EXTERNAL IMPACT ON ECONOMIC DEVELOPMENT.

Purpose This paper aims to estimate a New Keynesian small open economy dynamic stochastic general equilibrium (DSGE) model for Egypt using Bayesian techniques and data for the period FY2004/2005:Q1-FY2015/2016:Q4 to assess monetary and fiscal policy interactions and their impact on economic stabilization. Outcomes of monetary and fiscal authority commitment to policy instruments, interest rate, government spending and taxes, are evaluated using Taylor-type and optimal simple rules. Design/methodology/approach The study extends the stylized micro-founded small open economy New Keynesian DSGE model, proposed by Lubik and Schorfheide (2007), by explicitly introducing fiscal policy behavior into the model (Fragetta and Kirsanova, 2010 and Çebi, 2011). The model is calibrated using quarterly data for Egypt on key macroeconomic variables during FY2004/2005:Q1-FY2015/2016:Q4; and Bayesian methods are used in estimation. Findings The results show that monetary and fiscal policy instruments in Egypt contribute to economic stability through their effects on inflation, output and debt stock. The monetary policy Taylor rule estimates reveal that the Central Bank of Egypt (CBE) attaches significant importance to anti-inflationary policy and (to a lesser extent) to output targeting but responds weakly to nominal exchange rate variations. CBE decisions are significantly influenced by interest rate smoothing. Egyptian fiscal policy has an important role in output and government debt stabilization. Additionally, the fiscal authority chooses pro-cyclical government spending and counter-cyclical tax policies for output stabilization. Again, past values of the fiscal instruments are influential in the evolution of the future fiscal policy-making process. Originality/value A few studies have examined the interaction between monetary and fiscal policy in Egypt within a unified framework. The presented paper integrates the monetary and fiscal policy analysis within a unified dynamic general equilibrium open economy rational expectations framework. Without such a framework, it would not be easy to jointly analyze monetary and fiscal transmission mechanisms for output, inflation and debt. Also, it would be neither possible to contrast the outcome of monetary and fiscal authorities commitment to a simple Taylor instrument rule vis-à-vis optimal policy outcomes nor to assess the behavior of monetary and fiscal agents in macroeconomic stability in context of an active/passive policy decisions framework.

This article will analyze the interplay between capital movements and trade in services as structured in World Trade Organization (WTO) law, and it will assess the implications of the capital account liberalization for the freedom of WTO Members to pursue their economic policies. Although the movement of capital is largely confined to the domain of international financial or monetary policy, it is regulated by WTO law due to its role in the process of financial services liberalization, which generally requires liberalized capital flows. From a legal perspective, the interplay between capital movements and trade in services requires striking a delicate balance between the right of market access and the parallel right of economic stability. Indeed, a liberalized regime for capital movements could pose serious stability problems during times of crisis. For this reason, it is necessary that Members are able to derogate from their obligations and adopt emergency measures. Regulating the movement of capital in the General Agreement on Trade in Services (GATS) requires stretching the regulatory oversight of WTO law over different aspects of international economic policy. Indeed, capital movements are a fundamental component of the balance of payments and have a major role in shaping monetary, fiscal, and financial policies. This article will analyze how the discipline provided by the GATS on capital movements will affect not only trade in services, but also the Members' policy space on monetary and fiscal policy. The article will conclude that while the GATS offers enough policy space for the maintenance of financial stability, it does not fully take into consideration the need of Members to control capital movements in order to conduct monetary policies. The Author 2012. Published by Oxford University Press. All rights reserved., Oxford University Press.

