Changes In Government Spending Research Articles

Stabilization vs. Redistribution: The optimal monetary–fiscal mix

Stabilization and redistribution are intertwined in a model with heterogeneity, imperfect insurance, and nominal rigidity—making fiscal and monetary policy inextricably linked for aggregate-demand management. Movements in inequality induced by fiscal transfers make the flexible-price equilibrium suboptimal, thus triggering a stabilization vs redistribution tradeoff. Likewise, changes in government spending that are associated with changes in the distribution of taxes (progressive vs. regressive) induce a tradeoff for monetary policy: the central bank cannot stabilize real activity at its efficient level (including insurance) and simultaneously avoid inflation. Fiscal policy can be used in conjunction to monetary policy to strike the optimal balance between stabilization and insurance (redistribution) motives.

Why is child protection in many African countries perennially underfunded? - A political economy perspective

BackgroundAt a time when many children suffer from various kinds of abuse, child protection is chronically under-funded in government budgets. Whether a government decides to increase or cut spending on health, education, child protection and other issues boils down to political choice, which is influenced by social, economic, and political realities within which decisions on resource mobilization and allocation are made. ObjectivesExplore how political economy dynamics influence decisions on public spending on child protection in Africa. Participantsand Setting: 192 key informants selected through stratified and purposive sampling including government officials, academics, and civil society organizations from Botswana, Kenya, South Sudan, and Zimbabwe. The country selection reflects the different levels of fragility. MethodsUsing a multi-disciplinary conceptual framework, the study entailed document review, participant observation and in-depth interviews guided by an-open ended interview guide. The study applied a qualitative analysis methodology to identify common trends and themes. ResultsThe under-prioritization of child protection in budgeting is a consequence of a mosaic of political economy dynamics including prevailing socio-cultural and legal constructions of childhood, fiscal politics throughout the budget cycle, how the state is structured, and power exercised to drive national development. ConclusionsInstead of viewing under prioritization of child protection in government budgets as a purely technical problem, child-focused organizations should do some soul-searching and be intentional in seeking to understand and to navigate the politics and economics of public budgeting which influence decisions, if they are to trigger positive changes in government spending on child protection.

FISCAL POLICY AS THE PRIMARY TOOL TO AFFECT THE STRENGTH OF THE CAPITAL MARKETS

Fiscal policy is a powerful tool used by governments to achieve macroeconomic objectives, including the strength of capital markets. Capital markets are critical to economic growth and job creation, and fiscal policy can influence them through changes in government spending and tax rates. However, there are limitations and challenges to using fiscal policy, such as slow implementation and political pressures. Governments must carefully consider the impact of their fiscal policies on the economy and use other policy tools when necessary. Despite these limitations, fiscal policy remains a crucial tool for promoting economic growth and prosperity. This article explores how fiscal policy can impact capital markets, the challenges and limitations associated with its use, and the importance of careful consideration when implementing fiscal policies. Ultimately, governments must balance their desire to influence capital markets with the need to maintain a stable and thriving economy.

NEOLIBERALISM AND THE CHANGING NOTION OF INDIAN HIGHER EDUCATION

Neoliberalism is currently the most prevalent political philosophy across the world. It is a term used to describe the 20th-century resurgence of 19th-century ideas associated with free-market capitalism. The typical policies associated with neoliberalism include free trade, globalization, privatization, and changes in government spending to stimulate the private sector. This paper aims to better understand the reasons for this neoliberal turn in higher education and explore the visible and invisible ramifications of this paradigm shift in the policies for higher education in India. The paper focuses on the origins and meaning of neoliberalism, its application and practice in higher education, as well as the issues and critiques that have been raised in this context. The author offers both a critique of the neoliberal paradigm of marketized education and a challenge to academics to act as public intellectuals, both individually and with civil society organizations, to establish a counter-hegemonic discourse to neoliberalism for higher education. The paper concludes that neoliberal education reforms have made higher education much more diverse and have given rise to more learning opportunities; however, in India, which has enshrined systemic inequalities, neoliberalism has further reinforced existing inequalities, and public universities have lost their autonomy and led to knowledge capitalism.<p> </p><p><strong> Article visualizations:</strong></p><p><img src="/-counters-/soc/0058/a.php" alt="Hit counter" /></p>

Does government spending efficiency improve fiscal sustainability?

