Actual Budget Research Articles

Analisis Kinerja Keuangan Pemerintah Daerah Kabupaten Gorontalo Sebelum dan Saat Pandemi COVID-19 Periode 2017-2022

This study aims to analyze and test the performance of Local Government financial Gorontalo Regency before and when Covid-19 Pandemic. The kind of research this is descriptive quantitative methods with the approach. The population of the research is Local Government financial report Gorontalo Regency 2017-2022 period. Sampling techniques used in determining which is purposive sampling techniques sample that the sample of done deliberately by adjusting research objectives and certain criteria. The data used in this research is of secondary data on the report of actual budget. The sample used is 24 quarterly report and on the report of actual budget 2017-2022 period. Data collection techniques used is documentation. Analysis of the data used analytics descriptive statistics and analysis inferential. The result showed that there is no difference in the analysis inferential performance the Local Government finance Gorontalo Regency before and when Pandemic Covid-19 reviewed from the regional financial independence, the ratio of the pad, the ratio of the financial efficiency, the ratio of the operating expenditure, and the ratio of capital expenditure. In the analysis descriptive, the performance of the Local Government finance Gorontalo Regency before and when Pandemic Covid-19 showing the ratio independence included in the same criterion pattern of relationships instructive, the ratio of the effectiveness of pad included in the same criterion of ineffective, the ratio of the efficiency of the same criterion of inefficient, the operation included in the proportion of spending in general, its capital expenditure included in the proportion in general.

Financial Reporting, Tracking, and Analysis Practices Effect on Financial Performance of Commercial State Corporations in Kenya

In Kenya, legislative acts by parliament establish state corporations to promote social and economic progress. The state corporations advisory committee has identified eight distinct categories of these entities, which include financial, commercial, industrial, regulatory, public universities, training and research, service, regional development authorities, as well as tertiary education corporations. Out of the 33 state corporations in commercial and manufacturing category, 18 fall under manufacturing while 15 are commercial-oriented and therefore by their operational nature expected to make profits or operating surplus. The study focused on the fifteen (15) profit-making state corporations. Most commercial state corporations are in a state of perennial loss-making. Their financial performance trend between 2016-2020, shows that out of the 15 corporations in the commercial sector, only four (26.67%) are sustainable from their operations. This leaves over 73.33% of them struggling to survive and have to depend on government funding to address their liquidity challenges. This study sought to assess the impact of financial reporting and analysis on the financial performance of commercial state corporations in Kenya. The study assumed a descriptive study design. The study used a census procedure since all fifteen State Corporations under the commercial category were studied. Data was analysed using descriptive and inferential statistics. The inferential statistics results indicate that financial reporting and analysis have a positive and statistically significant effect on financial performance of commercial SOEs. The study found that improved financial performance was observed upon conducting periodical operational budget estimations, capital project estimations, periodical cash flow projections, and comparison of actual costs and budget variance analysis. The management and finance department to ensure that financial reporting processes are strengthened to enhance accuracy, openness, and compliance with governing requirements.

Allocation to Collection Ratio (ACR) pada Badan Amil Zakat Nasional (BAZNAS) Kabupaten Sijunjung Tahun 2021

The problem in this research is that the actual budget for ZIS funds collected and distributed each year is still not fully absorbed or the funds collected are still not distributed and there are also funds distributed that exceed the funds collected. Therefore, by using a measuring tool in the form of ratio analysis, you can see the extent of the Allocation to Collection Ratio (ACR) for the distribution and disbursement of ZIS funds at BAZNAS Sijunjung Regency for the 2021 period. The type of research used is Field Research or field research with an approach quantitative. In 2021 the Gross Allocation to Collection Ratio is 69% with quite effective criteria, Gross Allocation to Collection Ratio Non-Amil is 66% with quite effective criteria, Net Allocation to Collection Ratio is 85% with effective criteria, Net Allocation to Collection Ratio is Non -Amil is 84% with effective criteria, Zakah Allocation Ratio is 90% with very effective criteria, Non-Amil Zakah Allocation Ratio is 89% with effective criteria, Infak and Sadaqah Allocation Ratio is 36% with criteria below expectations, Infak and Sadaqah Allocation Non-Amil Ratio was 22%, below expectations.

