Effects Of Fiscal Policy Research Articles

The asymmetric effect of fiscal policy on private consumption and private investment over a business cycle: Evidence from Sub‐Saharan African countries

AbstractThis study examines the response of private consumption and private investment to an exogenous shock of fiscal policy and estimates the size of fiscal multipliers during periods of economic slacks and positive output gap. Panel vector autoregressive (VAR) estimation technique is performed on a sample of 18 Sub‐Saharan African (SSA) countries for the period 2000–2018. The study finds that the output’s fiscal impact multiplier is larger during contractions than during expansion. Furthermore, in contractions, the fiscal multipliers are 0.06% for private consumption and 0.6% for private investment. Meanwhile, in expansions, they are −0.03 for private consumption and −0.04% for private investment. The findings of this study are consistent with the results of previous studies predicting Keynesian views. Thus, to earn sizable, persistent, and long‐lasting effects through fiscal policy, this study recommends that spending programs should account for countercyclical fiscal policy and consider consumption and investment decisions before implementation. Moreover, the fiscal spending interventions tend to target rule‐of‐thumb households and financially constrained firms.

Government spending shocks and default risk in emerging markets.

The coronavirus pandemic has revived interest in the effects of fiscal policy. This paper studies the effects of government spending on default risk in emerging economies. We first build a general equilibrium small open economy model where government spending shocks influence external debt and sovereign bond spreads. We show that external debt piles up and sovereign bond spreads increase following a government spending shock. We then develop VAR evidence based on a panel of 18 countries. We find that in response to a 10% government spending increase, (1) the real effective exchange rate appreciates by 1.0% and the current account to GDP ratio deteriorates by 0.0025 on impact; (2) external debt increases by an average of 3.5% in the year following the shock; and (3) the EMBI Global spread rises by an average of 25 basis points within two years and peaks at 132 basis points 14 quarters after the shock, suggesting a higher sovereign default risk. The empirical results confirm the theoretical predictions from the general equilibrium model.

The Effect of Fiscal Policy on Manufacturing Sector Output in Nigeria.

The objective of the paper is to investigate the effect of fiscal policy on manufacturing sector output in Nigeria between 1986 and 2021. The type of data utilized was secondary and was extracted from the Central Bank of Nigeria’s 2021 statistical records. The Fully modified ordinary Least Square method of analysis was adapted in carrying out the analysis. Unit root tests were carried out on each of the variables used in the study to avoid spurious regression results, and the results confirmed variables are all stationary at first difference. The Co-integration ARDL bound test showed that long-run relationship exists between the variables, and the conditions necessary to apply the Fully Modified ordinary Least Square method (FMOLS) met. The study’s insights demonstrated that fiscal policy strategies significantly bolster the outputs of the manufacturing Sector output. The article advises that the budget and national planning should earmark increased resources for foundational advancements in their fiscal plans, such as electricity and transportation, as this will augment manufacturing industry results. Additionally, tax breaks and incentives should be granted to the manufacturing sector of Nigeria economy.

Quantitative Easing and Fiscal Policy Effectiveness

Quantitative Easing and Fiscal Policy Effectiveness

Differential impacts of fiscal consolidation policies under alternative monetary regimes: evidence from Indian economy

The study tried to examine the effects of fiscal consolidation policies under alternative monetary stances in Indian economy. Using structurally adjusted vector autoregression (SVAR) we found that both Monetary and Fiscal-policies interact in cooperative as well as competing manner depending on the type and timing of shocks. Although fiscal policy enjoys a certain degree of superiority, the potency of monetary policy has not waned away. In terms of effectiveness, the study found that the fiscal policy is a better tool of economic stabilisation in the short run but in long and medium run it may harm growth. A consolidation program aimed at infusing fiscal prudence was found to have differential impacts on economic growth depending on whether such a policy is undertaken in an expansionary or contractionary monetary regime. Ironically the fiscal-policy was found to have more influence on inflation than monetary policy pointing towards the fiscal theory of price level; FTPL.

Efficiency Evaluation of New Energy Light-duty Truck Policy in Major Cities of China

The electrification level of commercial vehicles in China has achieved remarkable development with the support of fiscal and tax policies. In this paper, 15 major cities are selected as samples, and the combined effect of national and local fiscal and tax policies is carefully assessed using the DEA model. The results show that: (1) the comprehensive efficiency of the sample cities is high, indicating that the current policy portfolio has achieved great efficiency in general. (2) Shenzhen, Chengdu and Shanghai are taking the lead in the promotion and penetration of new energy trucks, but the 3 cities fail to achieve the best overall efficiency, with lower scale efficiency and diminished returns to scale. (3) Most of the cities suffer input redundancy, and should further optimize the policy structure and synergy to ensure the efficient implementation of various policies.

