Autonomous Spending Research Articles

Comparative Fiscal Federalism and the Post‐Covid EU: Between Debt Rules and Borrowing Power

This thematic issue examines two main research questions: What are the features, the determinants, and the implications of fiscal integration in a system of multilevel governance like the EU? And, what can the post-pandemic EU learn from established federations when it comes to fiscal integration? We attempt to conceptualize the patterns of EU fiscal integration. In so doing, we identify eight instruments of fiscal integration in a federal or multilevel polity, equally divided between fiscal capacity and fiscal regulation, depending on the side of the budget and the mode of integration (autonomous or dependent). For instance, as part of the fiscal capacity instrument of integration, we propose to distinguish between revenue and expenditure capacity. Revenue capacity is then further divided into tax capacity, based on EU/federal taxes, and budgetary capacity, based on non-independent sources, for instance, contributions from the member states. Expenditure capacity is divided into autonomous spending capacity, meaning direct spending by the EU, and a dependent transfer capacity, where the EU merely distributes resources (both grants and loans) to the member states.

Sorting Out the Mixed Economy: The Rise and Fall of Welfare and Developmental States in the Americas

Sorting Out the Mixed Economy: The Rise and Fall of Welfare and Developmental States in the Americas

Modern Money Theory in the Tropics: A Reply to Agustin Mario

This paper responds to some inaccuracies on the discussion of our views on Modern Money Theory (MMT), as discussed by Agustin Mario. We believe that while is correct in noting that autonomous spending generates taxes, and fiscal balances are a result, MMT authors overlook the difficulties in pursuing expansionary fiscal policy in the developing countries. These are constrained by the existence of an external constraint that cannot be solved with a flexible exchange rate policy regime. Foreign reserves and capital controls are needed.

Fiscal, Investment and Export Multipliers and the COVID-19 Pandemic Slowdowns Uncertainty Factor in the First Half of 2020

The COVID-19 pandemic has caused a significant slowdown in the development of almost all economies in the world. In this context, the main goal of this research is to try to present changes in the value of fiscal, investment and export multipliers as a result of the COVID-19 pandemic. The research was conducted in selected European Union countries. They are France, Germany, Italy, Poland, Portugal and Spain. This research is based on the theory of effective demand. The values of feeds and leakages of total demand in the period from 2015 to 2020 were examined and calculated. On this basis, the individual multipliers of autonomous spending were analyzed and their changes in the first period of the COVID-19 pandemic were presented. The analyses led to a surprising conclusion: it found that the autonomous spending multipliers in some economies increased. This means that they have become ‘security buffers’ for the health of economies. This means that the increase in their value weakened the negative effects of changes in autonomous expenditure on gross domestic product.

Analyzing Domestic and International Project Finance Law: Discussion of Budget Overruns in Supported by the UK Government Infrastructure Projects

The purpose of this research is to compare the UK Government financing practices in international versus domestic projects. In the process of comparative analysis, the autonomous spending propensity of the UK Government seems to be a cause for increase in total project’s costs. After looking closely into all viable options, a legislative solution to the issue of budget overruns and delays appears to be necessary. In the analysis of historic legislation, it is shown that the risky investments are not limited by a regulation and their approval by taxpayers is not required. The disproportional involvement of the UK Government in projects abroad in comparison to defective domestic developments casts serious doubt as to the reasonable cost-benefit analysis. And because the taxpayers have no direct impact on the UK Government’s export of capital, the system of selecting a project for government investing shall be restructured. The main issue is that the current statutory framework for under-performing projects does not preclude the issuance of additional capital. In the Proposed Solution section of this research, the enactment of law governing the pitfalls at the budget estimation stage is discussed from sociolegal perspective.

La demanda agregada de la cultura en México: propensión al consumo y tasa de interés para empresas culturales

El presente trabajo es un ejercicio macroeconómico a partir de la información del Sistema de Cuentas Satelitales de la Cultura de México, que publica el Instituto Nacional de Estadística y Geografía (INEGI), considerando la contabilidad económica en el ramo. El objetivo es determinar un modelo de demanda agregada del sector de la cultura, a partir del cálculo de una propensión marginal al consumo y de una tasa de interés para empresas culturales. Para lograr la meta, se considera la literatura macroeconómica tradicional para deducir el gasto autónomo propio del ramo y, con ello, la curva de bienes culturales. También se toma en cuenta la presencia de la curva del mercado de dinero para obtener el propósito señalado. Se utilizan Mínimos Cuadrados Ordinarios (MCO) y, en el caso de presencia de heterocedasticidad, Mínimos Cuadrados Ponderados (MCP). Se concluye que la población mexicana, en promedio, no gasta más allá del 5.3% de sus ingresos en bienes culturales y que las empresas creativas, por sus mismas condiciones, requieren de tasas de interés muy por debajo de las del total del mercado financiero.