Budgeting Behavior: Indonesian Local Government Budget Predictions

Objective: The behaviors of overreaction and underreaction exhibited by public sector budget planners have an impact on the disparity between the initial budget set at the beginning of a period and the actual budget realization at the end of the period. This study aims to examine how budget planners in Indonesia predict budgets for local governments, specifically whether there is a difference in the overreaction or underreaction behavior of public sector budget planners among districts and cities in the South Sulawesi Province of Indonesia. Theoretical Framework: This study aims to elucidate the cognitive mechanisms of representativeness bias and the anchoring-adjustment heuristic, which may impact the behavior of individual budget planners in determining budget amounts for future periods and their reliance on past information. Method: This research employs a quantitative approach with a causal and explanatory study design. In this study, the independent variable is the behavior of public sector budget builders, while the accuracy of their predictions for the future budget of the public sector constitutes the dependent variable. The quantitative approach was selected because it aligns with the research's objective of discerning potential misestimations in the behavior of budgeting teams when determining the budgetary allocations for the upcoming year in various patterns or conditions. The research's respondents are the budgeting teams from various districts and cities in the South Sulawesi Province. To test the research subjects, a heuristic of representativeness and anchoring-adjustment is followed when utilizing patterns of revenue realization from previous years (time series). Results and Discussion: This study found that the average Uncertainty in Budget Planner Predictions for Local Governments in each district and city in South Sulawesi, Indonesia, is consistent and does not exhibit significant differences. This research is highly significant as it can provide a valuable contribution to public sector budget planners in Indonesia when establishing budget amounts for the forthcoming period. Research Implications: This study seeks to contribute to advancing research in the realm of public sector budgeting in South Sulawesi, particularly by providing an overview of the occurrence of overreaction and underreaction behaviors among the planners of Local Own-Source Revenue (PAD) budgets in South Sulawesi Province. Originality/Value: The novelty of this study lies in the empirical validation of the utilization of the concepts of representativeness and anchoring-adjustment in the behavior of public sector budget planners when determining the budget amounts for the upcoming period.

Implementation of Responsibility Accounting System Towards Cost Control and Cost Center Performance

Business competition requires companies to be able to look ahead and anticipate all possibilities that will affect thecompany's business development and hinder business development and growth. Responsibility accounting is a system that is structured in such a way as to suit the nature and activities of the company with the aim that each organizational unit can be accountable for the results of the activities of the units under its supervision. The aim of this research is to analyze in more depth the role and function of responsibility accounting as a tool for controlling and assessing cost center performance. The research method used in this research is using a literature review, especially articles published on Google Scholar. The articles listed are studied and analyzed in more depth using several keywords such as responsibility accounting, performance assessment, cost center and cost control. The results of this research conclude that the implementation of responsibility accounting greatly influences control and performance assessment in cost centers.Responsibility accounting will comprehensively measure and assess cost centers based on a comparison between budget targets and the actual budget that has been spent. By assessing the performance of cost centers, the company will be able to control and separate controllable costs from uncontrollable costs by each responsibility center, so that it can account forthe costs incurred by the company.

