Fiscal Policy in Association with Sustainable Economic Growth in the Period 2011-2020

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 paper analyzes the determinants of economic growth sustainability in Indonesia. Based on annual data 1971-2017, this research applies the vector error correction model (VECM) to estimate the dynamic effects of the inflation rate, tax ratio, government spending, broad money, and exchange rate on economic growth. The findings present the existence of long-run equilibrium in a set of those variables. Specifically, the price level and fiscal policy have positive impact on economic growth sustainability. We also find that the effect of monetary policy on economic growth is neutral. The monetary authority should strengthen the impact of monetary variables on economic growth. The exchange rate is part of international factors that threats the economic growth sustainability. It implies that economic growth sustainability is closely related to the international financial sector. Therefore, the central bank should control the exchange rate variable at the safety level to maintain economic growth sustainability.

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

In many economies the major role of government is the regulation and stabilization of the system in other to achieve macroeconomic objectives, which include but not limited to sustainable economic growth, full employment, and price stability. Monetary and fiscal policies have been considered as viable economic planning strategies for achieving the stated macroeconomic objectives. But the extent to which each is to be used to achieve the desired objectives is a matter of intense debate among policy makers and economists. This study is on monetary-fiscal policy coordination and economic growth sustainability in Nigeria. The objective is to examine the contributions of monetary and fiscal policies to economic growth in Nigeria and how their coordination has affected the economy towards growth recovery and sustainability. Unit root test, co integration test, Auto Regressive Distribution Lag (ARDL) model and trend analysis were some of the econometric techniques used for data estimation. The following variables were used as explanatory variables – Money Supply (MS), Monetary Policy Rate (MPR), Total Government Expenditure (TEXP) and Tax Revenue (TXREV), while the dependent variable is Real Gross Domestic Product (RGDP) proxy of economic growth. The data were sourced from Central Bank of Nigeria (CBN) statistical bulletin covering the period of 37 years. The result of the st stationarity test showed that all the independent variables were stationary at 1 difference while the dependent variable was stationary at level form. The Bound test proved that there was the existence of long run equilibrium relationship among the variables. The result from the short run analysis showed that TXREV was significant in one period lag and negatively related to RGDP. In the long run MPR and MS have significant impact on RGDP and were rightly signed. The combined effect of monetary and fiscal policies on the level of economic growth in Nigeria is found to be weak and unstable over the years of study, which indicates weak long-run relationship between the explanatory variables and the dependent variable. It is therefore necessary to establish an appropriate framework to intensify coordination between monetary and fiscal policies as tools for economic stabilization. However increased autonomy of the Central bank and the Debt management office may help realize the desired objective.

This study investigated the impact of the people category of the Sustainable Development Goals (SDGs) on sustainable and conventional economic growth in Asia and the Pacific region, using a sample of 52 selected countries between 2000 and 2023. Employing two distinct models, model A1 for conventional economic growth and model A2 for sustainable economic growth, we explained the relationships between five SDG indicators: employed poverty rate, stunted children, expenditure on health, expenditure of education, and % of women MNAs on economic growth. This study employed a fixed-effect model and random-effect model to investigate the impact of the people category SDGs on traditional and sustainable economic growth. The comparative analysis of each SDG in both models revealed valuable insights. SDG 1, “employed poverty rate”, has a positive impact on economic growth in both models, while SDG 2, “percentage of stunted child”, did not significantly influence economic growth in either model. Moreover, SDG 3 and SDG 4, relating to “government’s health expenditure per capita” and “government’s Education education expenditure per capita”, respectively, exhibited a positive impact on traditional and sustainable economic growth. Conversely, SDG 5, “percentage of women members of national parliament”, displayed an insignificant impact on traditional and sustainable economic growth models. In conclusion, this study suggests that policymakers should prioritize targeted interventions to alleviate employed poverty, enhance healthcare, and boost education spending. Moreover, promoting women’s representation in national parliaments should be approached with context-specific strategies to maximize its impact on economic growth.