Impacto de la Ley de Dependencia sobre el gasto autonómico en servicios sociales

ObjectiveIn this paper we address whether the System for Personal Autonomy and Care of Dependent Persons contributes to increasing the volume of resources of the public social services system (displacement effect) or, on the contrary, whether this development has taken place at the expense of other social services (substitution effect). MethodPanel data analysis is used to explain how per capita expenditure on social services evolves in the Spanish Regions under the common regime in the period 2002-2016. ResultsThe implementation of the Dependency Act is associated with a 14% increase in the level of per capita expenditure on social services. This effect raises 25% when the variable explained is expenditure on current transfers of a social nature. On the other hand, law changes introduced in 2012 and 2013 were associated with a reduction in per capita expenditure on current transfers of around 10%. ConclusionsThis evidence would refute the hypothesis that the System for Personal Autonomy and Care of Dependent Persons had merely a “substitution” effect on autonomous spending on social services.

Distribution Matters: The Reverse Robin-Hood Macroeconomic Effects

This paper examines income distribution’s impact on aggregate demand. Income distribution is introduced by replacing consumption as a function of aggregate income with consumption as the sum of two consumptions: a high income group’s and low income group’s. Notably the high income group’s MPC is assumed to be less than the lower income group’s. Analysis reveals two key results. As the high income group’s proportion of income rises: (1) aggregate demand falls and (2) autonomous spending changes cause smaller aggregate demand shifts. A reduced multiplier is the key. Empirical work supports the assumption that the high income group’s MPC is less than the low income group’s.

The multiplier of autonomous spending in the regional economy

The multiplier of autonomous spending in the regional economy

Enlarging the collective model of household behavior: A revealed preference analysis

We use a comprehensive model of strategic household behavior in which the spouses’ expenditure on each public good is decomposed into autonomous spending and coordinated spending a la Lindahl. We obtain a continuum of semi-cooperative regimes parameterized by the relative weights put on autonomous spending, by each spouse and for each public good, nesting full cooperative and noncooperative regimes as limit cases. Testing is approached through revealed preference analysis, by looking for rationalizability of observed data sets, with the price of each public good lying between the maximum and the sum of the hypothesized marginal willingness to pay of the two spouses. Once rationalized, an observed data set always allows to identify the sharing rule, except when both spouses contribute in full autonomy to some public good (a situation of local income pooling).

Multiplicative effects of the gaps of rationality

The author examines the negative impact of rationality gaps on the country’s economic development and economic security. The relationship between the gaps of rationality and the mechanism of the investment multiplier is analyzed. The article defines the notion of «the gap of rationality,» three types of the gaps of rationality. The definition of the effects of the multiplier and the accelerator of investment is given. It is indicated that the relationship between the multiplier and the accelerator of investments is complex, fractal in nature. Inside the mechanism of the investment multiplier there are components, both strengthening and weakening its effect. It is revealed that people with irrational behavior do not realize their irrationality. With the gaps of rationality, people can realize the irrationality of their behavior, but they continue to behave irrationally. The gaps of rationality lie in the fact that the goal is not a sufficient reason for carrying out actions. Decision-making does not automatically mean the appropriate action. Even after making a decision and starting the action, we can not expect that it will automatically end. The article proves that the multiplicative effect enhances the negative impact of rationality gaps on the economy. Specific directions of this influence are considered depending on the type of the gaps of rationality. For each direction, the negative effect of the multiplier effect generated by the gaps of rationality is described. As a result of the study, it was concluded that the negative impact of human irrationality on economic processes must be studied in conjunction with the spread of multiplicative effects in the economy. Keywords: the multiplier of autonomous spending; the accelerator o

Public Debt as a Burden on the Future Generation: A Keynesian Approach

By using an overlapping generations (OLG) model in the context of the production economy, this paper shows that public debt lowers the future generation’s well-being even in the situation of imperfect employment equilibrium. According to the dynamically extended multiplier theory, which has a rigorous microeconomic foundation, the effect of the redemption of public debt is equivalent to that of the balanced-budget multiplier because the redemption increases autonomous spending by old generation while the same amount of tax is levied on the young generation. Thus, the aggregate disposable income remains before the issuance since the value of the balanced-budget multiplier is unity. However, it is evident that real GDP before tax reduction increases; it costs more resources to earn the same disposable income. Therefore, it is unavoidable that the issuance of public debt impairs the welfare of future generation even in a Keynesian framework.

