Changes In Fiscal Policy Research Articles

Real Exchange Rate Depreciation and Domestic Tax Revenue Performance in Kenya

Purpose: Taxation plays a critical role in raising the resources needed for financing government activities in developing countries. On the other hand, the volatility of real exchange rates (RERs) has generated significant concern among academics and policymakers in view of its effects on macroeconomic variables such as tax revenue generation. This study therefore focused on real exchange rate depreciation on domestic tax revenue performance in Kenya. The study was guided Theory of Constraints. Methodology: The study employed an explanatory research design. Secondary data was collected from the CBK, KRA, and the World Bank. In this study time series data ranging from 2003 – 2023 was used to analyze the determinants of domestic tax revenue performance in Kenya. The hypotheses were tested at a significance level of .05 using the multiple regression analysis. A multivariate time series ARDL regression analysis model was used to analyze the data. Results: The study ARDL model concluded that Real exchange rate depreciation led to a notable decrease in domestic tax revenue performance, with β = -0.223945 and p = 0.000 < 0.05. This effect is intensified when considering the lagged impact, where a one-period lagged depreciation results in an even greater reduction in tax revenue performance, β = -1.927412 and p = 0.0004 < 0.05. Conclusion: The study recommended that government of Kenya should stabilize the exchange rate and prevent excessive depreciation by fostering a favorable trade balance and maintaining investor confidence. Additionally, future research could focus on the effects of fiscal Policy Changes on domestic tax revenue performance. Also, future studies could examine Impact of Global Economic Shocks on Domestic Tax Revenue.

A Schumpeterian exploration of Gini and top/bottom income shares

Abstract Data show that an increase in the Gini coefficient is associated with a falling bottom $p_{B}$ % income share and an increasing top $p_{T}$ % income share where, for example $p_{B}$ = 40 and $p_{T}$ = 1. This relationship, which we call the $X$ inequality relationship, is pervasive in the sense that it is observed in many countries, including the US, the UK, France and others. The purpose of this paper is (i) to construct a Schumpeterian growth model to explain the relationship, and (ii) to identify/quantify factors behind it via calibration of the US economy. Our model gives rise to a double-Pareto distribution of income as a result of entrant and incumbent innovations. Its advantage is that it allows us to develop iso-Gini loci and iso-income share schedules in a tractable way. Using a double-Pareto distribution as an approximation of an underlying income distribution, calibration analysis reveals that a declining business dynamism and fiscal policy changes in the past decades played a significant role in generating the $X$ inequality relationship in the US.

Decreasing Productivity in the Primary Healthcare: A Study of the Brazilian Case

ABSTRACT: In 2015, the United Nations (UN) proposed the 2030 Agenda, a resolution that outlines the global goals for sustainable development. This report focuses on promoting health and well-being, emphasizing the importance of primary healthcare (PHC). However, Brazil faces challenges in managing its healthcare system, exacerbated by fiscal policy changes that have reduced public sector expenditures after 2015. This study was motivated by these recent changes in Brazil’s fiscal policy. We evaluated potential fluctuations in total factor productivity (TFP) in 5,524 Brazilian municipalities’ primary healthcare from 2015 to 2019. TFP, a measure of efficiency and production technology in PHC, was computed using the bootstrapping Malmquist productivity index (MPI) derived from the Data Envelopment Analysis (DEA) algorithm. This study focused on the economic recession and austerity measures initiated in 2015. Moreover, it’s essential to highlight that the SARS-CoV-2 pandemic in Brazil in 2020 brought significant changes to the country’s economic, social, and health dynamics. Therefore, this research intentionally concentrated on the pre-pandemic period. Our results revealed that TFP in the PHC sector in Brazil decreased between 2015 and 2019. It was possible to note that three out of every four Brazilian municipalities experienced either stagnation or a decline in the TFP of primary healthcare, with more pronounced challenges in the Midwest and Northeast regions. Looking at the TFP elements, we could see a continuous drop in technical efficiency everywhere in the country, markedly in the Midwest and Northeast. Conversely, there was a considerable uptick in Brazil’s technological component. These results implied that there might have been advancements in PHC’s technological infrastructure, preventing even less favorable outcomes in the TFP indicator. We concluded that the productivity of primary healthcare in Brazil declined when the 2015 fiscal ceiling was implemented. This decrease in performance was evident in the sluggish growth rate of primary healthcare inputs, a diminution in vaccination coverage indicators, and an increase in hospitalizations for preventable causes. Given that health is a crucial component of social well-being, it is vital to highlight the need for comprehensive efforts to guarantee the effective operation and advancement of primary healthcare services, even during economic downturns.