Priority National Project – Healthcare: Financing, challenges, trends

Subject. This article discusses the problems of financing Russian healthcare and those related to the achievement of the targets of the specialized National Project Healthcare in 2024. Objectives. Based on the study of the Federal budget structure over time, as well as the results achieved within the framework of the implementation of the National Project Healthcare and the opinions of members of the Government of the Russian Federation, the article aims to find the main trend and the main problems of government financing of the industry. Methods. For the study, we used the historical method, analysis, systematization, and forecasting. Results. The article finds that the reduction in the budgets of national and federal projects related to healthcare in recent years is caused by objective reasons, but the paradigm of access to high-quality medical care for every Russian not only remains unchanged, but also receives proper government funding and high-quality development in accordance with the needs of modern society. Conclusions and Relevance. The problem of the lack of public sources to finance Russian healthcare has existed for a long time and, therefore, is not unexpected. In 2024, a budget sequestration is planned in conditions when at the end of 2023 the actual budget deficit exceeded the planned figure. In the context of the trend towards a decrease in public funding and taking into account the fact that 2024 is the year of the end of the National Project Healthcare, the achievement of the planned social development goals is at risk. The results of the study can be applied in the educational environment of higher education, in the scientific field, as well as for the development of new tools of government social and budgetary policies.

НАПРЯМИ УДОСКОНАЛЕННЯ БЮДЖЕТНОГО ФІНАНСУВАННЯ ПРОФТЕХОСВІТИ

The article describes the problems of budget financing of institutions of vocational education and training. The authors researched the actual budget expenditures in Ukraine by educational levels in the period since 2019 to 2023 and drew conclusions about the effectiveness and prospects of such funding. In particular, it was found that the main part of education expenses is being financed from local level budgets, which receive an educational subvention from the State budget. The authors have found out that the funding of vocational education in Ukraine is not given due attention and is insufficient. The lack of interest of local authorities in financing vocational education and training is explained both by unresolved property issues and by the lack of funds in local budgets, which causes public controversy both in the public area and between state administration bodies of different levels. However, the authors note that the government has launched several positive initiatives aimed at improving the situation. In particular, we are talking about the initiative to create training and practice centers (TPCs) at institutions of vocational education and training with funds earmarked as part of the educational subvention from the State budget. In addition, attention is focused on problem of unpopularity of the segment of vocational education, while at the same time there is a significant need for specialists in work specialties, especially in the period of recovery after the war. Also, the legislative framework for financing education in Ukraine as a whole and of vocational technical institutions in particular was investigated. As a result, non- budgetary sources of vocational technical education funding have been singled out. It is obvious that only state financing of vocational training institutions is not sufficient, so it is necessary to expand the practice of attracting donor organizations' resources. As a successful example, the EU4Skills and Skills4Recovery projects are given, which are fixed by the German government and are aimed at supporting the reform of vocational education in Ukraine.

Values Beyond “Health” in Budget-Constrained Healthcare Systems

ObjectivesMost current methods to value healthcare treatments only incorporate measures such as quality-adjusted life-years, combining gains in health-related quality of life and life expectancy in specific ways. Failure of these methods to recognize other dimensions of value has led to calls for methods to include additional values that are associated with the healthcare treatments but not captured directly by quality-adjusted life-years. This article seeks to provide methodologically sound ways to incorporate additional health-related outcomes, focusing on budget-constrained healthcare systems, in which using standard welfare economics methods are often eschewed. MethodsThe analysis develops standard extra-welfarist approaches to maximizing aggregate health, subject to fixed-budget constraints, using Lagrange multiplier methods. Then, additional valuable health-related outcomes, eg, reduced caregiver burden, real option value, and market- and non-market productivity are introduced. The article also introduces a social welfare function approach to illuminate how disability, disease severity and other equity-related issues can be incorporated into complete welfare measures. ResultsResulting analysis, fully developed in an Appendix in Supplemental Materials found at https://doi.org/10.1016/j.jval.2024.02.005 and summarized in the main text, show that understanding how average and marginal healthcare costs increase with output and how health augments “additional values” provides ways to assess willingness to pay for them in these fixed-budget situations. ConclusionsIn budget-constrained healthcare systems, only from actual budget allocations can values both of health itself and “additional values” be inferred. These methods, combined with methodologically sound social welfare functions, demonstrate how to move from “health” to “welfare” in measuring the value of increased healthcare use.