Demanda e desemprego no médio prazo

Apresentamos um modelo keynesiano no qual o conceito tradicional de equilíbrio do mercado de trabalho é substituído por um jogo evolucionário. O modelo permite concluir que, ao contrário da análise tradicional, a demanda agregada é crucial para determinar o nível de emprego de médio prazo. Mostramos que, ao alterarem a parametrização da dinâmica evolucionária, a política econômica e o gasto autônomo geram bifurcações, caracterizadas por mudanças no número de equilíbrios e/ou nas propriedades de estabilidade. O desemprego passa a ser compreendido não como resultado de uma rigidez nominal ad hoc, mas sim como uma propriedade emergente da interação entre agentes que buscam a melhor estratégia de barganha salarial em um ambiente de racionalidade limitada.

Multipliers in a Central Place Hierarchy

Open economy multipliers, at the community level, capture only a portion of the system‐wide impact of changes in local autonomous spending. Multiplier effects for the central place system will include the community‐specific multiplier, where the autonomous expenditure was initiated, plus all of the cross‐community multiplier effects generated through linkages among communities in the hierarchy. Import leakages, in the form of shopping at higher levels, result in “filtering up” of expenditure increases initiated at lower levels of the system.In an earlier paper (Olfert and Stabler 1994), community‐level multipliers for a central place system in the Great Plains were estimated. In this paper, the distribution of direct and induced spending, resulting from autonomous spending increases initiated at particular levels of a central place hierarchy, is derived and empirically estimated over all levels of the hierarchy. Building on (1) own‐community level multipliers, (2) an exhaustive set of cross‐community multipliers are derived and empirically estimated. The combination of own‐ and cross‐community multipliers produces (3) system‐wide multipliers that show the system‐wide impact of spending initiated at any level in the hierarchy. Finally, (4) level‐specific impact multipliers resulting from autonomous spending originating at any (every) level in the system are calculated.Results indicate that the induced impact of autonomous expenditure increases anywhere in the system will be the greatest at the top of the hierarchy, that autonomous increases at higher levels have a larger local impact than they do at lower levels, and that equal expenditure increases across the hierarchy will have a disproportionate impact at the top of the hierarchy, as well, dueto a combination of higher own‐community multipliers and spending up the hierarchy by residents of lower level centers.

On the dynamics of balance of payments constrained growth

This paper assesses the dynamic behaviour of policies for resolving trade deficits. We extend the Thirlwall-based model by introducing an equation for setting current account policy. Steady-state solutions implying current account equilibrium emerge under autonomous spending contraction, exchange rate develuation, export expansion, and import reduction. Stability holds with plausible restrictions. simulations based upon the United States reveal that autonomous spending, import, and export policies behave similarly in correcting trade deficits. Exchange rate devaluation generates considerably slower adjustment. Corresponding output growth paths are also examined. The study formally incorporates dynamics into the Thirlwall approach for analysing balance of paymnets constrained growth.

An Integration of CAPM with IS-LM Analysis into a Unified Theory of Aggregate Demand

Ever since James Tobin [23] explained the demand for money in a portfolio context economists have been aware of the relation between portfolio behavior and aggregate demand. On a most basic level, since the demand for money is at least partly dependent on portfolio behavior, the LM and aggregate demand schedules are also dependent. Nevertheless, formal derivations of aggregate demand schedules (e.g., from IS-LM schedules) have not as yet taken portfolio considerations fully into account.' Likewise, the vast literature on capital market theory emanating out of the Sharpe [22]-Lintner [18]-Mossin [19] mean-variance capital asset pricing model (CAPM) assumes that the level of aggregate demand (or income) is exogenously determined. Two of the most important literatures in macroeconomics, aggregate demand theory and capital market theory, have been largely developed along separate paths. The purpose of this paper is to unify the relationship between aggregate demand theory and capital market theory by explicitly incorporating the CAPM into an IS-LM framework.2 In this way we can examine the effects of shocks to the IS and LM schedules upon the returns to riskless and risky securities and the feedback effects upon aggregate demand. The influence of these shocks on aggregate demand (i.e., the monetary and autonomous spending multipliers) will be shown to depend on the amounts of security risk (beta coefficients) as well as upon investors' risk-return attitudes.3