Expectations and the neutrality of interest rates

Our central banks set interest rates, and do not even pretend to control money supplies. How do interest rates affect inflation? We finally have a complete economic theory of inflation under interest rate targets and unconstrained liquidity. Its long-run properties mirror those of monetary theory: Inflation can be stable and determinate under interest rate targets, including a peg, analogous to a k-percent rule.Uncomfortably, stability means that higher interest rates eventually raise inflation, just as higher money growth eventually raises inflation. Sticky prices generate some short-run non-neutrality: Higher nominal interest rates can raise real rates and lower output. A model in which higher nominal interest rates temporarily lower inflation, without a change in fiscal policy, is a harder task. I exhibit one such model, but it paints a more limited picture than standard beliefs. Generically, without a change in fiscal policy, monetary policy can only move inflation from one time to another.The last decade has provided a near-ideal set of natural experiments to distinguish the principal theories of inflation. Inflation did not show spirals or indeterminacies at the long zero bound. The large monetary-fiscal expansion of the covid era produced a temporary spurt of inflation. The same money unleashed in quantitative easing had no such effect.

Impact of Goods and Service Tax on MSME Sector: A Study Using Artificial Neural Network and Multivariate Analysis of Variance

Micro, small and medium enterprises (MSME) is one the vital sector of the developing economy. Changes in fiscal policy directly impact this sector the most. The present article aims to examine the impact of the recent Indian indirect system tax overhaul, that is, Goods and Service Tax (GST), on the MSME sector. We have employed multivariate analysis of variance and multi-layer perceptron neural network on the extensive data set for 60 months from April 2015 to March 2020. The empirical findings state that a significant increase has been observed in the MSMEs’ export, revenue generation and gross domestic product in the post-GST era. The findings may aid the emerging economies that are planning to alter tax systems to boost the MSME sector at the international level. JEL Codes: H20, L00, B22, C01, C45

КОРЕЛЯЦІЙНО-РЕГРЕСІЙНЕ МОДЕЛЮВАННЯ ВПЛИВУ БАЗОВИХ ЧИННИКІВ НА РІВЕНЬ ІНФЛЯЦІЇ В УКРАЇНІ

The correlation between the level of inflation and the money supply as well as the impact of unemployment on its level was researched in this article. Studying economic indicators on the basis of the correlation-regression analysis the authors substantiate the key factors that determine inflationary processes in the country. Certain trends and degree of interdependence between the researching economic characteristics were established.
 The problem investigated in the article is the clear identification of the influence of key factors that cause inflation in Ukraine, such as the volume of the money supply, the unemployment rate, etc., which makes it possible to identify the basic regulators of the development of the Ukrainian economy.
 On the basis of the conducted research, it was found that the change in the volume of the money supply has a statistically significant relationship with the level of inflation only in the long term, taking into account trend and nontrend years. It was established that the lack of dependence between the devaluation of the hryvnia and the level of inflation, as well as the lack of a relationship between the level of inflation and producer price indices, is explained by inflation targeting.
 For further research in this direction, it is important to take into account the factors substantiated in this article, which affect the level of inflation, in particular, and the economy of Ukraine in general. Constant monitoring of changes in fiscal and monetary policy will allow building more accurate correlation-regression models, which will enable the development of an effective inflation control strategy in the country.
 The results of the study make it possible to form a modern understanding of the inflation's dynamic in the Ukrainian economy and help to develop a productive strategy in anti-inflation policy and to make important decisions in the field of effective state management.