We evaluate the impact of government spending efficiency on fiscal sustainability and fiscal reaction function coefficients for a panel of 35 OECD countries during the period of 2007–2020. To answer our research question, we first compute the magnitude of the responses of government revenues to changes in government spending as well as the coefficients of the cyclically adjusted primary balance as function of one-period lagged government debt. Next, we make use of so-called government spending efficiency scores, which efficiently indicate how governments can maintain their level of performance whilst using fewer inputs. Our results show that for the input efficiency scores obtained, countries’ fiscal balance and fiscal sustainability is directly improved by the use of less public resources, whilst maintaining the same level of output. In the cases of the output efficiency scores, the commitment of increased government outputs can lead to higher economic growth and the generation of additional government revenues, which also improves fiscal sustainability. Specifically, rationalising public expenditures without jeopardising the actual level of public goods and provision of services is a stronger determinant of fiscal sustainability, as well as for the improvement of the primary budget balance.

Dynamic Effects of Changes in Government Spending in Pakistan’s Economy.

This study analyses the effects of changes in government spending on aggregate economic activity and the way these effects are transmitted in case of Pakistan for the period 1971-2008. To analyse the transmission mechanism of government spending innovations, the Vector Autoregressive Model is estimated for following five variables: government spending per capita, GDP per capita, consumption per capita, debt to GDP ratio, long term interest rate and real exchange rate. The consumption and output respond negatively to the innovation in government spending which is consistent with the standard neoclassical model. The interest rates increase in the face of expansionary fiscal spending. As government debt builds up with fiscal expansion, the rising risk of default or increasing inflation risk reinforce crowding out through interest rates. The real exchange rate tends to appreciate in response to rise in government spending. This finding is according to the open economy literature and also with the conventional literature. JEL classification: E21, E62, E63 Keywords: Government Spending, Vector Autoregressive Model, Impulse Response Function, Neoclassical Model

Macroeconomic effects of government spending shocks: New narrative evidence from Canada

This paper examines the macroeconomic effects of government spending shocks in Canada for the period of 1949–2012. We construct a novel measure of news about exogenous government spending changes identified through the narrative approach. We use government documents, mostly the budget speech, to identify the size, timing, and principal motivation for all planned major federal government spending changes. To achieve identification, we consider those changes that are unrelated to the contemporaneous movements in the economy. The implied government spending multiplier estimates using our exogenous government spending news series are between 1.08 and 1.69.

Analyzing and measuring the long-term balance relationship between changes in government spending and real growth in Iraq for the period 1990 – 2018

Purpose: The study Purpose to achieve to Study and analyze the reality of government spending and economic growth in Iraq through the real GDP index with and without oil. Originality/value: The authors used the changes in government spending and real growth a panel cointegration analysis and Granger causality procedure to detect the dynamic relationships between the variables for the period 1990 – 2018. Design/methodology/approach: Analyzing and measuring the impact of government spending on real economic growth with and without oil in the Iraqi economy. Findings: The results of the joint integration test showed that there is no long-term and short-term balance relationship between the two variables government spending and real output with oil. While it showed the existence of a long and short-term balance relationship between the two variables government spending and the real output without oil.

Using Variable Slope Total Derivative Estimations to Pick between and Improve Macro Models

Using the same data set, a researcher can obtain very different reduced form estimates just by assuming different macroeconomic models. Reiterative Truncated Projected Least Squares (RTPLS) or Variable Slope Generalized Least Squares (VSGLS) can be used to estimate total derivatives that are not model dependent. These estimates can be used to pick between competing macro models, improve current models, or create new models. A selected survey of RTPLS estimates in the literature reveals several common patterns: (1) as income inequality has surged around the world, the effect of changes in government spending (G), exports (X), and money supply (M-1) on Gross Domestic Product (GDP) have plummeted, (2) decreases in G, X, and M-1 cause GDP to fall more than equal increases in G, X, and M-1 cause GDP to rise, and (3) unusually large increases in G and M-1 cause their effect on GDP to plummet. These common patterns fit with a global glut of savings hypothesis, which predicts that an increase in savings will not cause an increase in production expanding investment. An appropriate model could be built around the idea that investors have a choice between investing to increase production or investing to earn rent or interest.

Government Spending Volatility and Real Economic Growth: Evidence From a Major Oil Producing Country, Saudi Arabia, 1970 to 2018

The objective of this paper is to examine the effect of government spending volatility on economic growth in an oil producing country—Saudi Arabia. The Hodrick–Prescott (HP) filtering approach was applied to decompose the data series into cyclical and trend components. The ordinary least squares, and nonlinear autoregressive distributed lag were also used, and the results confirm the negative effect of government spending volatility on real GDP growth in an oil-based economy. Moreover, the estimated coefficients of the nonlinear ARDL models indicate that changes in government spending have a significant short run and long run impact on real GDP growth, and real GDP growth responds asymmetrically to movements in government spending. Moreover, the more trade openness and credit fluctuate, the more volatile real economic growth is. Although the magnitude of government spending volatility is acceptable, the result proves that the exclusion of oil-based economies from the test of government spending volatility was inappropriate and unjustified. These results suggest that controlling the sources of instability in real GDP growth depends on the external sector and domestic credit. However, the successes of other countries should be presented and studied in order to choose appropriate policies that mitigate public spending volatility and contribute to sustainable economic growth.

