This article examines a fiscal-reporting problem that arises under fiscal dominance: net domestic financing may be recorded as domestic borrowing even when its economic substance reflects central-bank financing of the fiscal deficit. Under monetary dominance, domestic borrowing replaces private demand with public demand, so accounting classification and economic substance coincide. This article uses a financial transactions matrix to show why conventional fiscal accounting travels poorly to fiscal-dominance settings. It distinguishes demand-absorbing domestic borrowing from direct central-bank financing and securitised monetary financing, where commercial banks swap non-borrowed and non-interest-bearing excess reserves for government securities. An application to Guyana shows that banking-system financing in the 2025 fiscal accounts is explained by direct and securitised central-bank financing. The article recommends a more detailed reporting format to improve fiscal transparency, economic diagnosis, and public accountability.

This article develops a model in which fiscal financing composition interacts with imports, banks, and endogenous entry to shape Dutch-disease dynamics. Standard models abstract from imports-the missing-imports problem-so resource-financed spending mechanically generates real exchange rate appreciation and a smaller tradable sector. However, imports operate through two margins: (i) capital imports raise embodied productivity and expand non-tradables, and (ii) consumer imports compress markups and moderate entry into the non-traded sector. These forces weaken the mechanical link between resource-financed outlays and Dutch disease outcomes. Instead, money-financed outlay produces real exchange rate overshooting, fewer tradable firms, and distinct monetary diagnostics: a smaller money multiplier and declining liquid foreign assets in the banking system. Since money-and resource-financed spending produce similar demand effects but different import responses, omitting financing composition confounds identification and biases empirical inference. The analysis shifts the policy focus from resource-financed fiscal rules toward institutional constraints on monetary financing.

This article derives an open-economy Golden Rule of public finance. Under foreign exchange (FX) scarcity, both the marginal return and marginal cost of capital require FX adjustment. This yields an FX-adjusted net marginal product of public capital that incorporates marginal FX earnings or savings, net of FX maintenance and replacement costs. The efficiency criterion equates the FX-adjusted net marginal product with the world interest rate plus an FX scarcity premium. Aggregating across projects yields a portfolio Golden Rule: a minimum cost share of the public investment portfolio must be allocated to FX-earning projects to offset the return shortfall of FX-using projects. The conventional rule is too permissive when marginal capital imposes a net FX burden and too restrictive when its FX return is sufficiently large, leading to over- and under-accumulation of public capital. More broadly, the same correction identifies the relevant return for cross-country comparisons: the cost-normalised FX-adjusted return.

This article develops a flow-of-funds accounting model to explain the coexistence of balance-of-payments surpluses and domestic foreign exchange shortages-a paradox of plenty in many resource-rich economies operating under fixed or managed exchange rate regimes. The framework decomposes net foreign exchange demand into fiscal deficits financed by the central bank and the net accumulation of private bank credit. A shortage arises when net demand exceeds banks' net sales of foreign exchange, for example when the central bank finances government spending and accumulates foreign exchange to defend the peg. In long-run equilibrium, banks maintain a net purchase position in foreign currencies to offset the net accumulation of deposits by the non-bank sector. Thus, banks are not foreign exchange hoarders: balance-sheet stability and portfolio diversification explain this equilibrium. Evidence from Guyana corroborates these predictions and identifies central bank financing of government expenditure as the principal driver of foreign exchange shortages since 2012.

A flatter Phillips curve in open economies-where imports form a share of consumption and production costs-renders CPI-based inflation a lagging indicator of excess demand, increasing the risk of understating economic overheating. I develop a model that connects excess demand with forex market pressure, captured by an external output gap-defined as the deviation of output from the balance-of-payments consistent level. The external output gap serves as a leading indicator of overheating, where excess demand is masked by subdued CPI-based inflation (overheating on ice). The model introduces a composite output gap as a weighted average of domestic and external gaps. Crucially, it can be positive even when the domestic output gap is negative, leading to biased estimates from filtering methods. Incorporating the composite gap into business cycle analysis is essential to prevent excessively loose policy, while a focus on non-tradable or cost-based inflation is required to assess domestic inflationary pressures.