The concept of "budget execution" as a stage of the budget process and definition of its principles

The article is devoted to the study of the concept of "budget execution” as a stage of the budget process, taking into account the fact that lack of clarity in terminology and ambiguity in defining the key principles of budget execution create obstacles for qualitative analysis and effective management of the state's financial resources. Most of all, the importance of budget implementation lies in its role in providing financing for various areas of the economy, social programs and the development of the state as a whole. However, the lack of a clear definition of this concept and the uncertainty of its key principles create complications for the correct distribution and effective use of budget resources. Therefore, the study of the problem of defining the concept of "budget execution” involves the analysis of theoretical aspects of this process. Determining the basic principles of budget execution is critical to solving this problem, as it forms the basis for developing effective strategies for managing financial resources. It was found that the main task at the stage of budget execution is to ensure the full and timely receipt of taxes and other mandatory payments, as well as the financing of activities within the limits defined by the budget act. During the implementation of the budget, the bodies of representative and executive power at all levels, as well as local self-government bodies, make adjustments to the budget allocations that arise from changes in the exchange rate and uneven revenues to the budget. In addition, the goal of budget execution is to achieve compliance between actual budget receipts, expenditures from it, and budget- legal norms that establish the sources and volume of these revenues, as well as the directions and volumes of expenditures. Thus, the problem of defining the concept of "budget execution” and establishing its basic principles requires attention for further improvement of the budget process and effective use of financial resources. Ultimately, the article aims to systematize and clarify the terminology related to budget execution, as well as to reveal the key aspects of this stage of the budget process with an emphasis on those aspects that determine the efficiency and effectiveness of this process.

Budget deficit and money holding when consumers live forever in an endogenous growth model

<p class="MsoNormal" style="margin-top: 12pt; text-align: justify;"><span lang="EN-US" style="font-family: arial, helvetica, sans-serif;">In this paper I will show that budget deficit (or fiscal deficit) is necessary to achieve full employment under constant prices or inflation, using a model of endogenous growth in which consumers hold money for the reason of liquidity and live forever. Budget deficit need not be offset by future budget surpluses. I consider the continuous time case by taking the limit of the discrete time case when the time interval approaches zero. A continuous time dynamic model seems to be more general than a discrete time model. When the actual budget deficit is greater (smaller) than the value which is necessary and sufficient for full employment under constant prices, an inflation (a recession) occurs. The main argument of this paper is that a growing economy requires the continuation of budget deficit, and that we should not think of paying off the resulting government debt with taxes.</span></p>

Monitoring G20 Countries’ SDG Implementation Policies and Budgets Reported in Their Voluntary National Reviews (VNRs)

Monitoring Sustainable Development Goals (SDGs) has mainly focused on levels of achievement of targets and indicators, but few studies have examined policies and implementation efforts systematically. The Sustainable Development Solutions Network (SDSN) has called for more monitoring of policy efforts, which is necessary to understand why overall progress on SDGs has been insufficient. Responding to this call, this paper analyzes how the G20 countries’ SDG implementation policies and budgets were reported in their Voluntary National Reviews and creates a dataset of these SDG policies and budgets. The results showed that the G20 countries cumulatively listed a large number of policies—over 4100—in their VNRs. These policies were widely distributed among SDGs. The combined total of listed budgets was over USD 2.7 trillion. Most of the policies were substantive, broad-scoped action plans, national strategies, frameworks, programs, or laws/regulations, not just small projects or awareness-raising campaigns. Overall, VNRs listed more policies after 2018 than before. Also, VNRs tended to include relatively more policies relating to SDGs highlighted at the High-Level Political Forum (HLPF) in the year the VNR was prepared. The results also showed that smaller or developing countries generally did not indicate fewer policies than larger or developed countries. Despite the large number of reported policies, some areas of under-reporting were identified, especially regarding environmental SDGs and targets. Budgetary information was fragmented, and clearly did not match the scale of the reported policies, so actual SDG budget expenditures are probably much higher than reported in the VNRs. In conclusion, insufficient progress on the SDGs cannot be attributed to a simple lack of policies. Therefore, further research is needed to examine the policies’ actual contents, their appropriateness, level of ambition, level of funding, extent of implementation, and effectiveness. The database of policies created by this study is a necessary first step. The policy database can also be used to identify the G20 countries’ relevant policies for specific SDGs or issue areas which span several SDGs for monitoring implementation of specific issue areas.