الجامعة المستنصرية / كلية الادارة والاقتصاد

The importance of the research and its distinction from the previous research lies not in dealing with the ability of fiscal policy tools, i.e., government spending and taxes, to bridge the output gap, but also in it calculating the required amount of spending and taxes to close the output gap, as long as there is some amount of spending and taxes more or less than that. The required limit may cause damage to the economy, i.e., the outbreak of inflation or recession. Consequently, this research is considered as a guide for policy makers to know the required change in government spending and taxes accurately to avoid economic problems and achieve economic stability. The output gap, whether positive or negative, is a non-positive case, as long as it generates damage to the economy, represented by inflation or recession. Fiscal policy, with its various tools, may be unable to close the output gap due to the deficiency in the performance of these tools, which requires monetary policy assistance. The research problem is also indicated that when there is a recession, an expansionary fiscal policy (increasing government spending and reducing taxes) is necessary. But when there is inflation, a contractionary policy should be followed (reducing spending and raising taxes). However, the problem is that if the exact amount of government spending and taxes changes is not determined, severe damages are generated, such as an inaccurate drug dose. This is not to mention the slowdowns or lags in the transmission of the impact of fiscal policy measures to the targeted variables. The research chose a time frame that extended from 2000 to 2020. As for the spatial aspect, it was represented in a sample from different continents in order to make a successful comparison between them. These countries are the United States, Germany, Japan and Iraq. The research found that in all countries of the research sample, the government spending gap was positive, which means that it is at a level higher than the level required to bridge the output gap, perhaps because there are other items for spending on it other than closing the output gap, as is the case for the tax gap, which exceeded the required limit to eliminate Output gap, excluding Iraq.

Fiscal adjustments: lessons from and for the Baltic states

ABSTRACT This paper aims to investigate the effects of various fiscal policy measures for small and open economies by analysing the implications of fiscal shocks in the Baltic countries based on data for the period from 1995 to 2018. For this purpose, we have chosen structural VAR estimation methods following Blanchard, O., & Perotti, R. (2002). An Empirical Characterization of the Dynamic Effects of Changes in Government Spending and Taxes on Output. The Quarterly Journal of Economics, 117(4), 1329–1368, approach and relied on local projections for robustness checks. We find that the impact on growth of direct taxes, government consumption and public investment is strong and persistent in the analysed cases. Although the responses of FDI to fiscal shocks are less consistent as compared to output, in most cases, we get strong and persistent negative reactions in FDI to increasing tax burden.

Empirical Analysis of the Effect of Fiscal Policy Shocks in China

Abstract The central issues concerning fiscal policy makers include macroeconomic stability and growth stimulation. The policy decision process is facilitated by investigation on the effects of fiscal policy, such as a change in government spending or taxes on macroeconomic variables comprising inflation, aggregate output, and interest rates. Build on the Blanchard-Perotti identification approach, this paper empirically analyses the influence of fiscal policy to aggregate economic activities in China, and the estimated results are compared between China and the advanced economies. The findings demonstrate that the impulse responses incurred by tax shocks are generally stimulative, although government spending shocks tend to be neutral, revealing meaningful implications for the fiscal space and policy design.

Striving and Surviving: Romanian Journalism on the Quest for Funding Models

During the past decade, Romania’s media market has been experiencing massive shifts, particularly when it comes to its funding models. As elsewhere, these changes were triggered to a large degree by technological advances. The financial health of Romania’s media was also affected by local factors, including business practices, changes in government spending and media consumption patterns. This article describes the key trends in journalism funding in Romania in recent years and takes stock of the impact that the Covid-19 crisis is having on the industry’s financial health to understand the salient financial threats and opportunities that the country’s independent journalism is likely to face in the near future.

What drives road infrastructure spending?

AbstractIt is widely believed that basic infrastructure in the United States has been seriously underfunded in recent years. We examine this broad issue by focusing on two specific questions. First, how has subnational government spending on infrastructure changed over the last half‐century, focusing especially on transportation spending? Second, what factors have driven these spending changes? To answer these questions, we collect data on local, state, and combined state and local government spending on roads and other expenditure categories from 1957 to 2013. With these data, we first demonstrate that infrastructure spending has increased on average in real per capita terms across all states, even while it has declined significantly across all states as a percentage of government spending. Second, we also examine empirically several causal factors that help explain what has driven these changes in transportation spending over time, using several estimation methods and robustness tests. We find suggestive evidence that it is primarily changes in government spending on welfare programs that have driven these sizeable changes in transportation spending. Indeed, we calculate that, if state governments were spending the same percentage of their budgets on transportation in 2013 as they had been in 1957, then state government spending on transportation across all states would increase in total by an additional $133.5 billion in 2013, an amount equal to an additional $422 per capita.

