THE MACROECONOMIC IMPACT OF PRIVATIZATION

Privatization programs can generate substantial sums. This paper argue s that as a general rule, the proceeds of privatization should be trea ted as financing (and so put ''below the line'') and not as revenue. U nlike taxation, privatization never reduces private sector wealth. In exceptional cases, it may reduce the propensity to invest, and depress aggregate demand as a tax increase would. Given the difficulty of pre dicting when this will occur, and its exceptional nature, the receipt of proceeds from privatization does not, in most cases, warrant a rela xation of the stance of fiscal policy to maintain aggregate demand.