ANALISIS EFISIENSI BIAYA BAHAN BAKU, BIAYA TENAGA KERJA LANGSUNG DAN BIAYA OVERHEAD PABRIK TERHADAP RASIO PROFIT MARGIN PADA MIE AYAM BAKSO CAK NO SOLO

This study aims to analyze the efficiency of raw material costs, direct labor costs and factory overhead costs on the profit margin ratio at Bakso Cak No Solo Chicken Noodle. By doing cost efficiency, it can increase maximum profit. The study used a qualitative approach and descriptive data analysis techniques. Analysis of production cost efficiency uses a comparison between actual production costs and budget production costs. In this study using data from observation, interviews and documentation. From this study obtained the results that the efficiency of production costs on raw materials at the meatball chicken noodle shop is inefficient with a percentage of 125%, this shows that there is a difference between the actual production costs of raw materials. Thus, causing the Cak No Solo Meatball Chicken Noodle shop to experience a loss of Rp. 500,000. After making the efficiency of raw material costs, it was found that the actual raw material costs decreased by IDR 505,000, because of this the production costs became efficient with a percentage of 99%. With the efficiency of production costs, the profit earned by business actors increased by 0.94%, namely IDR 505,000. The NPM result of 81.03% is also obtained, which means that business actors are more efficient in managing costs and generating maximum profits from sales. The higher the NPM value means that the finances in the business are healthier and better.

Effect of Month End Close Practices on the Financial Performance of International Non-Governmental Organizations in Rwanda (2020-2021)

Purpose: Month-End Close Practices are tasks performed by finance department every month (or accounting period) prior to and following the closedown of the relevant books of accounts. It is good practice to closedown financial systems for each accounting period to allow the institution to compile its management accounts (e.g. showing the actual expenditure versus budget) to assess its financial position. Therefore, month-end procedures involves running reports to check transactions and balances, as well as preparing management accounts to assess the financial position of the organization. This study focused on the evaluation on Month-End Close Practices on the Financial Performance of International Non-Governmental Organizations in Rwanda. It aimed to finding out whether the Month-End Close Practices were effective and whether they really have effect on Financial Performance of International Non-Governmental Organizations in Rwanda especially in the selected NGOs over the period of 2020-2021. Methodology: The design of this study was a quantitative and qualitative descriptive in nature. The study enrolled 20 respondents senior finance staff from the selected NGOs. Quantitative data were collected using data collection sheet while qualitative data were collected using interviews, focus groups and observation. Quantitative data were analyzed using statistical package for social sciences (SPSS) version 20 and qualitative data were to look for emerging themes then further distilled to identify any abstract themes that could be understood holistically. Findings: The study findings revealed that Month-End Close Practices have a significant effect on the Performance of International Non-Governmental Organizations. The study found a strong positive correlation between moth end practices and financial performance. Recommendation: International Non-government organizations (NGOs) should maintain internal control system and policies related to the month-end close practices as it showed the high standard of compliance and financial performance.