Evaluating Fiscal Performance: A Fixed-Effect Panel Threshold Approach to National and Supranational Rules *

Fiscal rules are designed to prevent budget deficits arising from frequent and abrupt changes in countries' fiscal policies. These changes can be attributed to shifts in regional and global economic conditions, as well as short-term decisions made by governments. Recently, the COVID-19 pandemic has led to increased government spending and borrowing, rendering governments more vulnerable. In this context, the implementation of fiscal rules has gained renewed attention. However, to construct a more resilient infrastructure against future crises, it is not only the national fiscal rules that are critical, but also the presence of supranational fiscal rules that can ensure coordination and discipline among countries has become increasingly important. This study, therefore, seeks to analyze the impact of national and supranational fiscal rules on fiscal performance in 31 advanced economies over the period 2000-2020, utilizing the fixed-effect panel threshold model approach. The results indicate that national fiscal rule implementations become effective after a certain threshold level, whereas supranational fiscal rules are effective both below and above a specific debt threshold. This implies that while both types of fiscal rules are effective, supranational rules stand out in terms of their magnitude and their effectiveness even at lower levels of debt. These findings are expected to guide policymakers in evaluating fiscal rule policies and balancing local needs with the achievement of regional objectives.

FISCAL POLICY CHANGES: OPPORTUNITIES AND RISKS FOR REGIONAL DEVELOPMENT

Purpose. Evaluation of recent fiscal initiatives in the context of ensuring a reasonable balance between the volume and sources of tax revenues, the distribution of such resources, and the maintenance of a necessary level of business activity in times of war or post-war recovery. The study also involves an analysis of the state and availability of alternative funding instruments for budgetary expenditures and an assessment of the impact of fiscal initiatives on taxpayers. Methodology of research. The setting goal was achieved through the use of such methods analysis of scientific literature, normative documents to study the situation with the payment and administration of taxes; comparison of revenues to the budgets by components and dynamics, sources of financing budget deficits; systematization and generalization of the literature on the possibility and risks of using certain proposed fiscal instruments. The study is based on the analysis of data from various sources, including budget indicators (income and expenditures by components, sources of financing the budget deficit), fiscal statistics (tax rates, number of taxpayers by types of taxes, tax debt), socio-economic indicators (demography, level destruction caused by military actions) and the legal framework. Findings. The article assesses the vulnerability of local budgets in the context of their own revenue sources during wartime conditions and the expected changes in fiscal policy have done. Key fiscal initiatives since the onset of the widespread Russian invasion are analysed, identifying limitations with the greatest impact on the formation of the resource base of local budgets. The study also explores opportunities for financing regional development projects through budgetary funds and analyses the existing fiscal model. Originality. The article introduces a new approach to examining the relationship between fiscal policy and regional development, taking into account contemporary trends and economic conditions. It elucidates the connection between fiscal initiatives and factors influencing economic development during conflict or recovery. Practical value. The proposed research results enable the evaluation of key risks and the adaptation of interaction models between fiscal entities to the challenges of the present and future. Also, and the relationship between fiscal initiatives and factors that determine economic development in conflict or recovery conditions is also explained. The research can be used by scientists to build models of minimizing losses for budgets and preventing losses of the local economy when forming fiscal policy in terms of the tax base, tax rates and powers. Key words: fiscal policy, taxes, government budget, local budgets, regional development, tax revenues, taxpayers.

Study on the Impact and Response of the Implementation of Property Tax and Estate Tax on the Worldwide Asset Allocation of Chinese High Net Worth Individuals in the Context of Global Tax Reform

This paper examines the impact of property tax and estate tax implementations on high-net-worth individuals in China, offering insights into effective asset allocation and tax planning strategies to achieve legal tax optimization. It explores global asset diversification, the establishment of offshore trusts, family offices, strategic immigration planning, and philanthropy as mechanisms to mitigate tax liabilities while ensuring wealth preservation and compliance with evolving tax regulations. This analysis aims to provide a comprehensive framework for navigating the complexities of wealth management in the face of significant fiscal policy changes.

Assessing the Impact of Fiscal Policy on Economic Growth Rates

Relevance. The Guidelines for Budget, Tax and Customs Tariff Policy for 2024 and for the planning period 2025–2026 show that there will be a significant increase in expenditures for all funds of the Russian budget system. The expenses’ structure is changing significantly: it is expected to shift towards power expenses against the backdrop of a slight reduction in investments in human capital, social policy and the national economy growth. To ensure the budgetary balance required by law, the state predicted an increase in the tax burden in the next three years. This paper attempts to assess the impact of these changes on GDP dynamics. The authors calculated multipliers, including in key functional sections of the budget classification, to assess changes in fiscal policy, tax, and budget expenditure. Methods. We based these calculations on the impulse responses of the structural VAR model of the Russian economy. Also, the authors assessed the model on data for 2004–2021 to reckon the average-sized model (10 indicators) involved having used the Bayesian estimation method. Results. The calculated financial multipliers confirm a significant effect of fiscal policy on GDP; expenditures on social policy and the national economy showed the greatest stimulating effect.

