This new model can be used to derive the financeable fiscal deficit, given inflation targets, or to derive an equilibrium inflation rate for which no fiscal adjustment would be necessary. Here it is used to analyze inflation, external debt, and financial sector reform in Turkey.

This book analyzes the Peruvian and Bolivian macroeconomic experiments. It contrasts the logic of orthodox and heterodox policy, offers an account of the dynamics of hyperinflation and stabilization, explores the explicit and implicit class character, and suggests some lessons for future policy .

An empirical investigation of financial crises during the last 800 years.

The past approach to the international debt crisis has been traditionally based on conventional banking principle in which debt had to be paid back in fuH and in time. International lending was a function of the perceived credit standing of debtor country and the return on investment (ROI). If debtor country run into difficulties and had problems with service payments - it was generally assumed that the debt-related expenditures were mismanaged. With economic stability and firm financial rules - the debt crisis was supposed to disappear after application of appropriate adjustment measures. However in the world of inconsistent lending criteria greater uncertainty and increased volatility of expectations - the problem has continued to get worse. At the beginning of the 1990s a number of countries are more indebted than at any other time in the past. Until mid 1980s extern al debt economics has been rather a disembodied concept for most economists and business leaders. The main reason for this neglect of one of the most important macroeconomic categories was difficulty of distinguishing terminologically and methodologically the domestic determinants of national expenditures from the external ones. Then there were conceptual problems in distinguishing the functional determinants of macroeconomic liquidity from external and domestic determinants of macro-economic solvency. Moreover many studies of the debt crisis were one-sided. Usually debt was seen as a 'white-black' phenomenon with debtor countries accusing creditor countries for causing the crisis and vice versa.

With public debt soaring across the world, a growing concern is whether current debt levels are a harbinger of fiscal crises, thereby restricting the policy space in a downturn. The empirical evidence to date is however inconclusive, and the true cost of debt may be overstated if interest rates remain low. To shed light into this debate, this paper re-examines the importance of public debt as a leading indicator of fiscal crises using machine learning techniques to account for complex interactions previously ignored in the literature. We find that public debt is the most important predictor of crises, showing strong non-linearities. Moreover, beyond certain debt levels, the likelihood of crises increases sharply regardless of the interest-growth differential. Our analysis also reveals that the interactions of public debt with inflation and external imbalances can be as important as debt levels. These results, while not necessarily implying causality, show governments should be wary of high public debt even when borrowing costs seem low.