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The Macroeconomy of Central America : Procyclicality of Financial Systems in Asia - Robert Renhack

The Macroeconomy of Central America

Procyclicality of Financial Systems in Asia

By: Robert Renhack (Editor), Erik Offerdal (Editor)

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Opportunities for growth and investment in Central America could well improve in the coming years, as the region's ties with the world economy grow closer. This integration, however, also presents important challenges for economic policy to ensure that growth can be sustained and can benefit the poor. This book stresses the importance of keeping fiscal policy on a sustainable path, strengthening public investment in basic infrastructure and primary health care and primary and secondary education, and managing the risks associated with partial dollarization. ANA CORBACHO Economist, Fiscal Affairs Department, International Monetary Fund, USA HAMID R. DAVOODI Senior Economist, Middle East and Central Asia Department, International Monetary Fund, USA ALAIN IZE Advisor, Monetary and Financial Systems Department, International Monetary Fund, USA DANIEL LEDERMAN Senior Economist, World Bank, USA VALERIE MERCER-BLACKMAN Economist, Western Hemisphere Department, International Monetary Fund, USA GUILLERMO PERRY Chief Economist of the Latin American and Caribbean Region, World Bank, USA JANET G. STOTSKY Fiscal Affairs Department, International Monetary Fund, USA RODRIGO SUESCN Senior Economist, World Bank, USA ASEGEDECH WOLDEMARIAM Senior Research Officer, International Monetary Fund, USA

List of Tables, Figures, and Boxesp. viii
Forewordp. xii
Notes on Contributorsp. xv
Fiscal Sustainabilityp. 1
Introductionp. 1
A basic accounting frameworkp. 2
What are the factors behind recent developments in debt in Central America?p. 5
What level of public debt?p. 12
Potential fiscal vulnerabilities and policy flexibilityp. 18
How would adverse shocks impact on the need for fiscal adjustment?p. 26
Would fiscal rules be useful?p. 30
Some issues for further considerationp. 34
The accounting frameworkp. 35
Notesp. 37
Referencesp. 39
Tax Reform: Trends and Possibilitiesp. 41
Introductionp. 41
General principles of tax reformp. 42
Structure of tax system in Central Americap. 44
Domestic taxes on goods and servicesp. 51
Taxes on income and profits and taxes on wealthp. 58
Administrative issuesp. 82
Regional tax harmonizationp. 83
Looking to the futurep. 84
Notesp. 85
Referencesp. 85
Public Expenditure and Governancep. 87
Introductionp. 87
Economic growth, poverty, and inequalityp. 88
Level and composition of government spendingp. 93
Investment in education and healthp. 97
Provision of educationp. 98
Returns to investment in educationp. 98
Trends in educational attainmentp. 101
Indicators of the quality and quantity of education inputsp. 104
Government spending on educationp. 105
Teacher salaries and teacher qualityp. 110
Student-teacher ratios and schooling timep. 113
Provision of health servicesp. 113
Health quality indicatorsp. 117
Social safety netsp. 121
Governancep. 125
Summary and policy conclusionsp. 134
Notesp. 136
Referencesp. 138
Trade Structure and Policyp. 142
Introductionp. 142
Trade structurep. 143
Trade policiesp. 148
Tariff and nontariff barriersp. 148
The impact of NAFTA in Central Americap. 151
Policy reforms and economic growthp. 153
The United States and Central America trade relation: further trade integrationp. 155
A trade agreement between Central America and the United Statesp. 156
The 2002 US farm billp. 157
Central America and the United States: beyond tradep. 159
Some other features of Central American countriesp. 162
Implications for monetary arrangementsp. 163
Conclusionsp. 165
Notesp. 166
Referencesp. 167
Choice of Exchange Rate Regimesp. 169
Introductionp. 169
Theoretical considerations in the choice of exchange regimep. 170
Overview of the economic structure of the CAC countriesp. 171
An econometric approach to assessing exchange regimesp. 180
An index approachp. 182
Concluding remarksp. 186
Appendix 5.1p. 186
Index of effective exchange rate flexibility (FLT)p. 189
The construction of the index of suitability for a pegp. 190
Notesp. 191
Referencesp. 192
Financial Dollarization: What to Do About It?p. 194
Financial dollarization in Central Americap. 194
Dollarization: types and rootsp. 196
Risks and drawbacks of financial dollarizationp. 198
Is there a way out?p. 200
Conclusionsp. 204
Notesp. 205
Referencesp. 205
Indexp. 207
Table of Contents provided by Rittenhouse. All Rights Reserved.

ISBN: 9781403936523
ISBN-10: 1403936528
Series: Procyclicality of Financial Systems in Asia
Audience: Professional
Format: Hardcover
Language: English
Number Of Pages: 221
Published: 1st November 2004
Country of Publication: US
Dimensions (cm): 21.59 x 13.97  x 1.27
Weight (kg): 0.41
Edition Number: 1