The European Investor State: Its characteristics, genesis, and effects

In the wake of financial, sovereign debt and health crises, public interventions in the European economy have taken on a new level of breadth, marking a reentry in force of the state in economic life that goes beyond the regulatory state. Yet, these interventions do not follow the old Keynesian interventions neither, being shaped through a particular logic of investment that link public and private actors in a particular configuration. The introduction to this special issue lays out this configuration for the case of the EU and its Member States through the concept of “European Investor state.” By this concept, we refer to the redefinition of the role of European states in the economy as an “investor,” in reference to private investment funds, which the state seeks both to imitate and to enroll. The paper embeds this redefinition of state intervention in the context of the 2010s in Europe, characterized by worries about “secular stagnation” and growing concern about an “investment gap,” interpreted as the failure of financial markets to invest in productive sectors, especially when risky. The budgetary constraints and the ideological outlook then shaped the specific financial and off-balanced sheet tools of the investor state. Finally, the paper explores the implications of the Covid-crisis on this intervention model. It concludes that despite major changes in fiscal policy at the EU level, this approach is likely to persist, because of the lasting interpretation in terms of “investment gap,” which only public-private collaborations are seen to be able to fill.

RELACJE PORELATIONS BETWEEN AGRICULTURAL BUDGET POLICY AND FISCAL POLICY IN POLAND AFTER ACCESSION TO THE EUROPEAN UNION (2004–2022)MIĘDZY POLITYKĄ BUDŻETOWĄ WOBEC ROLNICTWA A POLITYKĄ FISKALNĄ W POLSCE PO AKCESJI DO UNII EUROPEJSKIEJ (2004-2022)

Aim: The paper evaluates Poland’s budget policy towards agriculture through the prism of agricultural budget expenditure under the conditions of Poland’s membership in the European Union (EU). The volume and real dynamics of agricultural budget expenditure in relation to state budget expenditure were analyzed. An answer was sought to the question of whether the active or passive nature of budget policy toward agriculture is consist­ent with the state fiscal policy option (expansive or restrictive). Methods: The relatively long period of analysis (covering 19 years, 2004–2022) allows us to see trends in the formation of the level and structure of agricultural budget expenditure and state budget expenditure, as well as to determine their mutual relations. Simple statisti­cal methods – structure and dynamic analysis – were used. Results: It is shown that the budget policy towards agriculture is characterized by a peculiar difference and independence from the state fiscal policy, which is mainly due to the great importance of the funds of the Common Agricultural Policy for the level and structure of agricultural budget expenditure. Conclusions: It was found that the level of support for agriculture in Poland from public funds (domestic and EU) in 2004–2022 was not directly dependent on the state budget situation. During the period, there were numerous changes in the state’s fiscal policy options and changes in the budget policy options towards agriculture, with these changes going in different directions quite often.

Fiscal policy and economic growth in Sub-Saharan Africa: Do governance indicators matter?

This study investigated the linkage between fiscal policy-governance indicators interaction and economic growth in 36 Sub-Saharan Africa (SSA) countries from the periods of 2011-2021 inclusive. The study employed two-step system Generalized Method of Moment (GMM) estimation technique due to its practical relevance in panel data analysis. The data obtained from World Bank and World governance indicator was checked for unit root through the help of Im Pesaran Shin and Levin-Lin-Chu unit-root tests, and the result revealed that data was stationary and safe for further analysis. The result of the study also presented that direct economic effect of fiscal policy is negative and significant in SSA countries. However, the interaction of fiscal policy with governance indicators has positive and significant effect on economic growth. Accordingly, before interacting with governance indicators, a percentage change in fiscal policy leads to a 0.20 percent decline in economic growth of SSA countries. Contrary to this, the interactive coefficient of fiscal policy and government effectiveness (0.019) and interactive coefficient of fiscal policy and corruption control (0.0046) are found to be positive and significant. Further, the finding of the study revealed that fiscal policy-voice and accountability interaction coefficient (0.011) and interactive coefficient of fiscal policy-regulatory qualities (0.014) are positively and significantly affecting economic growth of SSA countries. The policy implication is that policy makers in SSA countries should encourage economic policies that improve government effectiveness, strong corruption control, clean public services and better regulatory qualities.

