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This paper highlights the role of external indebtedness and the presence of inflationary inertia in order to assess the effectiveness and sustainability of inflation targeting during disinflation episodes. As the recent Argentinian experience illustrates, a sluggish inflation rate and a significant currentaccount deficit may make the stabilization process difficult. To illustrate the point, we build a model that shows that, when inflation adjusts fast, the target may be achieved without building too much external debt. But if inflation adjusts slowly, an excessive build-up of external debt could lead to an increase in the risk premium, a sudden shortage of foreign exchange, and the eventual collapse of the inflation-targeting regime. Fil: Libman, Emiliano. Centro de Estudios de Estado y Sociedad; Argentina. Universidad Nacional de San Martín; Argentina. Consejo Nacional de Investigaciones Científicas y Técnicas; Argentina Fil: Palazzo, Gabriel Martín. Centro de Estudios de Estado y Sociedad; Argentina. Universidad de Buenos Aires; Argentina. Consejo Nacional de Investigaciones Científicas y Técnicas; Argentina

The objective of the study is to: (i) assess the adequacy of the existing heat and electricity tariff levels for achieving financial viability of the energy sector operators; (ii) analyze the distributional implications of energy tariff increases; and (iii) assess the effectiveness of the existing social assistance programs and how to adjust them to mitigate the impact of energy tariff increase on the poor This report presents the key findings and recommendations for the Government of Moldova as well as other energy sector stakeholders. The report starts with a synopsis that summarizes the key findings and recommendations. The main report section starts with an introduction to country context, presents the design of tariff setting methodologies, and assesses the adequacy of tariffs based on constructed scenarios. Thereafter analysis of the distributional impact of projected range of tariff increases and the need to adjust the social assistance programs to mitigate the impact on the poor are presented. The report concludes with recommendations for the government on actions to be implemented on tariff setting methodologies and social assistance as well as areas for further research. Appendices include further background information of the analysis.

This article reviews the main issues of regulating and supervising banks in emerging markets with a view toward evaluating the long-run options. Particular attention is paid to Latin America and East Asia. These economies face a severe policy commitment problem that leads to excessive bailouts and potential devaluation of claims of foreign investors. This exacerbates moral hazard and makes a case for importing external discipline (for example, acquiring foreign short-term debt). However, external discipline may come at the cost of excessive liquidation of entrepreneurial projects. The article reviews the tradeoffs imposed by external discipline and examines various proposed arrangements, such as narrow banking, foreign banks and foreign regulation, and the potential role for an international agency or international lender of last resort. Liberalization and integration of financial markets have been associated with an increase in capital movements and with the financial crises. In particular, surges in foreign short-term debt have been blamed for crisis episodes in emerging economies in Asia (Thailand, Indonesia, and the Republic of Korea) and Latin America (Mexico, Brazil, Ecuador, and Argentina), as well as in the periphery of Europe (Turkey). These crises have proved costly in terms of output. Several policy responses have been suggested. Among them have been the reduction of short-term debt, the development of stock markets, the improved regulation and supervision of domestic financial system, enhanced transparency requirements and market discipline, and the establishment of an international lender of last resort. A catalog of “solutions” has been proposed to take care of the problems of banking in emerging market economies including moving to a narrow bank system, building a currency union, and leaving banking in the hands of foreign banks and offshore institutions. This article identifies policy responses tailored to the needs of emerging market and developing economies. The question is whether the regulatory policies and

This document provides a summary assessment of (presented) scaled-up crediting instruments as well as existing project-based crediting schemes against a number of important general characteristics of such instruments. Its purpose is to provide insights that may inform the design and use of possible scaled-up crediting instruments. This summary assessment begins with an examination of proposals for scaled-up crediting mechanisms. It considers existing crediting instruments, that is, (i) Kyoto project mechanisms (clean development mechanism (CDM) and joint implementation (JI)); and (ii) voluntary emission reductions (VER) schemes (in the non-compliance and voluntary markets). The characteristics (or issues) covered are: (i) national and international circumstances for market-based mechanisms and how these interact; (ii) coverage and boundary setting; (iii) participation and incentives for participation; (iv) caps, baselines, and allocations (or issuance); (v) market integrity and credibility; (vi) monitoring, reporting, and verification (MRV); (vii) program authority and administration; and (viii) potential scaling up modalities.