A News-Based Policy Index for Italy: Expectations and Fiscal Policy

In this paper we investigate the effect of a news-based policy shock on consumption and investments. To this aim, we construct a new measure of policy announcements, the Policy News Index (PNI), analyzing textual data from the most important Italian business newspaper (Il Sole 24 Ore). To disentangle and noise from fiscal policy communication, we provide measures of newspaper coverage of policy announcements purged from uncertainty. Using a BVAR, we estimate the response of households and firms to a on government spending. Results indicate that the news or foresight shock has delayed effects on government spending, consumption and investments. Agents receive mixed signals from newspapers about changes in government spending and they do not react before changes are fully in place due to a lack of trust. Additionally, we show in a counterfactual exercise that the confidence channel plays a crucial role in in the transmission of the shock. Hence, our results provides evidence that outcomes are expectations-driven.

Charitable Giving Responses to Education Budgets

Do changes in government spending affect voluntary contributions to those recipients? We examine how changes in K-12 education budgets impact donations to teachers using data from DonorsChoose.org, an online crowdfunding platform for public school teachers to raise money for their classrooms. Using a district-year panel and instruments to address the endogeneity of budgets, we find evidence for crowd-out of private giving, though the magnitudes are fairly small in this setting and do not offset a large proportion of a budget change. These results are driven by entirely teachers' posting of requests, illustrating the importance of considering the demand side of the charitable giving market.

The relationship between fiscal policy and economic growth in CEE countries

The relationship and effects between fiscal policy and economic growth have been an important theoretical and empirical research topic. The neoclassical models imply that the economic effects of changes in government spending will be neutralised by the impact of consequent changes in private spending. Endogenous growth models, on the other hand, imply that changes in the level and composition of taxation and government expenditure can affect economic growth. This aim of the paper is to explore the relationship and effects of fiscal policy and economic growth in 21 Central and Eastern European (CEE) countries over the period 2000-2018. The results, after controlling for various common and country-specific variables, imply that an increase in taxation, but not in non-productive expenditures, can positively affect economic growth. Our main findings are: (i) there is a significant and positive contemporaneous relationship between the general level of taxation and economic growth; and (ii) there is no relationship between the government final consumption and economic growth. Therefore, our results contributed to the scientific literature by providing empirical evidence on the contemporaneous relationship between the general government tax receipt and economic growth in CEE countries.

Micro-simulations of a dynamic supply and use tables economy-wide Leontief-based model for the South African economy

Background: South Africa has not fully recovered from the 2008 global recession. The World Bank has predicted that South Africa will be one of the worst performers in sub-Saharan Africa in 2020 with tepid growth of 1.3% which is far below the National Development Plan targets growth of 5.4% required a year to reduce unemployment, create decent jobs and generate enough revenue for social development. Aim: We aim to examine whether changes in the components of final demand (changes in government spending, household consumption expenditure, exports, investment spending) have a considerable effect on the sector's gross value added, job creation and tax revenue generation and whether there were changes in the exogenous final demand in die post-recession period. Setting: We focus on building supply and use tables based on 62 different sectors of the South African economy. Methods: An economy-wide Leontief multiplier-based model calibrated on a supply and use framework and a micro-simulation model is used to assess post-recession trends in macroeconomic, labour and fiscal multipliers for South Africa. Results: The simulations show that during the post-recession era, the effect of exogenous shock in the economy, like an increase in investment spending, although positive, yields a smaller return in terms of tax revenue, job creation and economic growth. At sector level, the results show that the inter-industry links and industry-consumer links have therefore weakened. Conclusion: Our findings imply that the persisting low growth trajectory associated with weaker inter-industry linkages could be exacerbated, while the fiscal austerity measures associated with weaker forward and backword tax linkages could be prolonged. We recommend government should follow a priorities-based spending policy that yields optimal socioeconomic returns.

When is discretionary fiscal policy effective?

Abstract We investigate the effects of discretionary changes in government spending and taxes using a medium-scale nonlinear vector autoregressive model with policy shocks identified via sign restrictions. Tax cuts and spending increases have larger stimulative effects when there is excess slack in the economy, while they are much less effective, especially in the case of government spending increases, when the economy is close to potential. We find that contractionary shocks have larger effects than expansionary shocks across the business cycle, but this is much more pronounced during deep recessions and sluggish recoveries than in robust expansions. Notably, tax increases are highly contractionary and largely self-defeating in reducing the debt-to-GDP ratio when the economy is in a deep recession. The effectiveness of discretionary government spending, including its state dependence, appears to be almost entirely due to the response of consumption. The responses of both consumption and investment to discretionary tax changes are state dependent, but investment plays the larger quantitative role.