Fiscal and Monetary Policy during Downturns: Evidence from the G7

WHITHER DEVELOPMENT. ECONOMICS? James H. Weaver and Kevin M. O'Keefe L·development economics enters its fourth decade as both a field of study and a theoretical launching pad for development assistance policies, it is appropriate to ask some hard questions: 1) Is development economics a legitimate field in its own right? 2) What have been the results of the return to orthodoxy in the 1980s? 3) What is the current state of development economics? and finally, 4) What is the future of development economics? Using these four questions to structure the paper we will attempt to present a critical review of development economics since its inception and to suggest a vision of the key elements likely to be addressed by development economics in the future. A Brief Overview OfDevelopment Economics Development economics has been characterized by its rejection ofthe relevance of classical economic theory and laissez-faire, free trade policy for developing countries. This rejection was based on: the disastrous experience, during the Great Depression, of capitalist countries following laissez-faire policies; the impressive rate of industrialization achieved by James H. Weaver is a professor of economics at the American University and is principal investigator ofthe Development Studies Program ofthe U.S. Agency for International Development. Kevin M. O'Keefe is a graduate student in the American University's School ofInternational Service International Development Program and a research fellow at the Development Studies Program. 113 114 SAISREVIEW the Soviet Union using centralized planning; and the conviction that the institutions necessary for market economies to operate were not present in developing countries. In this early period, development economists equated development with industrialization and virtually ignored agricultural transformation. Convinced that laissez-faire and free trade would not produce development, they argued for increased government planning, a large role for government saving and investment, protection of domestic industry, and greater foreign assistance. Not all orthodox economists accepted the arguments of development economists. Many kept believing in the relevance ofneo-classical economics and the laissez-faire, free trade strategy. Moreover, in addition to the orthodox development economists, there were many non-orthodox economists studying development during this same period. Two schools of non-orthodox economists emerged: dependency theorists and neo— Marxists. Dependency theorists agreed with the critiques made by the orthodox development economists but went further. They argued that successful capitalist development was impossible in developing countries because these countries were so dependent on industrialized countries for technology and capital. Dependency theorists clearly had a more highly developed theory of underdevelopment and its causes than of development . Although the policy prescriptions of this group were diverse, they often called for a de-linking from the international economic system, socialist revolution, or both. In the 1970s a new group on the left, classified as neo-Marxists, rejected dependency theory entirely. They argued that imperialism was a progressive force in developing countries and that the problem was not too much capitalism but too little. According to this school, the main obstacles to development were the same forces that had blocked capitalist development in Asia in the fifteenth century when it was beginning in Europe. These neo-Marxists pointed to the great progress made by Korea, Brazil, and others, in industrializing as proof that successful capitalist development was quite possible; and they concluded that only when pre-capitalist elements, such as feudal land tenure, have been eliminated and the productive forces ofsociety released through capitalism will it be possible to achieve a successful transition to socialism. An Overview of Three Key Development Strategies What practical strategies have arisen from the study ofdevelopment economics? We shall discuss three such strategies: import substitution industrialization, export promotion, and growth with equity. WHITHER DEVELOPMENT ECONOMICS? 115 Import Substitution Industrialization (ISI). In the 1950s, development economists proposed a strategy for rapid industrialization based on domestic production of consumer goods. This approach advocated the imposition of quotas and tariffs to keep foreign goods out and to protect infant industries. It also recommended the maintenance of overvalued or multiple exchange rates in order to encourage the importation ofcapital, intermediate goods, and raw materials, while discouraging the importation of luxury and consumer goods. Governments were advised to control and allocate foreign exchange to crucial...

This article examines the role of fiscal stabilization policy in a two‐country framework that allows for partial exchange rate pass‐through. Analytical solutions for optimal monetary and fiscal policy rules depend on the degree of pass‐through. Each country unilaterally uses its fiscal instrument to stabilize the costs facing exporters. The welfare effects differ strongly depending on the degree of pass‐through. For high levels, both countries are better off with the fiscal instrument and welfare is closer to the benchmark flex‐price level. For low levels, however, the unilateral equilibrium policy rules lead to high volatility in taxes, and fiscal policy ends up being destabilizing by transmitting exchange rate fluctuations. Because these results stem from strategic considerations by the two countries, the fiscal instrument is not used under policy coordination. In addition, imposing a monetary union increases welfare when pass‐through is low, including the case of local currency pricing. (JEL E52, E63, F41, F42)

Commodity smuggling is considered as one of the issues in the Iranian economy during last decades. Smuggling has had relatively high turnover during recent years and, thus, it has attracted much attention. Although smuggling is often assumed as an economic issue, its non-economic origins are so diverse that it can be regarded as a multidimensional process. Thus, a thorough analysis of this issue should take into account its different aspects. This paper presents an empirical analysis of commodity smuggling in the Iranian economy in terms of political economy. Accordingly, in a descriptive–analytical approach, along with the economic evaluation of smuggling, the non-economic (social, cultural, political, and geographical) dimensions are also studied from national and international perspectives. Results show that in order to fight against commodity smuggling, moving towards equilibrating the markets and relative prices through adopting proper foreign exchange and trade policies coincided with empowering border areas might be recommended.

I reconsider the issue of optimal monetary and fiscal policy in a fully fledged DSGE model augmented for a share of agents excluded from asset market participation (rule-of-thumb consumers) when many fiscal instruments are available. Limited asset market participation entails a stronger use of the consumption tax in place of the labor tax in steady state. Along the business cycle, monetary policy stabilizes inflation while fiscal policy can play an important role in attenuating the effect of productivity shocks on income distribution.

