Fiscal policy and inflation determinants in Tunisia: An ARDL model approach

This paper empirically investigated the relationships among money supply, government revenue, government expenditure, domestic debt, external debt, inflation rate, exchange rate and balance of trade in Nigeria based on time series data which spanned between 1981 and 2017. The data were sourced from Central Bank of Nigeria Statistical Bulletin publications of various issues and National Bureau of Statistics. The data were tested for stationarity using Augumented Dickey Fuller unit root test and Phillips-Perron unit root test while the co-integration test was conducted using Johansen’s methodology. Ordinary Least Square (OLS) estimating technique was used for the empirical analysis. The findings revealed that both the explanatory variables and the dependent variable have long run equilibrium relationship. The results further demonstrated that government revenue (GREV), government expenditure (GEXP), exchange rate (EXGR) and inflation rate (INFR) have statistically significant positive relationships with balance of trade (BOT) while money supply (MS), domestic debt (DDEBT) and external debt (EDEBT) exert statistically significant negative impact on balance of trade (BOT) in Nigeria. Based on the results, government at all levels should ensure implementation of monetary and fiscal policies’ instruments aimed at promoting favorable investment atmosphere through appropriate stabilization of interest rates, exchange rates and inflation rates in order to galvanize economic growth, economic stability, economic sustainability and favorable balance of trade; there should be promotion of exportation of Nigerian products by the government especially non-oil products in order to bring more foreign exchange earning into the country, boost productive activities and improve the balance of trade position of the country. In addition, government should ensure that loans borrowed from domestic and external sources are judiciously expended on productive activities in order to positively influence balance of trade; and there should be imposition of ban on importation of products that can be manufactured domestically so as to expand productive capacity of indigenous industries and ensure favorable balance of trade. Finally, different tiers of government should invest massively on critical infrastructure in the economy to boost local investment in productive activities, thus galvanizing balance of trade. Keywords: Monetary Policy, Fiscal Policy, Balance of Trade, Unit Root Test, Co-integration Test, Ordinary Least Squares, Nigeria DOI : 10.7176/JPID/50-07 Publication date :June 30 th 2019

This study focuses the relationship between the government revenues and current expenditures in long run in Iran Country covering data 1986 2110. The research uses the annual time series data which is obtained from the website of Central Bank. The OLS method is used to estimate the liner regression to show the relationship between these variables. EVIEWS 8 and SPSS software is applied to do this survey. This paper explains the relationship between government current expenditures and revenues of taxes and oil in the long run. The results of the research state in the long run during the years of the study the coefficients of the oil revenue and the tax revenue are 0.025 and -2.32 respectively. Hence the oil revenue in the long run is one of the main factors to make a decision by the government who determine its current expenditure level. The decision makers in Iran can use the results of this study to make better decisions for its budget planning. I. Introduction To take a good decision and to improve their societies, the governments need to design the budget. To do its functions a government uses budget as a planning and financial tool. There is a budget deficit while the government revenues are less than the government expenditures. Vice versa, when the government expenditures less than its revenues it is said that the government has budget surplus. There are always the budget deficit all of years during all of years of this study. In other words, the budget deficit is a characteristic of Iran economics. The budget deficit is determined by calculation of the difference between government expenditures and revenues. Some time the governments to reduce the unemployment rate at their societies use the budget deficit policy but having the budget deficit in the long period not only is a policy but also is a problem for society that it needs to solve. To solve this problem the government should reduce its expenditures or it should increase its revenues resources. The budget revenue resources should be stationary and they must have the lowest fluctuations. Strongly dependent budget with the production of a goods shows the government have to change its expenditures or revenues. To achieve these aims the government should know the relationship between government revenues and expenditures. It has been observed that in some cases revenue increase or expenditures reduction affect on its corresponding variable and makes the adopted policy ineffective. So before to make a decision about reducing of the expenditure or increasing revenues it is important to know the amount of dependences of those variables that affect on the government expenditures. One of the most important topics which have not been done enough research is the relationship between the government revenues and the expenditures especially in the long run. To obtain the appropriate financial policy to reduce or remove budget deficit it is necessary to find the relationship between government revenues and expenditures. In fact it is very important that the government informs the budget how much is affected from each of the revenues and which one of the revenues is the most effective. Before any decision on how to reduce or remove the budget deficit the relationship between revenues and expenditure should be estimate. The government expenditures even have increased in some the years its revenues have declined in Iran you can see the following graph:

The Impact of Fiscal and Monetary Policy on Economic Growth in Southern African Custom Union (SACU) Member Economies between 1980 and 2017: A Panel ARDL Approach