Wage Bargaining in a Macroeconomic Model with Rationing

A model of a single-commodity, closed economy is constructed in which the commodity price is fixed and its market clears by quantity adjustment. The distinctive feature is that the real wage and employment are determined by bargaining between unions, representing workers and firms. There are several possible regimes, some with labor hoarding. The effects of changes in autonomous spending and the reservation wage on the endogenous variables of the model, including employment and the real wage are discussed. Some interesting possibilities emerge for the cyclical movement of productivity and the real wage.

MONETARY POLICY EFFECTIVENESS: THE CASE OF A POSITIVELY SLOPED I S CURVE

POSITIVELY SLOPED I-S curves have recently played a role in the discussion of monetary theory and policy. David Meiselman, for example, has said, My own judgment is that under a wide range of circumstances, the I-S curve is best taken to have a positive slope. [1, p. 147] William Silber, in a recent article in this Journal discussed the effectiveness of monetary policy when there is a positively sloped I-S curve. [2]. The purpose of this note is to point out that, given a Keynesian model, such as is assumed in the Silber article, an upward sloping I-S curve leads to properties that are not consistent with historical experience. The reason for this is simple: Given a model with a positively sloped I-S, stability depends on adventitious circumstances. That is, stability occurs if it is assumed, as Silber does, that the central bank controls the money stock so that money is exogenous. But if there is a positive I-S, instability may occur when the authorities use interest rate targets and do not allow interest rates to rise or fall sufficiently to restore equilibrium, so that deviations from equilibrium may lead to cumulative, unbounded increases or decreases in GNP. Such behavior of GNP has not been observed in periods when the authorities have fixed interest rates, such as in the pre-Accord era when the Federal Reserve pegged the price of government securities, nor does such behavior correspond to the later performance of the economy when the Federal Open Market Committee used interest rate targets. The potential instability of the economy arises with a positively sloped I-S curve since the marginal propensity to spend out of GNP--the marginal propensity to consume plus the marginal propensity to invest-must be greater than one.' Then given fixed interest rates the geometric series representing the investment multiplier never converges. For example, an increase in government spending by $1 raises spending by more than $1, which, in turn, raises spending and income by successively greater amounts. Over time, the rise in income increases without bounds. The comparative statics multiplier, showing the change in income that is required to restore equilibrium, also reflects the peculiar properties of the model under these circumstances. In contrast to its usual character, the multiplier is negative so that for an increase in autonomous spending the income required for equilibrium is lowered. This is illustrated in Figure 1, where the I-S curve is shifted upward due to an increase in autonomous spending; in this case, at the same level of income, a higher level of interest rates is required to create no excess demand for current output.

The Short-Run Stability of Velocity and the Autonomous Spending Multiplier, 1946-1962

Previous articleNext article No AccessThe Short-Run Stability of Velocity and the Autonomous Spending Multiplier, 1946-1962Keith E. PhillipsKeith E. Phillips Search for more articles by this author PDFPDF PLUS Add to favoritesDownload CitationTrack CitationsPermissionsReprints Share onFacebookTwitterLinkedInRedditEmail SectionsMoreDetailsFiguresReferencesCited by Journal of Political Economy Volume 77, Number 3May - Jun., 1969 Article DOIhttps://doi.org/10.1086/259525 Views: 3Total views on this site Citations: 2Citations are reported from Crossref Copyright 1969 The University of ChicagoPDF download Crossref reports the following articles citing this article:Mohsin S. Khan The relative stability of velocity and the investment multiplier, Journal of Monetary Economics 4, no.11 (Jan 1978): 103–119.https://doi.org/10.1016/0304-3932(78)90036-3N. E. SAVIN FRIEDMAN-MEISELMAN REVISITED: A STUDY IN AUTOCORRELATION, Economic Inquiry 16, no.11 (Jan 1978): 37–52.https://doi.org/10.1111/j.1465-7295.1978.tb00491.x