Fiscal and monetary policies are fundamental to ensuring macroeconomic stability. An overly expansionary fiscal approach can diminish the effectiveness of monetary controls. Crafting an optimal mix of fiscal and monetary strategies is therefore essential, particularly under country-specific economic conditions. This study investigates the impact of fiscal and monetary policy instruments on Pakistan’s economic stability using data from 1980 to 2024. The study employs the Vector Autoregressive (VAR) model, Impulse Response Functions (IRF) and Variance Decomposition (VDC) to analyze the relationships. Results show that money supply initially exerts a negative impact on GDP but turns positive in the medium to long run. Fiscal policy, however, demonstrates stronger and more consistent influence on economic growth. Thus, fiscal instruments appear to be more effective than monetary measures in the context of Pakistan.

Purpose: After the trade liberation, Bangladesh has faced the crisis of trade imbalance. Therefore, trade liberation is considered as the driving force behind the crisis. To investigate this historical allegation, this study aims at analysing the factors that determined the post trade liberalisation aggregate import demand function of Bangladesh.
 
 Design/Methodology/Approach: Based on quarterly data from trade liberalisation period to reaching the economic stability period, 1992Q1 - 2007Q4, an autoregressive distributed lag (ARDL) approach to cointegration and an error correction model (ECM) have been utilised to estimate the impacts of natural calamity, gross domestic product, foreign exchange reserve, relative price and tariff on aggregate import demand of Bangladesh.
 Findings: Empirical results revealed that the natural calamity is identified to be nonresponsive to the nation's aggregate import demand both in the short and long run. This indicates that Bangladesh can meet the natural crisis related demand by herself without influencing its aggregate import demand. Results also revealed that the import volume of Bangladesh is cointegrated with relative import price, actual GDP and real foreign exchange reserve of the country. The import demand of the country can largely be described by its real GDP, while it is found inversely associated with relative price ratio in the long run. The long run association among import demand and tariff rate indicates that trade liberalisation has a significant positive impact on the country's aggregate import demand, as well as real foreign exchange reserve, as explained by the reduction in tariff rate.
 
 Research Implication: Developing countries like Bangladesh and the relevant business stakeholders would have considerable implications of such empirical findings with their trade policies, particularly how they should respond to unpredictable scenarios caused by the factors such as natural calamity, foreign exchange reserve, tariff, etc.
 
 Originality Value: The originality of the study lies in its uniqueness in using the historical data and factors that no studies have so far used in analysing the import demand function of Bangladesh.
 
 Keywords: Natural calamity, import demand, foreign exchange reserve, gross domestic product, tariff, trade liberalisation, Bangladesh.
 
 Cite as: Shikha, H. A., Alam, M. M., Murad, M. W., Said, J., & Ahmed, Z. U. (2023). A historical perspective of trade liberalisation dynamics in Bangladesh: impacts of natural calamity risk, gross domestic product, foreign exchange reserve, relative price and tariff on import demand. Journal of Nusantara Studies, 8(TI), 177-208. http://dx.doi.org/10.24200/jonus.vol8issTIpp177-208

Neste trabalho, formula-se um modelo macroeconômico de curto prazo a fim de se derivar as interações entre os setores agrícola e não-agrícola por ocasião da aplicação de políticas de estabilização. As variáveis exógenas são mudanças nas políticas fiscal, monetária e cambial e nos preços internacionais. As variáveis endógenas explicitamente analisadas são renda real para cada setor e preços relativos. Os principais resultados são: (a) os preços relativos tendem a variar quando as variáveis exógenas variam; (b) a produção agrícola e os preços relativos da gricultura tendem a se reduzir face a políticas fiscais e monetárias expansivas mesmo quando a elasticidade-renda de demanda para produtos agrícolas for zero; (c) embora o efeito inflacionario de políticas monetárias e fiscais expansivas seja maior quando a elasticidade de oferta de produtos agrícolas é baixa, os preços nominais da agricultura tendem a crescer no máximo tanto quanto os preços nominais não-agrícolas. Os efeitos de diversas pressuposições a respeito da elasticidades de demanda e de oferta sobre os resultados do modelo são também derivados.