Sustainability of Macroeconomic Policies, Inflation Targeting, and Crowding out

For developing countries like Bangladesh, understanding the relative impact of monetary and fiscal policies on GDP growth is crucial to formulate growth-enhancing policy decisions. This paper inspects into the relative effectiveness of these two policies on the real GDP growth of Bangladesh using ARDL, VECM and VAR estimation techniques to ensure comprehensiveness. From the results of all the three estimation techniques, it is seen that in the long run only fiscal policy has positive influence on growth while monetary policy stays either statistically insignificant or negative. In the short run, however, the results from the different estimation techniques are not much consistent. Here, ARDL technique shows that both money supply and government expenditure has statistically significant and positive effect on GDP while VAR-based Variance decomposition (VDC) and Impulse Response Functions (IRFs) state that only government expenditure has positive impact in the short run. In contrast, VECM technique reveals that neither money supply nor government expenditure has statistically significant impact in the short run. As from the results, it is apparent that government expenditure helps generating growth in the long run, it should be raised which may necessitate raising more government revenue. And, the main goal of monetary policy should be ensuring stability of the economy.

Relative Impact of Fiscal and Monetary Policies on Bangladesh Economy: A Comprehensive Approach

This work examined the comparative impact of fiscal policy and monetary policy on economic growth in Nigeria over the period 1981 to 2021 using annual time series data on real gross domestic product, broad money supply, government expenditure, total government revenue, and interest rate (lending rate). The objectives are to determine whether the fiscal policy or the monetary policy impacts more on economic growth in Nigeria and to ascertain the causality relationship between fiscal policy, monetary policy and economic growth in Nigeria over the period. The study employed ARDL Bounds Testing methodology in determining whether long run relationship exists between fiscal policy (proxy government expenditure and total government revenue), monetary policy (proxy broad money supply and interest rate (lending rate) and real gross domestic product. The result indicated that broad money supply representing monetary policy has positive relationship with and statistically significant impact on economic growth in Nigeria over the study period as indicated by its t-statistic and probability values of 6.436365 and 0.0000 respectively. Fiscal policy variable (government expenditure), on the other hand, has negative relationship with economic growth and statistically significant impact on economic growth in Nigeria as indicated by its t-statistic and probability values of -2.427968 and 0.0234 respectively. From the result, a change in money supply (monetary policy) affects economic growth positively while a change in Fiscal policy variable (government expenditure) affects economic growth negatively. Besides, the coefficient of monetary policy (0.457048) is greater than fiscal policy coefficient (-0.300554) and implies that monetary policy impacts more than fiscal policy impacts on economic growth in Nigeria. Therefore monetary policy does impact more than Fiscal policy on economic growth in Nigeria over the period studied. The result further indicated that there is no significant causality relationship between fiscal policy, monetary policy and economic growth in Nigeria over the period covered as indicated by the probability values of both fiscal and monetary policy variables employed and economic growth. The study therefore recommends that policy makers should focus more on monetary policy than fiscal policy so as to enhance economic growth since monetary policy has more concern with economic growth than fiscal policy. Keywords: Economic growth, fiscal policy, monetary policy, ARDL, Bound Test, Causality, Nigeria.

This paper empirically examines the relative effectiveness of fiscal and monetary policies on economic growth in Sierra Leone. The study utilizes annual time series data, spanning from 1980 to 2017, within an Autoregressive distributed Lag (ARDL) Bound Testing estimation framework popularized by Pesaran and Shin (1998). The unit root test results show that all the variables are integrated of order one, i.e. I(1), and the cointegration bound testing results confirm the existence of cointegration amongst the variables. The study reveals that monetary policy is more effective than fiscal policy in promoting economic growth in Sierra Leone. Specifically, the findings show that money supply, real exchange rate and inflation are the significant variables that influence economic growth in the long run. Whilst the finding shows a positive relationship between money supply and economic growth, it however reveals a negative relationship for both real exchange rate and inflation on growth during the study period. The short run dynamics also reveals that money supply, government revenue, government expenditure and war dummy are the main variables influencing real GDP growth in Sierra Leone. Furthermore, the result shows that 24% of the disequilibrium in real GDP is corrected within a year. The study recommends that monetary and fiscal policies should be well coordinated and government should implement a balanced budget in order to overcome the issue of fiscal dominance in the Sierra Leone economy.