THE GROWTH EFFECT OF THE EXPANSIONARY MONETARY AND FISCAL POLICIES APPLIED IN THE PERIODS WHEN THE ECONOMIES SHRANK: DEVELOPED AND DEVELOPING COUNTRIES CASES

Expansionary policies are implemented in periods when economies shrink and are generally considered to have a positive effect on growth. However, the implemented policy set, as well as its composition, also determines the structural differences, development levels, and basic growth dynamics of economies. In this study, the effects of expansionary monetary and fiscal policies applied in developed and developing countries during periods of economic recession on growth are examined, considering basic growth dynamics, and the short- and long-term outlooks are analyzed. To measure the effectiveness of expansionary policy in developed and developing countries, 55 developed and 55 developing countries are studied. For each monetary and fiscal policy, the 2007-2009 period applications are taken into account, while the effects of the main growth variables are examined during the 2007-2016 period. The system GMM method is used in the panel to see the reflections of policy effectiveness on growth in the 10-year period. While the results reveal how structural differences in the two country groups affect the effectiveness of policies, they also show that monetary and fiscal policies have different effects on growth.

Research of the fiscal and tax policies of High - tech industry in Northeast China

In recent years, the high-tech industry has become an important driving force for economic development, and it has become an important subject to study the fiscal and tax policies suitable for the development of local high-tech industry. This paper constructs a fixed-effects linear regression model with unbalanced panel data by selecting data related to high-tech industries listed in China in three northeastern provinces to empirically test the effects of fiscal subsidies and tax incentives on innovation inputs, outputs and economic benefits of enterprises. The result show that fiscal policies mainly motivate the development of high-tech industry R&D and innovation output, and the tax policies motivate the development of hightech industry R&D and economic benefit. The fiscal and tax policies have different effect to different enterprises, private enterprises will develop better than state-owned enterprises. To motivate the development of high-tech industry, government should formulate fiscal and tax programs according to the effects of fiscal and tax policies in different stages of the industrial chain, determine the leading methods, adjust the content of the existing fiscal and tax policies according to the characteristics of enterprises. The innovation point of this paper is to analyze the relationship between innovation R&D input, innovation output and revenue and fiscal policy related to high-tech industry from the perspective of complete industrial chain, and systematically compare the effect of existing fiscal policy and tax policy in three northeastern provinces, which provide a reference for future research related to the development of regional high-tech industry.

The moderating effect of social capital on fiscal policy responses to COVID-19: Cross-country evidence

This study suggests that an adequate level of social capital with a robust health profile might be associated with positive policy outcomes in combating COVID-19. We investigate the effect of interaction between fiscal policy responses and social capital on the spreading of the pandemic, by considering the country health profile, demographic and economic factors, in a cross-section of 94 countries. Firstly, the results of the analysis indicate the moderating effect of social capital on keeping the pandemic under control through fiscal policy measures. In particular, strong bilateral and family ties as well as better coordination and cooperation at the community level can facilitate the goal of fiscal policy measures. The results also reveal that the declining effect of fiscal policy on the pandemic mostly arises from the relatively high social capital levels, while it loses its effectiveness at low levels. Secondly, the findings emphasize the role of behavioural risk factors, care systems and preventative interventions as prominent determinants of surviving in pandemic. Thirdly, we conclude that taking specific measures for identified vulnerable and high-risk groups is quite important in overcoming the disease.

Budget Processes Modeling: Agent-Based Approach

The financial and economic crisis caused by anti-Russian sanctions and geopolitical tensions necessitates an increase in budget expenditures at all levels, in connection with which the issues of improving the fiscal system and reorganizing interbudgetary relations are being updated. To develop plans for adapting to current challenges, achieving the goals of fiscal stability and improving economic performance, transformations in the field of budget processes, the implementation of an effective fiscal policy, and a rethinking of the principles of fiscal federalism are necessary. Achieving this goals predetermines the need to use flexible budget analysis tools, such as agent-based modeling, which allows to reproduce the multi-level structure of the country's economy and budget system, as well as simulate complex budget processes. The article presents an overview of agent-based models developed by foreign and Russian researchers that reproduce various aspects of budgetary processes. The analysis of the architecture of models was carried out and the conceptual ideas of building models in accordance with the types of agents, their behavioral algorithms, as well as the goals of simulation modeling were considered. The expediency and efficiency of using the agent-based approach for modeling complex budgetary processes is substantiated. The analysis carried out in the article allows us to conclude that the agent-based simulation approach is successfully used for the following purposes: testing variable strategies for reforming budgetary processes, predicting the consequences of implementing fiscal policy, choosing the optimal strategy aimed at achieving budgetary self-sufficiency of the regions, as well as creating tools for assessing the effective allocation of budgetary funds to achieve target variables. The results of the study are proposed to be used for agent-based modeling of sanctions effects and search for strategies for reforming the fiscal system in order to counter the financial and economic crisis.

