Macro Policies 1: Fiscal Probity: The Starting Point for Good Institutions (and the Other Way Around?)

  • Oleh Havrylyshyn
  • Nora Srzentić
Part of the Palgrave Studies in Economic History book series (PEHS)


There is a very strong consensus in the literature that Ragusa practiced a very prudent policy with respect to state finances, minting and debasement of the currency as well as market-enhancing regulations. Chapter 2 noted that all modern-day proponents of institutionalism, no matter how critical they may be of “too-early and too rapid” liberalization, do accept the Washington Consensus’ emphasis on starting with fiscal stabilization and maintaining fiscal prudence. All agree that reckless public finance diminishes private investments and destroys commercial efforts. This consensus thus implicitly answers the question in the title: yes, fiscal probity must come first, but yes it becomes part of a virtuous circle; fiscal probity and good institutions are interdependent and both together mirror sensible policies.


Public Debt Government Debt Good Institution Washington Consensus Italian Bank 
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© Oleh Havrylyshyn and Nora Srzentić 2015

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  • Oleh Havrylyshyn
  • Nora Srzentić

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