Money holding and budget deficit in a growing economy with consumers living forever

<p class="MsoNormal" style="margin-top: 12.0pt;"><span lang="EN-US" style="mso-bidi-font-size: 10.5pt; font-family: 'Cambria',serif; mso-fareast-font-family: 宋体; mso-bidi-font-family: 'Times New Roman';">I examine the problem of budget deficit in a growing economy in which consumers hold money as a part of their savings in the case where consumers live forever. For simplicity and tractability I use a discrete time dynamic model and Lagrange multiplier method. In the appendix I briefly explain the solution using a discrete time version of the Hamiltonian method. I will show the following results. 1) Budget deficit is necessary for full employment under constant prices. 2) Inflation is induced if the actual budget deficit is greater than the value at which full employment is achieved under constant prices. 3) If the actual budget deficit is smaller than the value which is necessary and sufficient for full employment under constant prices, a recession occurs. Therefore, balanced budget cannot achieve full employment under constant prices. I do not assume that budget deficit must later be made up by budget surplus.</span></p>

Design of buoy network in port water area for monitoring air pollution: A robust optimization approach

Buoy network is a promising technique to monitor air pollution in port water area, which is not limited by terrain and can provide continuous measurements at a low cost. Determining the number and location of buoys is a key issue in the design of the buoy network, however, it is affected by stochasticity of wind direction, wind speed, and emission intensity of ship exhaust. Therefore, a robust optimization approach is proposed to solve the problem of how to design buoy network in port water area for monitoring air pollution, i.e., to determine the number and location of buoys, with consideration of stochastic ship exhaust emissions and wind conditions. First, a bi-objective robust optimization model is developed based on the concept of p-robust to maximize monitoring capacity and minimize costs of buoy network. A method for constructing stochastic scenarios is subsequently proposed by combining Latin Hypercube Sampling, ship emission inventory, and atmospheric diffusion simulation. Then, a solution algorithm integrating Epsilon-constraint and Nash bargaining solution methods is presented to solve the model. Finally, a container port in eastern China is selected as a study case. Finally, the relative regret of the obtained robust layout is less than 13.04%. Results show that improving monitoring capacity and cross-scenario robustness is premised on increasing costs, decision-makers need to balance these aspects and design a buoy network with actual budgets. This study provides insights into how to design a buoy network to monitor air pollution in port water areas, and presents methods to determine the decision solution of a bi-objective robust optimization model, which helps maritime and environmental authorities manage ship emissions in port and coastal regions.

Budget Deficit and Economic Growth in Cote d’Ivoire: A Search for Threshold

This study examines the effect of budget deficit on economic growth in Cote d’Ivoire. The study applies threshold regression model to annual data covering the period 1970-2022. The results show that fiscal policy significantly influences economic growth rate. Further, the study establishes that the threshold level of budget deficit conducive for economic growth is 4% of GDP. Beyond this threshold, budget deficit is detrimental to economic growth. As the actual budget deficit is above 4%, the study recommends measures aimed at increasing domestic revenue and enhancing efficiency of public spending to enable the country reap more economic growth associated with fiscal policy. In this regards, efforts should be deployed to reduce tax revenue losses from exemptions and evasion which represent a potential of 4.2% of GDP, i.e. more than FCFA 1800 billion. Under certain assumptions, the “true” budget deficit threshold of Cote d’Ivoire is around 2% of GDP.

