Effects Of Fiscal Policy Research Articles

Key Factors for Financial Market Stability and Policy Response

This paper examines the stability of financial markets, emphasizing their importance in economic systems by enabling efficient capital allocation, risk transfer, and information dissemination. It explores the impact of market volatility on the economy, highlighting wealth effects and financing conditions. The study identifies key factors influencing market stability, including robust regulatory frameworks, transparency, and risk management systems. It also evaluates the effectiveness of monetary and fiscal policies in mitigating market fluctuations. The paper underscores the need for adaptive policies, analyzing historical and international experiences to provide insights for future stability measures. Finally, it stresses the importance of international cooperation in enhancing global financial market resilience, advocating for shared information, unified regulatory standards, and collaborative efforts among international financial institutions.

Debt Dynamics and Fiscal Sustainability in Nigeria

This study investigated the stabilizing effect of sustainable fiscal policy on public debt dynamics as well as the impact of debt dynamics on fiscal sustainability in Nigeria for the period (1980 – 2022). Using secondary data obtained from the Central Bank of Nigeria Statistical Bulletin (2023), World Development Indicators (WDI, 2023), Debt Management Office (DMO – various years), Penn World Table (PWT – multiple years), and World Economic Outlook (WEO – various years), the study used suitable cointegration and other econometrics techniques viz: Dynamic Ordinary Least Squares (DOLS), Markov-switching model and polynomial models. It was found, amongst other things, that (i) Automatic debt dynamics can influence debt dynamics, (ii) The robustness or otherwise of primary fiscal balance determines the direction of changes in the total debt stock, and (iii) positive debt dynamics vis-à-vis dwindling revenue flows and growing government expenditure, would result in fiscal unsustainability. It was recommended, amongst other things, that since automatic debt dynamics is one of the significant influences on debt dynamics and is being fuelled by the direction of adjustments in inflation and interest rate, there is a need for concerted efforts at stabilising inflation and interest rate to stabilise public debt dynamics. Also, the study revealed that the size of the primary balance influences the changes in public debt stock. It was recommended that the authorities should endeavour to maintain a robust primary fiscal surplus to stabilise growth in public debt, if not minimise it and grow the economy.

Econometric Analysis of South Africa’s Fiscal and Monetary Policy Effects on Economic Growth from 1980 to 2022

This study examined South Africa’s economic growth rate from 1980 to 2022 through an econometric analysis of fiscal and monetary policies. The study sought to investigate the relationships between the economy’s growth rate and various fiscal and monetary policy variables, taking into account different economic approaches such as Keynesian, monetarist, and Wagner’s perspectives. The methodology used consisted of data preparation, multiple unit root tests, Autoregressive Distributed Lag (ARDL) cointegration analysis, diagnostic tests, and pairwise Granger causality analysis. The empirical analysis found a long-term cointegration among the economic growth rate, government debt, expenditure, and revenue in fiscal policy, though government debt and expenditure were not statistically significant. Contrary to economic theory, increased government revenue had a negative correlation with economic growth. There was no long-term relationship found between the economic growth rate and monetary policy variables such as the official exchange rate, inflation rate, real interest rates, and M3 money supply. Pairwise Granger causality tests revealed a one-way relationship between government spending and economic growth, providing support to the Keynesian approach to fiscal policy. This study also discovered evidence that economic growth Granger-causes inflation, implying that economic growth may have predictive power for inflation, consistent with the demand-pull inflation hypothesis. However, no direct predictive relationships were found between the selected monetary policy variables and economic growth, supporting the long-run theory of monetary neutrality. This study suggests evaluating spending, managing inflation, implementing reforms, closing infrastructure gaps, encouraging investment, and ensuring fiscal sustainability.

Analyzing public sentiment toward economic stimulus using natural language processing

Purpose This study aims to investigate public sentiment toward economic stimulus using textual analysis. Specifically, it analyzes Twitter’s public opinion, emotion-based sentiment and topics related to COVID-19 economic stimulus packages. Design/methodology/approach This study applies natural language processing techniques, such as sentiment analysis, t-distributed stochastic neighbor embedding and semantic network analysis, to a global data set of 88,441 tweets from January 2020 to December 2021 extracted from the Twitter platform, discussing COVID-19 economic stimulus packages. Findings Results show that in the fourth quarter of 2021, there is a declining trend of positive sentiment (−5%) and an increasing trend of negative sentiment (14%), which may indicate the perceived inadequacy of COVID-19 stimulus measures. Topic modeling identifies seven topics, highlighting the necessity of stimulus in the education sector. Practical implications The big-data findings of this study provide a better understanding of public sentiment about economic stimulus for regulators and policymakers, which can help in formulating more effective fiscal and monetary policies. Originality/value Public sentiment is a significant concern for regulators because of its associated ambiguity, such as how to design stimulus packages and evaluate the effectiveness of previous measures. This study applies natural language processing, contributing to the growing literature on designing effective economic stimulus.

External Financial Flows, