Fiscal policy and national saving in emerging Asia: challenge or opportunity?

This paper has examined empirically the contribution of fiscal policy in the achievement of sustainable economic growth in Nigeria. Using the Solow growth model estimated with the use of Ordinary Least Square method, it was found that fiscal policy has not been effective in the area of promoting sustainable economic growth in Nigeria. Although, the finding seems invalidating the Keynesian postulation of the need for an active policy to stimulate economic activities, however, factors such as policy inconsistencies, high level of corruption, wasteful spending, poor policy implementation and lack of feedback mechanism for implemented policies evident in Nigeria which are indeed capable of hampering the effectiveness of fiscal policy have made it impossible to come up with such a conclusion. To put the Nigerian economy, therefore, along the path of sustainable growth and development, the government must put a stop to the incessant unproductive foreign borrowing, wasteful spending and uncontrolled money supply and embark upon specific policies aimed at achieving increased and sustainable productivity in all sectors of the economy. Keywords: Fiscal Policy, Economic Stabilization, Economic Growth JORIND Vol. 5 (2) 2007: pp. 19-19

An Analysis of the Relative Effectiveness of Monetary and Fiscal Policies on Economic Performance in Five CARICOM Member States: Barbados, Belize, Guyana, Jamaica and Trinidad and Tobago

This study investigates empirically the fiscal policy impact on the economic growth index in Nigeria for the period 1985-2015. Data for the study were collected from secondary sources. The expost facto research design was adopted for the study. The data were analysed using OLS multiple regression, unit root test, co-integration and Error Correction mechanism (ECM). The results revealed that the variables were all stationary at level and co-integrated of the same order in the long-run. The result also showed that fiscal policy significantly influenced the rate of growth in Nigeria economy. It was therefore recommended that government should ensure transparency in budget implementation and fiscal discipline to put Nigeria on the path of sustainable growth.

Researchers have come up with varying opinions on the impact of fiscal policy tools on the economic growth of many nations. While some are of the view that fiscal policy tools have positive relationship with economic growth, others posit that it has a negative impact while a third group are of the opinion that its impact could either be positive or negative depending on how it is harnessed with other macro-economic variables and yet a fourth school of thought has emerged. They are of the opinion that fiscal policy tools could have a little but not significant impact on the economic growth of any given nation. Thus this study is set to lend its voice and opinion on this discuss with emphasis on the Nigerian economy using a time series data for the period 1999-2020. The data were analyzed using Ordinary Least Square method and a Vector Auto regression Analysis. In the model, Real GDP (taken as dependent variable) was regressed on tax revenues, capital and recurrent expenditures. Other independent variables include deficit financing, external and domestic debts. Findings of study indicate that in the short run, deficit financing, domestic debt and recurrent expenditures all had significant positive relationship with economic growth in Nigeria; while there exists a significant negative relationship between external debts and real GDP. Capital expenditure and tax revenues did not have a significant relationship with economic growth in Nigeria in the short run. In the long run, the earlier outcomes fizzled out as only the lagged value of RGDP, taken as an explanatory variable was found to be positively significant. From the foregoing analysis, it was established that fiscal policy tools did not sustain a significant relationship with economic growth in Nigeria in the long run, thus pitching our tent with the fourth school of thought. Fiscal policy tools are not enough to pilot the economic ship of Nigeria. The study therefore recommends that government should use fiscal policy instruments to complement its sister strategy – the monetary policy tools to promote stability in the Nigerian economy. A good mix of fiscal and monetary policy tools could help in the formulation and implementation of sound economic policies; the impact of which will be appreciated from the standpoint of how rapidly and effectively it fosters, innovates or facilitates economic growth in Nigeria.

I examine the Koizumi Junichiro era in Japan to derive lessons for the current Abe Shinzo administration that vows to get Japan back on the path of sustainable growth. Standard growth theory identifies total factor productivity (TFP) as the key to sustainable growth. The existing empirical evidence clearly indicates that economic recovery during Koizumi's tenure was accompanied by robust growth of TFP. To account for this improvement in TFP performance, I focus on developments during Koizumi's term: promotion of competition by introducing market discipline to various sectors of the economy, effectiveness of market entry and exit, and use of foreign competitive pressure to enhance domestic efficiency. KEYWORDS: Japanese economy, Koizumi Junichiro, Abenomics, total factor productivity.IN THE MIDST OF MOUNTING FEAR OF A THIRD LOST DECADE OF growth for Japan, newly elected prime minister Abe Shinzo aptly placed the priority of his first cabinet on reviving the economy following the landslide victory of his Liberal Democratic Party (LDP) in the general election of December 2012. His government has unveiled three of his economic program, dubbed Abenomics. The first two arrows involve pursuit of a dramatic regime change at the Bank of Japan as well as big fiscal spending to reflate the economy and jump-start its growth. Although these expansionary macroeconomic policies have thus far been effective in giving an initial boost to aggregate demand and reversing the deflationary trend, their initial impact may already be waning. In order to get the economy firmly back on a sustainable growth path, the Abe administration has yet to fill in the third arrow before its first two arrows eventually fizzle out.According to standard growth theory, total factor productivity (TFP) is the key to long-term economic growth as its growth rate represents the slope of the steady-state growth path. Economic growth is not sustainable and is destined to wind down if it is not accompanied by TFP growth. Therefore, the theory suggests that in order for Japan to have a successful growth strategy, the third arrow of Abenomics should aim at improving the country's TFP. Since reform proposals offered so far in Abe's two attempts to shoot the third arrow were generally viewed as modest and ambiguous, the third arrow obviously requires a more focused approach so that it clearly demonstrates the potential to liftthe country's TFP.I argue that Prime Minister Abe may not have to look further than the immediate predecessor of his earlier term in office to find valuable lessons for his growth strategy. Under the premiership of Koizumi Junichiro (2001-2006), Japan was poised to exit its long-running recession and head toward sustainable growth. To be sure, Koizumi's term was never free from controversy and is still the subject of frequent criticism. However, careful analysis of this period through the lens of standard economic growth theory reveals interesting policy implications.The Japanese Economy Under KoizumiKoizumi the Reformer?One word that was never in short supply in public discourse throughout Koizumi's term was reform. Entering the race for the premiership in 2001, Koizumi presented himself as a true reformer who would pull Japan out of its economic malaise. He pledged to put an end to the bad debt problems of the banking sector, clean up the decadelong financial mess, and stand up to the entrenched government bureaucracy by (among other things) privatizing the country's postal savings system.Koizumi was not the first prime minister to talk about the country's need for structural reform. The Big Bang in the Japanese financial sector had already started as early as November 1996 when then Prime Minister Hashimoto Ryutaro announced wide-ranging financial deregulation measures. In fact, deregulation was already high on the policy agenda under the premiership of Murayama Tomiichi, a predecessor of Hashimoto. …

This paper surveyed and access the empirical literature on the sources of budget deficit and their policy implications on the processes of sustainable economic growth and development. The Ghanaian experience and evidence shows that the budget is not projected to be on a sustainable growth path under current socio-economic and political (governance) policies; the budget is projected to increase more quickly than the country’s Gross Domestic Product (GDP). The modeling of underlying variables (Inflation, Gross Domestic Product, Real Interest Rate, Gross Investment, Real Exchange Rate) to estimate the quantitative effect of continued budget deficit on the rate of economic growth, governance and development. The sample used for this study is based on panel data-sets between 1994 and 2014. Results obtained from the analysis pointed to an adverse impact of continued budget deficit on the processes of economic growth and development. The paper recommends the adoption and implementation of policies that could reverse the un-sustained budget deficit leading to crowding out of the private investment but rather, put the economic on a sustained path of growth and, development in the medium to long term.

s from short-run shocks, and which is capable of highlighting many important interactions between fiscal and monetary policies. We look at both the steady-state and the stability properties of the system. The analysis is especially relevant for cases where fiscal and monetary policies are decided with reference to different objectives, possibly by different authorities. It may be less useful for cases which one type of policy (e.g., fiscal policy) is given absolute priority (e.g., the fiscal authority behaves as a Stackelberg leader) and monetary authorities are forced to behave ways that ensure the maintenance of fiscal policy. The latter was what Sargent and Wallace had mind when they derived the path of the money stock and of inflation necessary to maintain fiscal policy settings [7]. The interesting literature that emerged along those lines was surveyed by Haliassos and Tobin [6]. The analysis introduces some new perspectives on policies aimed at attaining an acceptable inflation rate over the longer run. When a monetary authority maintains a target rate of inflation over the longer run, it also fixes the long-run real rate of return on money which is directly linked to inflation when money bears a zero (or an institutionally fixed) nominal interest rate. As a result, the size of the long-run inflation target generally affects the equilibrium composition of the total government debt, i.e., the ratio of money to government bonds. A sustainable monetary policy is one which not only fixes the rate of growth of nominal money to equal the target inflation rate plus the rate of growth of real GNP, but which additionally ensures that the equilibrium composition of government debt will be attained over the longer run. Otherwise, the system does not get onto its steady state, and the package of fiscal and monetary policies is not sustainable over the longer run. From this point of view, simple monetary policy rules targeting inflation, such as Friedman's x % rule, are not general sustainable, because they only fix the slope of the money path, without ensuring that the composition of government debt gets to the appropriate steady-state level. This point has implications for the interaction between fiscal and monetary policies. The steady-state equilibrium composition of government debt is not influenced only by the size of the inflation target, but also by fiscal policy settings. A change fiscal policy alters the equilibrium composition of government debt that the monetary authority has to bring about through its open market operations if it does not want to abandon its inflation target. Changes fiscal policy for a given inflation target also have effects on the long-run capitaloutput ratio, unless the conditions for debt neutrality are met. With regard to government spending on goods and services, G, the question is whether crowding out of private capital is unavoidable. The possibility that capital may be crowded in by higher ratios G/Y has been noted by Tobin and Buiter and by Friedman, but not under inflation targeting [9; 3; 4]. In fact, the present paper shows that crowding may still be observed situations where the mechanisms identified by the previous authors cannot operate. In particular, the mechanism whereby an increase government expenditure leads to crowding existing models is by raising the steady-state rate of inflation, thus lowering the real rate of return on money. This produces effects on the demand for money and for government bonds that create room portfolios for the extra holdings of capital. However, when inflation is set at a target level, this channel is not open. What can still happen is higher short-run inflation the transition to the steady state, so that the level of the steady-state price path ends up being higher while its slope is still equal to the long-run inflation target. This possibility is demonstrated here. The above effects on the capital-output ratio presuppose that complete debt neutrality does 1011 This content downloaded from 157.55.39.209 on Sat, 14 May 2016 06:30:33 UTC All use subject to http://about.jstor.org/terms 