deficits in the context of some developing countries. Finally the paper develops the theme of endogeneity of money supply to fiscal policy and international capital flows and points out the difficulties faced by stabilization policy under these conditions.
Keywords: Fiscal Deficit, Current Account Deficit, Endogeneity of Money Supply
JEL Classification: E51, E63, H62, O11, O18
Suggested Citation: Suggested Citation
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