This study examined fiscal policy and macroeconomic policy dynamics in Nigeria. The study specifically assessed whether there is a long run and short run causal relationship running from fiscal policy instruments such as government revenue, government expenditure and debt to macroeconomic variables such as interest rate and GDP in Nigeria. The data for the study were source from the CBN statistical bulletin for the period 1980 to 2016. The exploratory design was combined with the ex-post facto research design; the data collection method was desk survey. The study used the Vector Error Correction Mechanism (VECM) for data analysis. Findings from the analyses showed that there is no long run and short run causality running from fiscal policy instruments such as government revenue, government expenditure and debt to interest rate in Nigeria. The study also showed that there is no long run and short run causality running from fiscal policy instruments such as government revenue, government expenditure and debt to GDP in Nigeria. The study on the basis of these findings recommends that Fiscal policy should be tailored towards sustaining economic growth and development; in view of this government avoid further borrowings as this may increase the debt servicing burden and result in a negativity effect on growth in the long run and lastly that fiscal policy should be used to complement monetary policy effects as if used alone may not achieve the desired target for interest rate in Nigeria. Keywords: Government Expenditure, Government Revenue, Government Debt, Fiscal Policy, Interest rate, Inflation rate, Economic growth

ABSTRACT: The purpose of the study is to analyze the relative efficacy of monetary and fiscal policies in fostering economic growth in Bangladesh concerning predictability, speed, and magnitude. Moreover, it aims to find the relationship between the economic boom of Bangladesh and two measures of macroeconomic management i.e., monetary and fiscal policy. The ARDL model and bound test are applied to examine the long-term link between monetary policy, fiscal policy, and economic growth. Data is obtained from the World Development Indicator (WDI) for Bangladesh for the period 1974 to 2022. Several diagnostics tests like CUSUM and CUSUMQ are used to identify both the strengths and weaknesses of the models. The findings demonstrated a long-term correlation between the two policies and economic growth. According to the calculated short-run coefficients, the short-term effect of fiscal policy is mentionable but the effect of monetary policy is negligible in the short term. But over time, the immediate effects become noteworthy. The long-term outcomes indicated that both fiscal and monetary policies have a favorable and substantial long-term impact on economic growth. The result shows fiscal policy is more effective compared to monetary policy for making Bangladesh, a role model of Bangladesh. Furthermore, all the diagnostics tests showed the stability of the estimated ARDL model. Expansionary fiscal and monetary policies lead to higher government spending and an increase in the money supply, which raises GDP levels. Conversely, if government spending and the money supply decline (contractionary fiscal and monetary policies), the GDP level falls. As a result, this study suggests using expansionary policies to boost Bangladesh’s economy.

This study aims to answer the question: What is the nature of the relationship between fiscal and monetary policy in Jordan? Are the two policies complementary to each other, alternatives, or go in opposite directions?. This study applies the vector autoregression VAR, the Impulse Response Function test, the Granger Causality test, and the. Variance Decomposition Analysis. The results showed that there is a bidirectional causal relationship between government expenditures and money supply, as well as a bidirectional causal relationship between tax revenues and money supply, the main conclusion that the fiscal policy through the use of government expenditures and tax revenues and the monetary policy through the money supply go in the same direction, and complement each other, this is supported by the fact that the expansionary fiscal policy in Jordan during the study period was also accompanied by an expansionary monetary policy. The monetary authority sets interest rates on loans and there is no significant role for fiscal policy instruments in influencing the interest rate in Jordan. The study recommends harmonization between the declared and implemented policy. Each authority should serve its goals with independence and complementarity between the two policies. In this case, coordination means preventing extremism in pursuing an expansionary or contractionary policy from this or that authority, what is required is that the Central Bank and the Ministry of Finance agree on coordination, integration and balance between objectives.

Our paper examines the impacts of monetary and fiscal policies on Borsa Istanbul (BIST) performance in Turkey. In the established model, government expenditures, tax revenue, budget deficit, money supply (M2), interest rate, gdp growth rate included as independent variables and BIST stock market capitalisation as dependent variable for last 25 years (1995 to 2020). Firstly, Augmented Dickey - Fuller (ADF) and Philips Perron (PP) unit root tests have been performed to the series for stationarity. To confirm long run relationship, Autoregressive Distributed Lag (ARDL) cointegration technique has been applied. Subsequently, error correction method has been used for analyzing short run relationship between series and causality relationship has been tested by granger casuality test. The test results, indicate the existence of long run relationship between both policies and stock market performance, while short run relationship exists only between budget deficit and gdp growth rate variables on stock market performance respectively positive and negative impact. The results also pointed out there is a bidirectional causality relationship between budget deficit and stock market performance. GDP growth also is the cause of stock market performance.