Assessment of public debt sustainability in the Balkan market

This research paper focuses on the relationship between public debt and the economy in the Republic of North Macedonia. Debt size has become a crucial indicator for monitoring the health of economies, and North Macedonia’s economy is often reliant on borrowing. The COVID-19 crisis exacerbated the country’s already high level of debt, limiting budget response options. The effectiveness of implemented measures to mitigate the crisis depends on their adaptation to specific conditions. To assess the sustainability of public debt, the study uses ordinary least squares (OLS) and multivariate regression analysis, providing an empirical evaluation of North Macedonia’s public debt sustainability by using data from the Ministry of Finance. The main findings of the paper reveal insights into the sustainability of public debt and the impact of fiscal policies on economic stability. The study highlights the importance of careful debt management and the need for fiscal policies that strike a balance between supporting economic growth and maintaining budget sustainability. The empirical analysis and methodology employed in the study offer valuable insights for policymakers and researchers, aiding in the formulation of effective fiscal policies. Research has its limitations on the usage of the quartile data for earlier periods — transition periods that were not available.

THE FISCAL POLICY OF THE REPUBLIC OF ARMENIA AS A TOOL FOR MACROECONOMIC REGULATION OF THE ECONOMY

The Fiscal policy is the important direction of the macroeconomic policy of the state, by which the state affects the economy, ensuring its normal development. The strategic problems of the socio-economic development of the Republic of Armenia require a modernization of the fiscal system as an integral part of the financial policy aimed at the economic and social well-being of our country. Therefore, the creation of an effective, dynamic and stable developing economy without a systematic approach to the formation of sources of financial resources in Armenia, as well as without determining the role and the place of the institutional links of the financial and credit system and evaluating their contribution is practically impossible. In the article the fiscal system is considered as a single whole, which, according to the author, is explained by the unity of the tax and budget policies, their strategic and tactical goals, as well as by the close correlation of the tax revenues and budget expenditures. The article is more than relevant today, because the implementation of an effective fiscal policy is the main tool for the development of the country's economy.

Digitizing public finance and its impact on the effectiveness of fiscal policy Selected experiences with special reference to Iraq

Digitizing public finance and its impact on the effectiveness of fiscal policy Selected experiences with special reference to Iraq

Simultaneous identification of fiscal and monetary policy shocks

AbstractThis research contributes to the literature on the effects of fiscal and monetary policy by exploiting non-Gaussianity of the time series for the identification of a Bayesian structural vector autoregression model. Using quarterly US data from 1954:IV to 2006:IV and from 1985:I to 2020:III, we formally assess the plausibility of theoretically predicted signs to label fiscal policy, monetary policy, and business cycle shocks. The impulse responses of consumption to the fiscal policy shock depend to some extent on the sample period, but the implied fiscal multiplier is always less than unity. On investment, there is a lagging crowding-out effect with a high probability, but it is not strongly evident in the latter sample. As for the responses after a contractionary monetary policy shock, we find a weakening output after some lags consistent with the leading monetary policy literature. The business cycle shock turns out to matter for government spending only in the long run, while it is already important for the federal funds rate in the short run.

Time to build, financial frictions, and the effectiveness of fiscal stimulus

<p>By introducing time to build, which creates a time-lag between government investment and the accumulation of productive capital, into an analysis of fiscal stimulus to the economy with financial frictions, we find that the effectiveness of fiscal policy is dampened. While the weakening effects of time to build become significantly weaker alongside with a higher fraction of government bonds allocated to leverage-constrained banks, which can be explained by a high correlation between time to build and financial frictions in both worsening balance sheet conditions of banks. Furthermore, the stimulus effects of public investment become stronger associated with shorter time-to-build period.</p>

Redistributive Effects of Fiscal Policy across the Income Groups in the Urban-Rural Areas of Pakistan