Empirical investigation on the comparative potency of monetary and fiscal policies is still dubious among two major schools of thought in economics so called classical and Keynesian. Hence, this paper investigates the relative effectiveness of monetary and fiscal policies in affecting economic growth by employing Auto-Regressive Distributive Lag Model (ARDL) for the time spanning from 1975 to 2017. The proxies used in this study for monetary and fiscal policy were Broad money supply (M2) and government consumption expenditure respectively while real GDP at constant prices in 2010 is used as proxy for economic growth in Ethiopia. Anderson and Jordan (1968) “St. Louis equation’’ has been used to estimate the comparative potency of monetary and fiscal policies. The empirical results indicate that both the monetary and fiscal policies have equal statistically significant and positive impact on economic growth in Ethiopia with different significance level and magnitude. Besides of equal effectiveness, the elasticity of real output with respect to fiscal policy variable is greater than the elasticity with respect to money supply which show fiscal policy is more effective than monetary policy in influencing Real GDP in the long-run. However, in the short run, the fiscal policy is effective while that of the monetary policy proxy by money supply is ineffective in affecting output growth in Ethiopia. Therefore, to have continuous and sustainable economic growth, the coordination of monetary and fiscal policies are vital and the lack of this coordination leads to a sharp downturn of overall economic performance, even can hurt the economy.

textabstractThe Sustainable Development Goals (SDGs) put much emphasis on the employment and inequality, a noteworthy shift from the Millennium Development Goals (MDGs) and their focus on poverty eradication. To achieve ‘Sustained, inclusive and sustainable economic growth’, SDG Goal 8 contains targets on productivity-enhancing policies, employment and decent work, and makes reference to three out of the four fundamental labour rights. While these are necessary ingredients for a sustained increase in living standards and important elements of heterodox accounts of development, they are not sufficient conditions to create equitable growth. Drawing on examples from Asia, the paper makes this argument by addressing three orthodox conjectures: that workers benefit from productivity growth through higher wages; that factor shares in national income are roughly constant; and that policy interventions such as minimum wages are bound to fail. The paper concludes with two policy implications: (1) Countries need to adopt fiscal, wage and social protection policies that reduce inequalities of outcome and achieve faster income growth for the poorest – elements which can be found in Goal 10. (2) Effective labour markets governance needs to include the right to freedom of association and collective bargaining, the only fundamental labour right not explicitly mentioned in the SDGs.

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.

The government's strategy was previously under pressure to improve the economy, one of which is the implementation of fiscal policy. This is because the Covid-19 pandemic in previous years had an impact on all sectors, especially the financial sector. Now with its fiscal policy adjusting between government revenue and spending. Part of the government's fiscal policy during the pandemic, namely the tax relief program aimed at easing the burden on taxpayers and reorienting the 2020 State Budget to increase government spending. Through in-depth research and analysis of the government's strategy for overcoming the impact of fiscal and monetary policies on the economy, it is hoped that a better understanding of government actions in encouraging inclusive and sustainable economic growth in the Indonesian economy will be provided.

SDG 8’s goal is to promote sustained, inclusive, and sustainable economic growth; full and productive employment; and decent work for all. This chapter examines the experiences of East Asian developing countries in achieving rapid and inclusive economic growth by focusing on the role of international tradeand foreign direct investmentnexus created through global value chains (GVCs)by multinational corporations (MNCs). GVCs enabled participating companies and countries to improve productivity, contributing to economic growth. The factors attributable to the participation in GVCs include high competitiveness of local companies and open business environment created by the Asian government. Moreover, construction and maintaining well-functioning soft (e.g., education and legal systems) and hard (e.g., transportation and communication systems) infrastructure by the government and international donors contributed to the creation of business-friendly environment. Faced with growing protectionism and the threats of growing US-China rivalry, infectious diseases, climate change, etc., maintaining an open and transparent rules-based business environment is crucially important to further achieving sustained, inclusive, and sustainable economic growth. In the light of absence of effective global economic order, exemplified by ineffectiveness of the World Trade Organizationin trade liberalization as well as dispute settlement, regional economic frameworks such as the CPTPP and RCEP in the Asia and Pacific region would be proven to be effective to achieve the goal.

This study investigates the impact of customers' buying power on the sustainability of economic growth in Nigeria, focusing on identifying the factors influencing customers' buying power and their contribution to long-term economic stability. A descriptive survey research design was adopted for this study, which involved a population of 1,260 Nigerian consumers, with a sample of 378 respondents drawn from the South-South and South-East geopolitical zones. A stratified random sampling technique was used to ensure proportional representation across various income levels and sectors. The primary data collection instrument was the Evaluation of the Impact of Customers' Buying Power on the Sustainability of Economic Growth (EICBPSEGQ) questionnaire, comprising 14 items rated on a four-point Likert scale. Validity of the instrument was established through expert review, achieving a content validity index (CVI) of 1.00, while reliability was confirmed with Cronbach's Alpha coefficients of 0.94 and 0.96. Data were analyzed using descriptive statistics and standard deviation. The study revealed that customers' buying power plays a significant role in shaping economic growth and stability. Key findings indicated that inflation reduces spending ability, while exchange rate fluctuations impact the affordability of imported goods. Income inequality hinders economic participation, and government fiscal policies are critical in stabilizing the economy. Other factors, such as unemployment, political instability, and access to credit, also significantly affect customers' purchasing power. The findings underscore the collective importance of these factors in enhancing economic growth and maintaining long-term stability in Nigeria. To protect consumers' purchasing power, it is recommended that the government focus on stabilizing inflation through effective monetary and fiscal policies. This could include controlling the prices of essential goods and services, implementing measures to curb inflationary pressures, and managing the money supply to prevent excessive currency devaluation. By stabilizing inflation, consumers’ buying power can be maintained, which in turn will support sustainable economic growth.