Nexus Between Fiscal Policy Mechanism and Stock Market Output in a Growing Economy

Abstract Fiscal policy methods are critical to a country’s economic stability. However, when fiscal policy changes occur, all economic sectors react either favorably or adversely. The stock market is not spared from this reaction because it is likewise an important aspect of the economy. From 1998 through 2020, the inquiry looks at the link between fiscal policy mechanisms and stock market performance. The Levin, Lin, and Chu test is used to determine data stationarity. At zero latency, all factors remain constant. Other screening tools employed indicate that all datasets and models utilized in this work are of satisfactory quality. Pearson Product Moment Correlation (PPMC) is a statistical method used to investigate the link between fiscal policy plans and stock market results. Correlation coefficients quantify the strength of a link between two variables. The study’s findings indicate that fiscal measures such as tax income, domestic borrowing, government capital, and regular expenditure have a substantial and extremely strong positive relationship with Nigerian stock market returns. The study also indicates that foreign borrowing is harmful to Nigeria’s stock market advancement. Other data indicate that foreign borrowing has a modest to very weak link with other fiscal policy methods when compared to the outcomes of the other instruments. As a result, the report recommends increased tax income collection and a significant reduction in the country’s foreign debt.

Intertemporal substitution in labor supply: A meta-analysis

The intertemporal substitution (Frisch) elasticity of labor supply governs how structural models predict changes in people's willingness to work in response to changes in economic conditions or government fiscal policy. We show that the mean reported estimates of the elasticity are exaggerated due to publication bias. For both the intensive and extensive margins the literature provides over 700 estimates, with a mean of 0.5 in both cases. Correcting for publication bias and emphasizing quasi-experimental evidence reduces the mean intensive margin elasticity to 0.2 and renders the extensive margin elasticity tiny. A total hours elasticity of about 0.25 is the most consistent with empirical evidence. To trace the differences in reported elasticities to differences in estimation context, we collect 23 variables reflecting study design and employ Bayesian and frequentist model averaging to address model uncertainty. On both margins the elasticity is systematically larger for women and workers near retirement, but not enough to support a total hours elasticity above 0.5.

Recovery Ready Workplaces: A key strategy for reducing overdoses and sustaining recovery from substance use disorder.

In 2021, overdose deaths surpassed the 100,000 mark for the first time in the United States' history, and alcohol-related deaths continue to surpass 140,000 each year. Regulatory and societal barriers to effective treatment and prevention of substance use disorder (SUD) persist. Innovative strategies and approaches to support long-term recovery can help re-duce morbidity and mortality associated with SUD. Improving access to quality treatment and the availability of a broad range of policies and programs to support recovery and address social determinants of health, including employment supports, are key to curbing the overdose epidemic and rebuilding stronger communities. This article outlines the role Recovery Ready Workplaces can play in reducing overdoses and helping individuals sustain recovery from SUD, as well as in strengthening communities. This article describes how congressional and state legisla-tive action, Americans with Disabilities Act (ADA) enforcement and expansion, and other programmatic and fiscal policy changes at the state and federal levels will accelerate the adoption of Recovery Ready Workplaces as an element of a comprehensive response to SUD. The article also identifies existing state models and proposes specific federal- and state-level solutions to address some of the current limitations. Recovery Ready Workplaces benefit employees, employers, and the nation's economy. Recovery Ready Workplaces are a supportive tool and policy strategy to help those with SUD thrive in recovery and to bolster communities and the econ-omy as a whole.