There exist a large number of studies related to the estimates of government budgetary redistributive effects and its related problems with regard to different countries of the world.1 Studies of the impacts of government expenditures and taxes in Pakistan have been conducted within the framework of either incidence of taxes or the impact of expenditures across the income groups. The studies carried out by Azfar (1972); Jeetun (1978); Alauddin and Raza (1981) Malik and Saqib (1985, 1989) cover different aspects of taxation—tax incidence, progressivity or regressivity of the tax system across the income groups/individuals and regions. These studies did not discuss the expenditure side of the budget. Shirazi (1996) analysed the impact of government transfer programmes (Zakat and Ushr) across the income deciles. Ghaus (1989) studied the incidence of provincial and municipal government service-related expenditure benefits in Karachi metropolitan and therefore, the scope of her study was limited to one city only. Despite the existence of a rich bibliography on the subject of government redistrbutive budgetary effects and its related problems, no study is available which covers the overall redistributive impacts of government budgetary policy in Pakistan. This study explores the impacts of government expenditures and taxes on the distribution of income across various income groups along with net fiscal impacts in the urban-rural areas of Pakistan. The rest of our study is organised as follows. In the following section, Part II, we describe the methodology and data set. In Part III, the results of the study are presented. The Part IV concludes the paper.

Policy coordination and the effectiveness of fiscal stimulus

This paper shows that government spending shocks in the U.S. has become ineffective due to lack of coordination between monetary and fiscal policies. Employing the post-war U.S. data, we report strong stimulus effects of fiscal policy during the pre-Volcker era, which rapidly dissipate as the sample period is shifted toward the post-Volcker era. We explain the causes of this phenomena via a sentiment channel. Employing the Survey of Professional Forecasters data, we show that forecasters tend to systematically overestimate real GDP growth in response to positive innovations in government spending when policies coordinate well with each other. On the other hand, they are likely to underestimate real GDP responses when the monetary authority maintains a hawkish stance that conflicts with the fiscal stimulus. The fiscal stimulus, under such circumstances, generates consumer pessimism, which reduces private spending and ultimately weakens the output effects of fiscal policy. We further report statistical test results that confirm our claims.

Testing policy effectiveness during COVID-19: An NK-DSGE analysis

We examine the effectiveness of fiscal and monetary policy in mitigating the impact of COVID-19 in India using the NK-DSGE framework. In terms of policy effectiveness, our findings imply that expansionary monetary policy is effective in reviving economic growth both from the demand side and supply side. In contrast, expansionary fiscal policy is effective only from the supply side. Our findings recommend the implementation of optimal policy mix in a coordinated and staggered framework for effective mitigation of ill-effects of the COVID-19, such as reviving employment and capacity utilization to its pre-pandemic level with minimal inflationary effects.

Kebijakan Pemerintah untuk Meningkatkan Pertumbuhan Ekonomi di Indonesia Pasca Covid-19

ntroduction: Covid-19 has hurt the global economy, including in Indonesia. This research analyzes government policies to increase economic growth in Indonesia after Covid-19. Research Methods: The method used is a qualitative method with a literature study approach. The type of data used is secondary. Data collection in this research was through journals, books and websites. Results: The research results show that the government's policy to increase economic growth after Covid-19 is as follows: (1) there is a policy in the health sector in the form of vaccination created by the government. (2) monetary policy in the form of minimizing state expenditure during Covid-19, raising or lowering bank interest rates, and providing cheap credit for the Indonesian people as well. (3) fiscal policy in the form of distribution of cash assistance and necessities, encouraging MSMEs. Of these three policies, the policy that has the most significant influence on economic growth after Covid-19 is the vaccination policy. As a result of this policy, Indonesia's economic growth will increase from 2.97% to 5.72% in 2020 to 2022. Conclusion: From this research, it can be concluded that economic growth has increased after Covid-19 occurred, which was caused by the existence of very effective fiscal and monetary policies to increase economic growth in Indonesia.

How the pandemic affected interregional inequality in Russia

ABSTRACT Analysis of trends in interregional inequality in Russia in 2015–21 and of the actual outcome during the 2020 pandemic and the subsequent recovery in 2021 reveals short-term regional convergence in seven indicators, albeit of different depth and duration. Sub-federal budget revenue experienced the most significant and persistent reduction in interregional disparities, the main sources of which were a reduction of unevenness in a number of taxes, a significant increase in federal transfers and a change in their nature. After a strong short-term convergence, industry, trade, transport and investment all tended to return to long-term divergence paths. Personal income and wage inequality responded weakly to the shock in the short term and entered the new long-term path. Multidirectional spatial trends resulted from the interaction of sectorial and fiscal policy effects during the pandemic.