Effects Of Fiscal Policy Research Articles

Assessing the effect of trade and FDI on growth-unemployment nexus

Research background: Unemployment is a huge topic for policymakers, scholars, and, in general, society. Historically, there have always been a lot of discussions about this phenomenon. It is already acknowledged that unemployment is closely related to economic activity: when the economy is growing, more people are employed, and when economic activity is low, employment decreases, and unemployment rises. This relation is well-researched in the framework of Okun’s law. However, it is far less known how this relationship holds if international economic relations are introduced. Thus, the motivation for the research was to examine the role of international trade and foreign direct investment (FDI) on the growth-unemployment nexus. Purpose of the article: To assess how trade and FDI affect growth and gender-, age-, and educational attainment level-specific unemployment relationship and on what scale this effect varies over different business cycle phases. Methods: Scientific literature review, comparative analysis, and panel regression. Findings & value added: Given the lack of research examining what effect FDI and trade have on the growth-unemployment nexus, this paper estimates modified Okun’s equation on the European Union (EU) countries (EU–28, by the composition of the EU until 31/01/2020) for the period from 2000 to 2019 while incorporating international aspects that can have an impact on this nexus. Also, this study develops a specification that can be useful to monitor the potentially different effects of FDI and trade on the growth-unemployment nexus during different business cycle phases. The estimations of the panel regression for unemployment disaggregated by age, gender and education level has showed that import, export, inward FDI, and outward FDI have a negative effect on the growth-unemployment nexus. It means that with an increase in the intensity of international economic relations, the influence of gross domestic product (GDP) growth on unemployment becomes less significant. Thus, the effectiveness of expansionary fiscal policy to reduce unemployment becomes less effective in more open economies, which in the case of the EU are the smallest member states with relatively small domestic markets.

한국의 거시적 재정정책의 효과 분석

This study employs a dynamic analysis to assess the effectiveness of fiscal policy on the private sector within the Korean economy, utilizing long-term macroeconomic data. To achieve this, we conduct quantitative economic empirical analysis using the vector autoregressive model under the rolling window scheme. The major takeaways of this study confirm the necessity for strong fiscal policies in the Korean economy, given a new economic normal characterized by low growth, akin to advanced economies. Furthermore, it underscores the importance of implementing a balanced policy mix that combines both monetary and fiscal measures to guide the economy effectively towards stabilization.

Estimating the economic effects of US state and local fiscal policy: A synthetic control method matching‐regression approach

AbstractIn this paper, we advance the empirical literature on US state and local fiscal policymaking by using the synthetic control method (SCM) to create pairwise matches for states in subsequent regression analysis of the relationships between state and local fiscal policies and several state economic outcomes. Additional contributions include the use of principal component analysis to construct broader narratives of state economic performance and to reduce the dimensionality of the characteristics used in SCM matching, while the regressions also include variables to control for post‐matching economic shocks. Compared to conventional regression analysis, the SCM matching‐regression approach better addresses potential endogeneity, reduces interpolation bias, and creates fiscal policy measures that better reflect policy differences. The SCM‐matched regressions produce more statistically significant relationships between state and local fiscal variables and economic outcomes than do the conventional unmatched regressions, suggesting improved identification of state and local fiscal policy effects on economic outcomes. Robust relationships found include negative economic effects of the own‐source revenue burden and property taxes. Consistent with the existing literature, the estimated fiscal policy effects are quantitatively small and unlikely to drive differences in state economic performance.

Impact of fiscal policies on the labor market with search friction: An estimated DSGE model for Japan

This study investigates the effects of heterogenous fiscal policies on Japan's labor market amidst increasing national debt and economic downturns. We develop a Dynamic Stochastic General Equilibrium model incorporating labor market search friction, staggered wage negotiation, price stickiness and productive government employment. This model is used to compare the impacts of multiple fiscal policies—including government employment spendings, direct government expenditures, and tax cuts—on employment. The model, estimated with macroeconomic data of Japan spanning 1985 to 2019, offers a detailed look at how fiscal policies influence employment dynamics.Our analysis shows that increasing employment within the government sector significantly lowers unemployment rates, with a long-term unemployment reduction effect (multiplier) of −0.4. Collectively, all fiscal policies contribute to 23.96 % of the employment rate fluctuations, with government employment policies playing a dominant role, accounting for 8.55 % of these variations. This underscores the significant stabilizing effect of government employment policies in the labor market and their capacity to boost private sector employment through enhanced household income and increased private sector productivity. This research not only sheds light on the critical role of public sector interventions during economic downturns but also enhances our understanding of the effectiveness of Japan's fiscal policies.

