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Large budget deficits pose real threats to macroeconomic stabil-ity and therefore to growth and development. Large deficits will, perhaps after some time, lead to inflat on, exchange crises, ex-ternal debt crises, and high real interest rates. The Policy, Planning, and Research Complex distributes PPR Working Papers to disseminate the fuindings of work in progress and to encourage the exchange of ideas among Bank staff and all others interested in development issues. These oapers carry the names of the authors, remect only their views, and should be used and cited accordngly. The findings, interpretations, and conclusions are the authorsown. They should not be attributed to thc World Bank, its Board of Di-cctors, is management, or any of its mcmber countries Pu bl ic Di sc lo su re A ut ho riz ed Pu bl ic Di sc lo su re A ut ho riz ed Pu bl ic Di sc lo su re A ut ho riz ed Pu bl ic Di sc lo su re A ut ho riz ed
Fischer et al. (Mon,) studied this question.