Financial Programming and Stabilisation Policy Options for Macro-Economic Adjustment

The paper initially discusses the real and monetary aspects of short-run structural adjustment using a flow-of-funds methodology. Based upon such a framework, it then specifies an analytical basis which is capable of integrating the financial programming model of the Fund with the financial requirements approach of the Bank in a manner which removes the existing dichotomies between the real and financial sectors of the economy. The merged model, which defines monetary, external, real and financial sector equilibrium, is then used to prescribe feasible stabilisation policy options for the Indian economy over the current fiscal year.