Estimating the dynamics of fiscal financing in emerging economies

<p class="MsoNormal" style="margin-top: 8pt; line-height: 14pt; text-align: justify;"><span lang="EN-US" style="font-family: 'Cambria',serif; mso-fareast-font-family: '等线 Light'; mso-fareast-theme-font: major-fareast; mso-bidi-font-family: 'Times New Roman'; color: black; mso-themecolor: text1;">I present a theoretical model and an empirical approach for jointly estimating the effectiveness of fiscal policy and the stochastic process of sovereign interest rate shocks. The theoretical model has features relevant to small open and emerging economies. Interest rate shocks affect the ability of firms to finance payroll expenses. This theoretical feature creates a propagation mechanism for interest rate shocks and affects government spending multipliers. This paper proposes a strategy for jointly estimating government spending multipliers and the interest rate shock process parameters.</span></p>

Financial Inclusion Policies and Performance of Nigerian Listed Deposit Money Banks

The development of modern technology for financial transactions poses exciting enquiries to both the finance sector operators and policy formulators with regard to appropriateness of previous institutional measures and availability of devices that will guarantee efficiency, effectiveness and financial stability of fiscal policies. This study evaluates the impact of financial inclusion strategies on the performance of Nigeria’s banking industry. To get the intended outcome, this study employs an ex-post facto research strategy to investigate the relationship between financial inclusion and the economic performance of the Nigerian banking industry. The data utilised in this study is sourced from various secondary sources from 2009 to 2019. The study included descriptive statistics and the Ordinary Least Square method of Regression analysis. The findings of the study suggest that the adoption of Point of Sale (PoS) terminals significantly influences the overall efficiency and effectiveness of the banking industry in Nigeria. Additionally, it revealed that financial transactions conducted through Automated Teller Machines (ATMs) have a substantial impact on the Return on Equity (ROE) of the banking industry in Nigeria. On the other hand, it was determined that Mobile Money Transfer did not demonstrate a significant impact on the performance of the Nigerian banking sector. The report so suggests, among other recommendations, that the Central Bank of Nigeria should conduct a downward revision of electronic payment transaction rates in order to foster greater financial inclusion.

Is government debt a burden on workers' income share? An investigation on Italian dynamics

This paper aims to explore if there is a connection between public debt and wage share; the intention is to contribute to the literature regarding both the efficacy of fiscal policy and financialisation of economics. The paper examines the case of Italy between 1960 and 2019, a rather long period during which the country, much like many other advanced economies, was affected by the contemporaneous presence of deteriorating public accounts and a reduced share of national income going to labour. The empirical analysis employs a long run dynamic technique and finds that an increase in debt decreases wage share, challenging the effect of fiscal policies on employment and national income. However, when distinguishing between the components fuelling debt, the estimates reveal controversial outcomes: primary deficit increases wage share, while interests in public debt decrease it. The results are consistent with the changes in policy strategy that occurred in three subperiods and suggest that public debt should be managed, accounting for the reciprocal effects of fiscal and monetary policy and considering the introduction of a common safe asset to preserve labour income.

An Empirical Study on the Dynamic Impact of Monetary and Fiscal Policies on the Herding Behavior among Manufacturing Companies

This paper investigates the dynamic interplay between monetary and fiscal policies and their influence on herding behavior among manufacturing companies in China. Herding behavior, characterized by the tendency of firms to mimic the actions of others rather than making independent decisions, can significantly affect market stability and efficiency. The study employs a comprehensive dataset spanning a period that encompasses various monetary and fiscal policy interventions, alongside fluctuations in market conditions. Using advanced econometric techniques, including Vector Autoregression (VAR) models and Granger causality tests, we analyze the short-term and long-term effects of monetary and fiscal policies on herding behavior within the manufacturing sector. The study also examines the moderating role of firm-specific characteristics such as size, industry, and financial health on the relationship between policies and herding behavior. Preliminary findings suggest a complex and dynamic relationship between policy interventions and herding behavior. Monetary policy tools, such as interest rate adjustments and open market operations, exhibit significant short-term effects on herding behavior, influencing firms' decisions to follow prevailing market trends. Similarly, fiscal policy measures, including tax incentives and government spending, demonstrate varying degrees of impact on herding behavior, contingent upon the economic context and firms' financial positions. Furthermore, the study explores the transmission channels through which monetary and fiscal policies influence herding behavior, including their effects on market liquidity, risk perceptions, and investor sentiment. Understanding these mechanisms is crucial for policymakers and market participants to anticipate and mitigate the adverse effects of herd behavior on market stability and efficiency. In conclusion, this empirical study contributes to the existing literature by providing insights into the dynamic relationship between monetary and fiscal policies and herding behavior among manufacturing companies in China. The findings have important implications for policymakers aiming to design effective policy interventions to foster a more resilient and stable market environment, ultimately promoting sustainable economic growth and development.

