Many developing countries are resource-constrained – that is, they are running a current account deficit. The deficit in the current account indicates that aggregate demand exceeds aggregate supply. Alternatively, domestic investment cannot be financed using national savings, necessitating...

Across a sample of thirty four emerging countries, the evidence shows the frequent existence of a pro-cyclical fiscal impulse. However, the scope for countercyclical policy increases with the availability of international reserves as it enhances credibility and mitigates concerns about the...