The search for balanced, sustainable growth clearly involves the unwinding of large and persistent global imbalances. Much of the attention in the rebalancing debate has centred on how shifts in monetary and fiscal policies affect current account imbalances. This paper goes beyond macroeconomic management considerations and exchange rate realignments to assess how one type of structural policy reform – namely trade and trade-related policy reforms – may facilitate global rebalancing. In addition, the paper analyses how might various rebalancing scenarios, even if they do not explicitly include major trade policy reforms, impact global trade. Our analysis suggests that a co-ordinated response involving macroeconomic, exchange rate and structural reforms, including trade policy reforms, are needed to address imbalances in the global economy. Trade is a part of the solution since trade policy distortions reduce the benefits from trade and, through their effects on relative prices, jointly influence economic incentives on both the trade balance and net national savings sides of the national savings-investment identity. In particular, since some imbalances stem from the asymmetric pattern of remaining protectionism in goods and services sectors, a balanced approach to trade policy reform could facilitate the global adjustment process.

During the mid 1970s, Chile began a bold program of unilateral trade liberalization following decades of protectionism, effectively putting an end to four decades of import substitution policies. Like other countries Latin America, Chile had relied on quantitative restrictions (QRs) and, some cases, high tariffs to protect the production of importables. Agricultural exports were subject to QRs; moreover, agriculture suffered a high indirect taxation from industrial protection (Hurtado, Valdrs, and Muchnik). The current trade regime is simple to describe: a uniform tariff of 11% applies to all importables except wheat, sugar, and edible oils, which have a price band scheme which provides additional protection beyond the uniform tariff. There are no QRs on imports and no export taxes, licensing, or quotas. A uniform VAT applies to all imports and domestic production, and under the Uruguay Round Agreement (URA) of April 1994, Chile bound tariffs at 25% for all products except wheat and sugar (at 31.5%). Thus, Chile's program of tariffs, like several countries Latin America, had already occurred at the time of the URA April of 1994. Chile, therefore, came out of the GATT negotiations with virtually no mandated changes to its trade policies. Today, Chile's agricultural trade policy is facing new challenges. One is to maintain an open trade regime the face of continuous pressure for protection of importables because of a stress on profitability since about 1990. A second challenge is to improve trade-related institutions such as rules for dealing with contingency protection measures (safeguards, antidumping, etc.,) that remain out of step with liberalized trade. A third challenge is related to preferential trade agreements (PTAs), which have taken on astonishing prominence more recently the trade policy debate of the postUruguay round Latin America. Regional agreements are in and trade agreements proliferate: MERCOSUR the Southern Cone; NAFTA North America; the Free-Trade Agreement at the Summit for the Americas Miami; and older treaties such as the Andean Trade Preference Act. Add to these the trade

This paper documents business cycles' fluctuations in Chinese provinces. China's de facto federalism, within a context of great geographical and economic diversity, suggests the great importance of policy coordination between provinces. We investigate the role of various potential determinants of provincial business cycles' synchronization. We consider exogenous factors like distance and size as well as policy factors such as industrial, fiscal and trade policy. Results emphasize the benefits of domestic trade and local fiscal policy rationalization on the stabilization of output fluctuations. However, they also identify international trade and local economic policy heterogeneity as growing centrifugal forces.• JEL Classification: E32, F41, E63

The Serbian Parliament has adopted the fiscal consolidation program recognizing an exponentially rising public debt as a real threat to the economy that must be contained in order to avoid sovereign default. Despite the legacy of unfavorable macroeconomic development due to last-year's flood, a challenging expenditure cuts approach was adopted. It will keep domestic demand at depressed levels for some time even if austerity measures are not front-loaded but phased-out over three years. The reverse of the debt trend is projected for 2017, when the debt-to- GDP ratio will reach 80 percent. We use in this paper QUEST_SERBIA DSGE model to assess what would happen to the Serbian economy if the policy maker consistently implemented the policy package. Results are compared with model based estimates of what would happen if the policy maker did nothing at all. The differences between these experiments are considered as net effects of the fiscal consolidation package. Assessment of the spontaneous development is based on an unconditional forecast from the model, while controlled development is based on a conditional forecast. The social costs of fiscal consolidation will be significant if the fiscal policy is not supported by an adequate mix of monetary and foreign exchange policies. Among alternative scenarios we had designed, a delay in monetary easing was the worst case. A timely easing of the monetary policy followed by a relatively stable real exchange rate shows the best simulation results. Fiscal consolidation as proposed is a workable policy, which will keep the rising debt-to-GDP ratio at sustainable level, but it is still not sufficient to reverse debt trend in 2017. Perhaps the other structural measures will do this job, but they are beyond the scope of this paper.

Achieving Price Stability in Nigeria: Monetary Policy Rate Approach vs. Foreign Exchange Policy Approach