COVID-19 shock, fiscal subsidies, and consumption resilience of new energy vehicles: evidence from Shanghai, China

New energy vehicles are regarded as an important measure for improving air quality, reducing oil dependence, fostering emerging industries, and promoting high-quality development. Since 2009, the Chinese government has been committed to promoting new energy vehicles through various policy measures, such as fiscal subsidies. Meanwhile, the outbreak of the COVID-19 pandemic at the end of 2019 has brought great impact on the economy and society. Thus, it is a topic of research to determine if the fiscal subsidy policy can assist new energy vehicles to resist the pandemic’s impact and build consumption resilience. Current researches lack enough attention to the role of fiscal subsidy policy in enhancing consumption resilience under the pandemic impact. By utilizing monthly sales data of new energy vehicles in Shanghai from January 2018 to February 2021, this study employs regression discontinuity (RD) analysis and the combination of the RD with the differences-in-differences (DID) model, to comprehensively evaluate the impact of the COVID-19 pandemic on new energy vehicle consumption and the effectiveness of fiscal subsidy policies in enhancing consumption resilience. The findings reveal that the COVID-19 pandemic shock, with a bandwidth of 3 months, led to a 23% decrease in new energy vehicles sales. In comparison with unsubsidized vehicles, sales of subsidized new energy vehicles significantly increased by 15–80% during the pandemic shock, indicating that fiscal subsidies are crucial in enhancing the consumption resilience of new energy vehicles. Compared with other country-specific new energy vehicles, the subsidy effect of domestic new energy vehicles is relatively inadequate during the pandemic shock. The retreat from subsidy policies has contributed to a decline in the consumption of new energy vehicles in response to the pandemic shock. It is necessary to further improve the consumption resilience of domestic new energy vehicles and pure electric vehicles.

How Australia Has Been Affected by US Monetary and Fiscal Policies: 1960 to 2022

This paper uses Reiterative Truncated Projected Least Squares to estimate the effects of US monetary and fiscal policy on Australia using quarterly data between 1960 and 2022. When Australia had a fixed exchange rate (1960–1983), both US fiscal and monetary policies were positively correlated with Australia’s GDP, which fits the predictions of a small-country IS/LM/BP model with relatively immobile capital. When Australia had a flexible exchange rate (1984–2022), US fiscal policy was positively correlated with Australia’s GDP, but US monetary policy was negatively correlated with Australia’s GDP, which fits the predictions of a large-country IS/LM/BP model.

The Effects of Fiscal Policy and Monetary Policy on Borrowing Costs and Credit Access for SMEs: An Empirical Study

The objective of this study is to investigate the impact of fiscal policies (FP) on borrowing costs and credit access (BCAC) for SMEs, considering the role of monetary policy (MP) as a the second independent factor. This research aims to understand more deeply how fiscal and monetary policies can be utilized to support growth and access to finance for SMEs, as well as identify remaining barriers to access to finance. Through comprehensive analysis, this study is expected to provide effective policy recommendations to improve access to credit for SMEs, which in turn can support economic growth and job creation. This study adopts a quantitative research design using statistical analysis to examine the impact of fiscal policies on borrowing costs and credit access for Small and Medium Enterprises (SMEs). The analysis will be conducted using the SMARTPLS 3.0. Sample size based on valuable samples are 120 of SME. The sampling technique used in this study will be purposive sampling. This approach will involve selecting SMEs that meet specific criteria, such as size, sector, and eligibility for relevant government programs or incentives. Result of this study state Fiscal Policy (FP) and Monetary Policy (MP) have a significant effect on Borrowing Costs and Access to Credit (BCAC).

RETRACTED ARTICLE: Evaluating the effect of green fiscal policy on firm energy performance: evidence from China

RETRACTED ARTICLE: Evaluating the effect of green fiscal policy on firm energy performance: evidence from China

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.

Impact Analysis Of Monetary And Fiscal Policies On Indonesia’s Economic Growth

After the Covid-19 pandemic, the world faced economic challenges stagflation, namely high inflation and declining economic growth. To overcome this, the Government made arrangements through monetary and fiscal policies. This study analyses the effect of monetary and fiscal policies on Indonesia's economic growth. This research has eight obtained monetary, fiscal and other macro-economic variables, a novelty compared to the previous researcher. Based on the impulse response analysis in the Vector Error Correction Model, the highest impacted variables to maintain economic growth were the growth of income tax and capital market index, and to negatively impact were exchange money and government expenditure. Over an extended period, it shows that the increase in inflation, money exchange, number of broad-money, interest rate, and government expenditure will impact the decrease of economic growth. In contrast, the increase in government income from tax and capital market indexes will impact the increase in economic growth.

