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It has recently been suggested that allowing for switches between different inflationary regimes produces a much better fit for the Fisher relationship between interest rates and inflation, at least for U.S. data. The paper assesses the merits of the regime-switching theory as an explanation for the apparent fluctuations in real interest rates in Australia, Canada, Germany, the United Kingdom, and the United States.

Banks and Banking --- Inflation --- Interest Rates: Determination, Term Structure, and Effects --- Price Level --- Deflation --- Finance --- Macroeconomics --- Real interest rates --- Long term interest rates --- Short term interest rates --- Yield curve --- Financial services --- Prices --- Interest rates --- United States

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This is the fourth of a series of papers that are being written as part of a larger project to estimate a small quarterly Global Projection Model (GPM). The GPM project is designed to improve the toolkit to which economists have access for studying both own-country and cross-country linkages. In this paper, we add Latin American economies to a previously estimated small quarterly projection model of the US, Euro Area, and Japanese economies. The model is estimated with Bayesian techniques, which provide a very efficient way of imposing restrictions to produce both plausible dynamics and sensible forecasting properties.

Commerce --- Business & Economics --- International Commerce --- Globalization --- Econometrics. --- Economic aspects --- Economics, Mathematical --- Statistics --- Banks and Banking --- Foreign Exchange --- Inflation --- Production and Operations Management --- Macroeconomics: Production --- Price Level --- Deflation --- Interest Rates: Determination, Term Structure, and Effects --- Macroeconomics --- Currency --- Foreign exchange --- Finance --- Output gap --- Real exchange rates --- Real interest rates --- Exchange rates --- Production --- Economic theory --- Prices --- Interest rates --- United States

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This paper investigates fiscal developments in 112 countries during the 1990s. It finds that, while the overall fiscal balance improved in most of them, the composition of this improvement differed. In nonprogram countries, revenues increased modestly and expenditure declined sharply, while in program countries both revenue and expenditure declined. However, in countries with programs that included structural conditions the adjustment was effected primarily through sharp expenditure compression. We did not find evidence of a statistically significant impact of IMF conditionality. Morever, fiscal improvements are strongly influenced by cyclical factors.

Banks and Banking --- Macroeconomics --- Public Finance --- International Monetary Arrangements and Institutions --- Fiscal Policies and Behavior of Economic Agents: General --- Fiscal Policy --- National Government Expenditures and Related Policies: General --- Interest Rates: Determination, Term Structure, and Effects --- Public finance & taxation --- Finance --- Expenditure --- Fiscal consolidation --- Fiscal stance --- Fiscal conditionality --- Real interest rates --- Fiscal policy --- Financial services --- Expenditures, Public --- Interest rates --- United States

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This paper examines the Chilean experience with capital controls and reviews studies on controls on capital inflows. Controls on Chile’s inflows had only a temporary impact in reducing specific inflows because they were affected by avoidance. There is some evidence that controls increased interest rates and altered the composition of capital inflows. The studies, however, contain important methodological problems in measuring flows and significant econometric weaknesses, which cast doubt on the robustness of the estimates. No study has assessed the political economy of the controls. It seems premature to view the Chilean experience as supportive of controls on capital inflows.

Banks and Banking --- Exports and Imports --- Foreign Exchange --- Current Account Adjustment --- Short-term Capital Movements --- International Investment --- Long-term Capital Movements --- Central Banks and Their Policies --- Interest Rates: Determination, Term Structure, and Effects --- International economics --- Currency --- Foreign exchange --- Finance --- Capital inflows --- Capital flows --- Capital controls --- Real exchange rates --- Real interest rates --- Balance of payments --- Financial services --- Capital movements --- Interest rates --- Chile

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This paper derives an interest rate rule for monetary policy in which the interest rate response of the central bank toward an increase in expected inflation falls as debts increase beyond a certain threshold level. A debt-constrained interest rate rule and the threshold level of debt are jointly estimated for Canada during the first decade of its inflation targeting regime of the 1990s. There are three main findings of this paper. First, a high government debt could constrain monetary policy if government spending-rather than taxes-is expected to adjust in future in line with debt service costs. The 'constraint' operates through an altered policy transmission mechanism through changes in the IS curve. Second, the effects of the debt-constraint on monetary policy are quite different during booms and recessions. Third, empirical estimates show that Canadian monetary policy might have been constrained by a high government debt-GDP ratio during the 1990s. Policy was less loose than what inflation indicators called for.

Canada -- Economic conditions -- 1991. --- Economic history. --- Fiscal policy -- Canada. --- Monetary policy -- Canada. --- Banks and Banking --- Inflation --- Public Finance --- Production and Operations Management --- Price Level --- Deflation --- Interest Rates: Determination, Term Structure, and Effects --- Debt --- Debt Management --- Sovereign Debt --- Macroeconomics: Production --- Macroeconomics --- Finance --- Public finance & taxation --- Public debt --- Real interest rates --- Short term interest rates --- Output gap --- Prices --- Interest rates --- Debts, Public --- Production --- Economic theory --- Canada