Fiscal Consolidation and Firm Growth in Developing Countries: Evidence from Firm-Level Data

Despite a longstanding debate around the economic effects of fiscal consolidation policies, relatively few studies have focused on developing countries, and even fewer have paid attention to the growth implications at firm level. Using a unique narrative dataset based on contemporaneous policy documents to identify changes in fiscal policy aimed at reducing the accumulation of public debt, we investigate the effects of fiscal consolidation on the growth of 118,279 firms in 98 developing countries from 2006 to 2018. The results indicate that a one percentage point increase in fiscal consolidation as a share of GDP leads, on average, to a decline in firm growth of 3.97 percentage points. This decline is reduced when consolidation is large. We also find that debt-driven consolidation based on tax hikes is more contractionary than that based on spending cuts, though this contractionary effect is mitigated when spending cuts exceed 1.5 percent of GDP. While the negative effect of fiscal consolidation on firm performance is more pronounced in large and non-exporting firms, the effect is not statistically important in low-debt-risk developing countries.

Fiscal policy, public investment and structural change: a P-SVAR analysis on Italian regions

ABSTRACT This study analyses the regional impact of public expenditures focusing on three domains central to the Italian National Recovery and Resilience Plan (NRRP): green, digital and knowledge. Relying on a regional public expenditures sectoral dataset for the period 2000–19, we perform a panel structural vector autoregressive (P-SVAR) model showing that fiscal policy has positive and long-lasting effects on gross domestic product (GDP) and private investments. A relevant heterogeneity is detected, relative to: (1) the effects of sectoral spending in crowding-in investment; (2) the impact on regions’ ‘structural upgrading’; and (3) a discrepancy in fiscal multipliers across macro-areas. Nevertheless, the results suggest that the NRRP may help in reducing the Italian divide.

The Changing Demographic Profile of Middle Eastern Countries

Purpose: The main purpose of this study is to evaluate changing demographic patterns in Middle East countries to recognize that the inexorable demographic momentum will have important implications for the economic and social forces that will shape future societal well-being. Theoretical framework: The demographic change-economic growth relationship has become the dominant paradigm in the field of population and development, and an advocacy tool for highlighting the benefits of the age structure change. The young dependent population of a nation decreased compared to the working-age counterpart following an annual birth decrease. Thus, with lesser individuals who are dependent on the country, it has the chance for fast economic growth. Design/methodology/approach: This study is based on a deductive approach to focus on the evaluation of changing demographic patterns in Middle East countries. Findings: The working-age population in the Middle East region is a potential agent of change toward realizing a more successful future, through their role in reaping the demographic dividend. It is imperative for Middle Eastern countries to implement the needed macroeconomic strategies and changes, fiscal, regulatory, and labor-market policy changes, which will take full advantage of the employment prospects. Research practical social implication: This study makes significant contributions to the existing body of knowledge of changing demographics in Middle East countries. Policymakers need to carry out critical action which is crucial if the working-age population in the Middle East is to attain its maximum potential, offer solutions to problems, and assist the region in benefiting from the demographic dividend. Originality/value: This study is different from the previous studies because it evaluated the changing demographic patterns in Middle East countries in a detailed way.

Exploring the relationship between global economic policy and volatility of crude futures: A two-factor GARCH-MIDAS analysis

This study investigates the impact of global economic policy on the volatility of crude oil futures using a two-factor GARCH-MIDAS (Mixed Data Sampling) analysis. The core of the problem statement is the need to understand how global economic policy affects the volatility of crude oil futures, which has significant implications for investors, decision-makers, and market participants. The study aims to determine the correlation between critical global economic policy variables and crude oil futures volatility. This study combines the Generalized Autoregressive Conditional Heteroscedasticity (GARCH) framework and the Mixed Data Sampling (MIDAS) method to create a Two-Factor GARCH-MIDAS model. This model thoroughly analyzes the long- and short-term dynamics between economic policy and crude oil futures volatility by incorporating macroeconomic and financial market data. The analysis covers a specific period from 2010 to 2021 and considers both prosperous and challenging economic times. The study's narrow geographic focus on a region with significant global economies and oil markets ensures a thorough representation of monetary and fiscal policies and changes in crude oil futures prices. The analysis provided insight into the complex link between volatility in crude oil futures and global economic policy. The results provide insightful information about how changes in interest rates, fiscal policies, and trade regulations affect the volatility of crude oil futures. The study advances knowledge of the connections between economic policy and energy markets, enabling investors and decision-makers in the international oil market to make more informed choices.