1012 Michael Haliassos not hold. If it does, then cuts current taxes would have no effect on the capital-output ratio. The work of Barro [2] inspired a voluminous theoretical literature on debt neutrality (or Equivalence). Haliassos and Tobin [6] present a comprehensive account of the literature exploring the restrictive conditions under which the neutrality theorem holds. The present analysis of sustainability adds a new dimension to the debate. Suppose that agents believe debt neutrality and save the current tax cut, so as to raise their bequests to descendants and to eliminate any effects on their utility arising from future tax increases. Then, the question is whether taxes will indeed have to go up the future, i.e., whether current fiscal policy is sustainable or not. If it is, Ricardian behavior on the part of agents is not rational, since the expectation that taxes will have to rise the future leads to behavior which violates it. It turns out that Ricardian equilibria are not necessarily rational, while one can also construct non-Ricardian equilibria which are rational. Section II presents an illustrative model for analyzing sustainable fiscal and monetary policies. Section III investigates the requirements for a sustainable monetary policy targeting inflation. Section IV discusses the interactions of fiscal and monetary policies and the implications of inflation targeting for crowding out or crowding of private capital. Section V investigates the rationality of Ricardian behavior. Section VI offers concluding remarks. The Appendix contains a formal derivation of comparative statics and stability results. II. An Illustrative Model The economy to be considered is one which fiscal policy rules are decided with reference to different objectives from those of monetary policy, which is aimed at maintaining a target inflation rate over the longer run. According to the notion of sustainability introduced here, if the combination of fiscal and monetary policies is unsustainable, the economy cannot attain a steady state by following those policies. This is either because a steady state does not exist or because it is not stable. If the government persists following those policies, then the economy is likely to get onto an unstable trajectory. It is difficult to describe precisely what will be observed if this is allowed to happen. A plausible doomsday scenario might be that we would experience a stock market crash, for example. However, it seems more likely that policy authorities will not allow the economy to reach such a point. After realizing that their policies are unsustainable, they are likely to reverse them, e.g., by abandoning their inflation target or by reducing the deficit-to-GNP ratio. Here, we highlight some general principles for detecting unsustainable policy mixes. The points can be made by employing a relatively general macroeconomic structure which explicitly allows for asset accumulation. Consider a closed economy with three assets: high-powered money, H, government bonds of total nominal value B, and claims to homogeneous physical capital K, one for each unit of capital. All asset stocks are measured per efficiency unit of labor. The fiscal policy instruments are (i) the ratio of real government expenditure on goods and services, G/Y, and (ii) the average tax rate, t, which is the ratio of total taxes net of transfers (T) to GNP. The primary budget deficit to GNP ratio is then G/Y t. Fiscal authorities issue bonds to finance the total budget deficit, while the monetary authorities determine the degree of monetization and the overall composition of accumulated government debt, H + B, through their open market exchanges of money for bonds.' 1. This is different from saying that the monetary authorities can exogenously fix the fraction of the deficit which is monetized. It will be seen below that this fraction is dictated by inflation targeting steady state. This content downloaded from 157.55.39.209 on Sat, 14 May 2016 06:30:33 UTC All use subject to http://about.jstor.org/terms SUSTAINABILITY, INFLATION TARGETING, AND CROWDING OUT