The present study aimed to determine the dynamic relationship between good governance, fiscal policy, and economic growth in Oman. In the context of the current study, researchers chose a quantitative approach to answer the research questions, utilizing the latest 2023 data from the World Bank and The Global Economy databases. The data for the current study was carefully selected using variables that represent aspects of governance, fiscal policies, and economic performance. Our analysis uses Ordinary Least Squares (OLS) regression and the Autoregressive Distributed Lag (ARDL) Model. These methods help us understand these factors’ immediate and long-term impacts on Oman’s economy. The results we obtained offer fascinating insights into the country’s economic dynamics. We observe bidirectional causal relationships between the Good Governance Index (GGI) and the Regulatory Quality Index (RQI) and economic growth, while Fiscal Policy Effectiveness (FPE), Government Efficiency Index (GEI), and the Rule of Law Index (RLI) exhibit unidirectional causality towards GDP. Budget Balance (BB) shows no causal relationship with GDP, implying external factors influence it. Additionally, moderation analysis underscores the significance of digital financial inclusion in amplifying the effects of governance and fiscal policies on economic growth. These findings hold practical implications for policymakers and stakeholders in Oman. Specifically, they highlight the importance of governance, regulatory quality, and effective fiscal policies in shaping the economic landscape. To foster sustainable economic development, efforts should improve governance, enhance fiscal policy effectiveness, and promote digital financial inclusion.

The Indonesian government policy in encouraging sustainable economic growth to reduce unemployment, poverty and inequality is threatened to fail, because economic growth does not reach targets and is not of quality. The purpose of this research is to explain the four pillars of growth and development namely; human capital, social capital, institutional economics and entrepreneurship as the main drivers of quality and sustainable economic growth. This research method used primary data on entrepreneurship and SMEs in the provinces of Central Java and Yogyakarta. The correlational form of recursive model path analysis was used as analytical method. The research results show the very strong role of human capital as the main key in driving economic growth both directly and indirectly. The existence of human capital and social capital will further encourage new economic institutions, furthermore new economic institutions will encourage the competitiveness of productive entrepreneurship and high, quality, and sustainable regional economic growth. The policy implication is that high, quality, and fundamentally sustainable economic growth must be built on the four main pillars basis namely; human capital, social capital, institutional and entrepreneurship in order to be more successful in reducing development problems; unemployment, poverty and income inequality.

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.

PurposeThe study examines the impact of fiscal policy shocks on economic growth and income inequality in Ghana. This has become necessary because of the interdependence between growth and income inequality and the role fiscal policy plays in this relationship in the development process of a country. Thus, a study that investigates how government expenditure shock and tax revenue shock influence the relationship between economic growth and income inequality could assist policymakers to adopt the best policy mix to ensure income equity and sustained economic growth in Ghana.Design/methodology/approachIt employs sacrifice ratio from structural VAR model using quarterly time series data from 1996 to 2019 on Ghana.FindingsOur results show that government expenditure shock impacts economic growth, exchange rate and education positively and significantly in the long run. Also, tax revenue shock has a positive impact on income inequality, economic growth and education. The findings further show that there exists a trade-off between economic growth and income inequality in the long run.Originality/valueThe relationships between fiscal policy shocks, economic growth and income inequality have been extensively discussed among scholars. Understanding how these three macroeconomic variables are determined and their interrelationships are crucial for policymakers. This is because fiscal policy aids in both economic growth and income inequality. In the empirical literature, the emphasis has been on independently estimating the growth effects of fiscal policy or the distribution effects of fiscal policy, leaving out the existence of possible trade-off between economic growth and income inequality following a fiscal shock. To the best of our knowledge, no empirical study has been done on Ghana to empirically examine the trade-off between economic growth and income inequality as we do in this paper.