Fiscal Policy in Public Health Crisis (COVID-19): An Analysis Based on IS-LM Model in China

The Chinese economy was severely impacted during the Novel Coronavirus pandemic (COVID-19). This paper will investigate the impact of the epidemic on different fields of the economy, such as consumption and investment, and the role of positive fiscal policy in the recovery of the national economy from the perspective of the government. In addition, this paper will then use the IS-LM model as the analytical method to explore the effect of fiscal policy through the movement of the curve. According to the model, in the face of the epidemic, the Chinese government has boosted economic growth through a series of fiscal policies such as increasing government subsidies, reducing taxes, and issuing consumption vouchers. Moreover, as demonstrated in the literature by different scholars, under the current condition of China, the effect of fiscal policy will be much better than that of monetary policy, and therefore it is the most effective way to address short-term shocks.

Chinese and Us Economic Policies During the Covid-19 Period: Analysis of Fiscal and Monetary Policies in the Two Countries

During the ongoing COVID-19 pandemic, which is widely regarded as one of the most significant crises in human history, both China and the United States, being prominent global economies, implemented fiscal and monetary policies that were tailored to their own national contexts. Due to the substantial scale of their governmental structures and economic systems, conducting a comparative analysis of policy efficacy between these two nations has evolved into a multifaceted subject within the field of economics. The research aims to conduct a comparative analysis of the behavior and effectiveness of macro-stimulative fiscal policies in China and the United States, specifically focusing on their linkage with the monetary policies issued by the respective central banks. The primary objective is to examine how these policies contribute to the enhancement of economic vitality in both nations. In addition to analyzing the effectiveness of these policies, this study will investigate the adverse effects of these policies on the economies of the two countries.

The effect of green fiscal policy on green technological innovation: evidence from energy saving and emission reduction fiscal policy.

The "National Comprehensive demonstration of Energy Saving and Emission Reduction Fiscal Policy" (ESER policy) is a green fiscal policy to facilitate China's green sustainable development. Green sustainable development is facilitated by green technological innovation. Thus, evaluating the influence of the ESER policy on green technological innovation is essential. This study employs the difference-in-differences model to assess the ESER policy effects. The findings suggest that the ESER policy facilitates green technological innovation, but the policy effect has inhibited green technology innovation in neighboring cities. Mechanism analysis indicates that this policy effect is realized through increasing scientific research investment intensity and promoting industrial structure upgrading. Heterogeneity analysis indicates that this policy is effective in facilitating green technological innovation when performed in eastern, non-old industrial base, non-resource-based, and high green innovation level cities. In addition, the ESER policy implemented in conjunction with innovation policy can be more effective in promoting green technological innovation. These results provide valuable insights for improving the ESER policy and offer helpful guidelines for green fiscal policymaking in other countries.

Impact of Fiscal Policy on Unemployment

Under the conditions of a modern market economy, the employment issue is a difficult problem that governments around the world must face directly. As one of the most important means for governments to implement macroeconomic regulation and control, it is of greater theoretical and practical significance to give full play to the positive role of fiscal policy in promoting employment. This paper introduces the concept of a flow model of unemployment to study the impact of fiscal policy on the labour market and explores the government's role in easing the contradiction between labour supply and demand and unifying the labour market through fiscal expenditure, taxation, social security and other means. This paper consists of four parts. The first part describes a flow model of unemployment in detail and studies how to reduce the unemployment rate theoretically. The second and third parts tell the different effects of expansionary fiscal policy and tight fiscal policy on the unemployment rate respectively, and how the government chooses the appropriate fiscal policy. The fourth part of the article selects the example of Japan in an economic down cycle to illustrate that the government needs to take into account both short-term and long-term factors, as well as the overall and local economic situation, and choose an appropriate direction or combination of fiscal policies in order to reduce the unemployment rate.

Economic instruments for natural resource efficiency: The role of carbon taxation and fiscal policy

The research attempts to examine various connections between carbon taxation, economic development, policy framework (i.e., Fiscal and Monetary Policies), natural resources utilization and carbon emissions in the context of Chinese economy from 1980 to 2022. The study seeks correspondence relationships fiscal policies, monetary policy, and carbon dioxide emissions. This research addresses estimation and spurious regression issues with the application of cutting-edge nonlinear bootstrapping tools for testing purposes. The analysis reveals long-term integrated relationships between the variables considered and carbon emissions. In fact, it is very relevant to say that both sets of economic policies (monetary and fiscal) do have a positive impact upon carbon emissions. The application of nonlinear causality indicated environmental anxieties, as the findings from this test reveal a unidirectional causality lacking any reciprocal influences between consumption, economic productivity and resource utilization, and carbon emissions. Basically, energy policy is governed under the umbrella of fiscal policies. Similarly, the results also endorse by highlighting a one-sided effect of fiscal policies, thus accelerating environmental deterioration. These results confirm the destruction caused to the environment by economic policies, and a sense of real urgency for significant policy reforms.

The effectiveness of fiscal policy in Iraq for the period 2004-2020: Future Vision

The effectiveness of fiscal policy in Iraq for the period 2004-2020: Future Vision