This paper examined the nexus of macroeconomic policy (monetary and fiscal policies), investment and economic growth. The findings established that monetary and fiscal policies affect aggregate investment and economic growth in Nigeria. It also showed that the management of monetary and fiscal policies in Nigeria has not yet achieved macroeconomic stability objective. The implementation of the monetary policy, in particular, has not helped to stimulate savings and ensure it's efficient allocation for investment purposes, hence appropriate rate of investment and sustained economic growth has eluded the country. For a sustainable macroeconomic policy that will engender appropriate rate of investment and sustained economic growth, this paper therefore, recommends harmonious working relationship between monetary and fiscal authorities, effective coordination and harmonization of monetary and fiscal policies, monetary policies should focus on lowering interest rates and increasing availability of credits to productive sectors of the economy. Furthermore, the monetary authorities should strongly discourage exploitative tendencies and unethical practices of banks, banks should avoid sharp and unscrupulous practices and discipline themselves to play according to the rules of the game as well as effectively carry out their financial intermediation role.

Sources of economic growth in China from 2000–2013 and its further sustainable growth path: A three-hierarchy meta-frontier data envelopment analysis

Abstract, Fiscal and monetary policies have an important role in sustainable economic growth in Indonesia. This research aims to evaluate the effectiveness of fiscal and monetary policies in achieving sustainable economic growth. The research method applied is descriptive analysis using secondary data obtained from various trusted sources. The research results show that fiscal policy, which includes budget regulation, taxes and subsidies, has made a positive contribution to economic growth. However, efforts are still needed to improve the efficiency of budget management and transparency in the use of public funds. Meanwhile, monetary policy, which includes setting interest rates and the money supply, also has a significant impact on economic growth. However, the need to balance price stability and economic growth remains a challenge. In conclusion, to achieve sustainable economic growth, close coordination between fiscal and monetary policies is needed. In addition, comprehensive structural reforms and increasing institutional capacity are very important to create a supportive environment to ensure sustainable economic growth in Indonesia.

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.

By developing an endogenous growth model on the base of Lucas (1988) embodying the endogenous labor supply and pollution externality, this paper aims to examine the interaction between negative pollution externalities, endogenous leisure- labor choice, human capital investment and sustainable development. Within this framework, we first study the optimum in the planned economy and derive the conditions under which the sustainable growth path is both feasible and optimal. Furthermore, we show that an increase in the productivity of human capital sector, in the abatement expenditure elasticity of pollution damage reduction and in environment consciousness will stimulate the long-run growth rate. But a rise in leisure consciousness and in the output elasticity of pollution damage incremental will lower the long-run growth rate. Finally, it is also revealed in our model that a government could intervene and bring the market economy onto a sustainable and optimal growth path through conducting public abatement policies or levying Pigouvian taxes.

The purpose of this paper is to investigate the relative effect of monetary policy and fiscal policy on economic growth in Ethiopia. The paper employed annual time series data from a period of 2009 to 2019. The paper performed Augmented Dickey-Fuller test for unit root, Johansson test of co-integration and Ordinary Least Squares estimation technique to analyze the data. The findings revealed that monetary policy proxy by interest rate has significantly a negative effect on the Ethiopian economic output. Likewise, the study found that fiscal policy proxy by government expenditure has significantly and positively influenced the economic growth (GDP) in Ethiopia. Finally, the study exposed that fiscal policy is somewhat influential than monetary policy in altering economic growth of Ethiopia. The study suggested that both fiscal and monetary policies should be implemented simultaneously to ensure macroeconomic stability and sustainable economic growth in Ethiopia. It is also recommended that government annual budget and projects implementation should be monitored adequately to ensure price stability, full employment, and economic growth. Monetary policies implemented by the National Bank of Ethiopia should promote conducive investment atmosphere through appropriate stabilization of interest rates, and inflation rates to promote economic growth of the country. DOI: 10.7176/PPAR/10-11-01 Publication date: November 30 th 2020

The linkage between fiscal policy and economic growth has attracted the attention of empirical investigators in economic literatures. This study systematically reviewed sub-Saharan African literatures just to examine the relationship between fiscal policy and economic growth. To achieve the objective of the study, 11(eleven) empirical literatures in 7(seven) Sub-Saharan African literature studied between the year 2013 and 2020 were selected. As regard to sampling, random sampling was used to enhance the representatives of the sample. The criteria for selection were the relevance of the topic and the geographical area of studies. In this procedure, the first geographical area and then studies were selected. In the second stage relevance of the studies was considered as inclusion crateria. Descriptive statistics was used for data analysis. The result shows that the studies selected for review are more interested in the long-run relationship between fiscal policy and economic growth than its short-run effect. This implies that Sub-Saharan African countries are using fiscal policy for economic growth rather than stabilization. Regarding consensus on the relationship between the two variables, majority of the literature selected for review found that fiscal policy is positively and significantly affecting the economic growth of the Sub-Saharan African countries. The major fiscal policy tools used in the selected literature are government expenditure and tax reflecting the similarity of economic structures and compositions in sub-Saharan Africa. In conclusion, the compositions of fiscal policy instruments are almost similar in sub-Saharan Africa. The policy implication is that policymakers in sub-Saharan Africa should give due attention to the composition of fiscal policy tools.

The Political Economy of Recent Economic Growth in India