This article develops a model to examine the U.S. trade deficit, motivated by three facts: (i) a clockwise convergence dynamic between the trade balance and nominal exchange rate (1990Q4-2009Q1); (ii) the central role of valuation effects in external adjustment; and (iii) the macro-financial disruptions following the 2025 Trump tariffs. The framework combines a short-run trade balance schedule - capturing goods-market equilibrium and valuation effects - with a long-run schedule consistent with a stable NIIP and no persistent asset revaluations. Calibration suggests that the trade deficit reflects persistent under-investment relative to the Golden Rule benchmark. Tariff shocks trigger financial decoupling-rising inflation expectations and long-term borrowing costs - which reduce the expected return on U.S. assets, depress asset prices, and curb domestic absorption. These effects generate dollar depreciation and a smaller equilibrium trade deficit. The optimal unilateral tariff is 8.32 percent, and the optimal fiscal deficit share of GDP is 0.135 percent.

The canonical Dutch disease models are largely real-sector in nature and often do not account for political economy considerations. Presenting an intuitive theoretical framework, which is illustrated by two case studies, the article bridges this gap by proposing a monetary sector for assessing Dutch disease effects. It is demonstrated that political pressure owing to new oil discoveries leads to central bank monetization in order to meet optimistic electoral promises. This monetization of deficit often produces a real exchange rate appreciation that might be interpreted as a Dutch disease phenomenon (the Guyana case). Monetization also coincides with real exchange rate depreciation during an oil boom as the case study of Ghana illustrates. The paper argues that monetization can also result in a quantity adjustment in the form of diminished foreign exchange availability (liquidity) in times of plentiful US dollar oil revenues. The empirical estimates suggest that (on average) a 1 US$ increase in monetization corresponds to a 1.14 US$ decline in FX liquidity in Ghana and a 2.50 US$ decrease in Guyana. Hence, the paper underscores the importance of fiscal-monetary policy coordination: the expansion of domestic money supply cannot be in excess of that which is permissible by newfound oil revenues.

This article develops a stock-flow consistent (SFC) model of fiscal and debt sustainability in an open economy, addressing a key inconsistency in the conventional debt indicator—the debt-to- GDP ratio—which combines stock and flow variables. The analysis shows that the government’s budget constraint yields a fiscal rule that is not SFC: a long-run primary surplus systematically overshoots or undershoots the stock-flow equilibrium (the bullseye) and can trigger debt crises. By contrast, an SFC fiscal rule demonstrates that a long-run primary deficit attains goods-market equilibrium and a stable debt ratio, even under dynamic efficiency and across exchange-rate regimes. SFC accounting permits a primary deficit because it includes the private sector and external balances, unlike the government’s budget constraint. Finally, the model shows that monetised fiscal deficits undermine debt sustainability in both fixed and flexible exchange-rate systems, by depleting foreign-exchange reserves or increasing the long-run rate of nominal depreciation, respectively.

This paper presents new evidence on the ethnic distribution of labour income and employment in Guyana, 2006-2016. Three key results emerge. First, the ethnic distribution of income is more egalitarian prior to 2014. Second, Indo-Guyanese dominated each category of employment and all but two income categories in 2014. Third, this group experienced a rapid reversal of fortune in 2016. Motivated by this evidence, this paper develops a simple model of political and economic competition between Indo-Guyanese (dominant group) and Afro-Guyanese (out-group). A key result is that democratic processes produce the worse of two equilibria, where the intergroup income inequality is highest. Moreover, overall income inequality is driven by intergroup distribution, i.e. the in-group's share of profit income relative to the out-group's share of wage income. The framework also presents comparative statics for how cross-ethnic voting and a resource boom affect within- and between-group income distribution. One noteworthy feature of the model is its ability to explain the dynamics of state capacity in heterogeneous societies. A weak state emerges when the dominant group becomes a majoritarian tyrant, and lowers state autonomy and enforcement capacity. A despotic state is possible by the dictatorship of an ethnic minority who fears the worse distributional outcome. A third possibility is a narrow corridor as a tightrope saddle path, which suggests that an inclusive state is premised on intra-elite and intra-society distributional concessions.