Analysis of Budgets of Some Communities of the Martuni Province in 2019-2021

Key words: state budget, municipal budget, special income, own income, expenses, interest, implementation This article presents the planned and actual budgets of some communities of Martuni province, as well as the subsidies allocated from the state budget. The pre-war/2020/ and post-war periods were studied, including those communities that remained occupied by the enemy after the war. The article includes the private incomes of the studied communities, which are important in the formation of budget incomes. In 2019, the total revenues of the 35 municipal budgets of Martuni province amounted to 96.4% of the plan, of which the own revenues actually made up 98.2%, the planned provision was 144075.8 thousand drams, 134,500.0 thousand drams were financed from the state budget: the implementation is 93.4%. The expenses in the specified time-period were planned for 388411.2 thousand drams, as a result 354325.2 thousand drams or 91.2% were used. In 2020, the total revenues of the budgets of the communities of Martuni province actually amounted to 69.8% compared to the plan. At the same time, the implemantation of own revenues was 42.9%. Allocations from the state budget made up 99.9%. The expenses of the communal budgets actually amounted to 75.6% of the plan. It should be noted that the pandemic since the beginning of the year, the war in Karabakh on September 27 affected the formation and use of municipal budgets. In 2021, the income implementation of the budgets of 35 rural areas of Martuni province was actually 80.9%, of which only 66.4% compiled the own incomes. 95.2% of subsidized allocations were made. In 2021, out of the planned 410689.0 thousand drams, 343646.8 thousand drams were actually used for the expenses of the budgets of the communities of the Martuni province; the implementation was 83.7%.

An Optimized Energy-Harvesting Transmission Scheme for Diffusion-Based Molecular Communications.

In this paper, we propose an optimized transmission scheme with energy-harvesting for a diffusion-based molecular communication system composed by nano-devices fed by piezoelectric nanogenerators. To this end, we firstly derive a system model that analytically describes the mean and the variance of the aggregated noise at the output of the receiver and the achievable Bit Error Rate. Then, we formulate an optimization problem that minimizes an objective function defined as a linear combination of the probability that the voltage across the ultra-nanocapacitor of the transmitter goes under a target value and the number of enqueued packets. We solve this problem by considering the actual energy budget, a target Bit Error Rate, and the need to achieve the simplicity of the transmitter as constraints. Finally, we use computer simulations to validate the formulated analytical models and demonstrate the unique ability of the proposed approach to guarantee BER = 5% and BER = 10% for communication distances up to 47μm and 50μm, respectively, while registering better results against baseline scenarios.

The budget deficit in an endogenous growth model with bequest and money holdings

By an endogenous growth model with a two-period overlapping generations structure, I examine the existence of a budget deficit in an economy that endogenously grows by investments of firms. The consumers leave bequests to their descendants and hold money as a part of their savings. I use a Barro-type utility function, where people include the utility of their children in their own utility. The main results are as follows. 1) A budget deficit is necessary for full employment under constant prices. 2) Inflation is induced if the actual budget deficit is greater than the value at which full employment is achieved under constant prices. 3) If the actual budget deficit is smaller than the value which is necessary and sufficient for full employment under constant prices, a recession occurs. Therefore, a balanced budget cannot achieve full employment under constant prices. I do not assume that the budget deficit must later be made up by a budget surplus. I use a Barro-type utility function to prove the necessity (or inevitability) of a budget deficit instead of the neutrality of government debt. In the appendix of this paper, I show that if money, as well as goods, are produced by capital and labor, a budget deficit is not necessary for full employment under constant prices.

Monetary economy and budget deficit in endogenous growth model

AbstractBy an endogenous growth model with two‐period overlapping generations structure and money holding of consumers, we examine the existence of budget deficit in an economy which endogenously grows by investments of firms. The main results are as follows. (1) Budget deficit is necessary for full employment under constant prices. (2) Inflation is induced if the actual budget deficit is greater than the value at which full employment is achieved under constant prices. (3) If the actual budget deficit is smaller than the value which is necessary and sufficient for full employment under constant prices, a recession occurs. Therefore, balanced budget cannot achieve full employment under constant prices. We do not assume that budget deficit must later be made up by budget surplus. This paper is an example of an analysis using a very simple model of the following statement by John Maynard Keynes.“Unemployment develops, that is to say, because people want the moon;—men cannot be employed when the object of desire (i.e. money) is something which cannot be produced and the demand for which cannot be readily choked off. There is no remedy but to persuade the public that green cheese is practically the same thing and to have a green cheese factory (i.e. a central bank) under public control.”In the appendix of this paper, we show that if money as well as goods are produced by capital and labor, budget deficit is not necessary for full employment under constant prices.