Fiscal and monetary policy plays a vital role in macroeconomic stability. The Keynesians have emphasized the fiscal policy whereas the Monetarists supported interventions under monetary policy. In fact, these policies are interrelated and influence each other. The expansionary fiscal policy overheats the economy and reduce the effectiveness of monetary policy. The use of the appropriate mix of tools under fiscal and monetary policy is of immense importance for economic stability under country specific economic conditions. Therefore, the instant study was meant to look at the effectiveness of monetary and fiscal policy instruments in stabilization of Pakistan’s economy. The data was collected from secondary sources of Government of Pakistan from 1986 to 2022. The government expenditure was analyzed to be a proxy for fiscal policy whereas money supply for monetary policy. The study employed Impulse Response Function (IRF) and Variance Decomposition (VDC) in Vector Autoregressive (VAR) Model. The findings of IRF confirmed the impact of money supply on economic growth in Pakistan. At first, the money supply affected the GDP negatively but after 3rd year, its impact was changed to be positive and it was rising sharply. It indicated that the expansionary monetary policy was effective in the medium and long run in Pakistan. It was concluded that the fiscal policy appeared to be relatively more effective for its contribution towards economic growth as compared with monetary policy.

The aim of this paper is to empirically investigates whether Sierra Leone fiscal policy is sustainability. In this regard, I employ different econometric methodologies used in the empirical literature to investigates the sustainability of fiscal policy. The empirical findings that emerged from this study are useful on one hand to creditors, serving as a guide for lending to the government, and, on the other hand to the government, cautioning policymakers to avoid public debt from exploding that could possibly lead to fiscal insolvency and/or debt distress. I start by testing for the stationarity properties of the primary balance, the necessary condition for a sustainable fiscal policy. The findings indicated that Sierra Leone fiscal policy is sustainable under the review period. Next, I test for cointegration relationship between government revenue and government expenditure, the alternative approach to test for a sustainable fiscal policy. On this note, I employ both the Dynamic Ordinary Least Square (DOLS) and the Johansen cointegration techniques. Both approaches confirmed the existence of a cointegration relationship between government revenue and government expenditure. The estimated cointegration coefficients show that fiscal policy during the review period is weakly sustainable and the cointegration between government spending and revenue is positive (but less than one) and statistically significant. This implies that for each percentage point of GDP increase in government expenditure, government revenues increase by less than one percentage point of GDP. Additionally, I proceeded to endogenously account for structural breaks in the cointegration relationship, which is relevant for Sierra Leone, a country that has witnessed significant changes over the years, including the Structural Adjustments Programme (SAP) in the 1980s, tax reforms in the 1990s and 2000s, etc. I found evidence of a significant structural break occurring in 1984. There also exists uni-directional causality running from government revenue to government expenditure. This causality result is in line with the tax-and-spend hypothesis as proposed by Friedman (1978).Finally, I estimate an error correction model and the error correction term shows that the speed of adjustment from the expenditure side works faster than that of the revenue side to correct the fiscal disequilibrium.

The relationship between revenue and government expenditure is an important subject in public economics especially for Iran country, which is suffering from persistent budget deficits. From point of view of theoretical studies, there are essentially four schools of thought on the direction of causation between government expenditure and revenue. The main purpose of this study is to investigate the Long and short Run relationship between government revenue and government expenditure in Iran Country covering data 1978- 2012 with using An Auto Regressive Distributive Lag (ARDL) Approach. The Iranian economy has been subject to a multitude of structural changes and regime shifts during the sample period. First, time series properties of the data are first analysed by Augmented Dickey-Fuller (ADF), Zivot-Andrews and Lee – Strazicich (2003, 2004) model. The results of the ADF and Lee – Strazicich models indicate that all series under investigation are non-stationary at level. However, it is evident from the results of Augmented Dickey-Fuller and Lee – Strazicich tests that revenue and government expenditure are stationary at first difference because null hypotheses of unit roots for all the variables are rejected at 1 percent significance level then, we investigated causality between revenue and government expenditure by using an application of Toda-Yamamoto approach. Their evidence generally found unidirectional causality running from government revenue to government expenditure. So, these results consistent with the revenue-spend hypothesis. In the three stage, Autoregressive Distributeded Lag (ARDL) technique is used to describe both long run relationships and short run dynamic adjustments between government revenue and expenditure variables. The results of this paper support the Freidman (1978) hypothesis that government revenues cause expenditure and revenues have a positive causal impact on government expenditure.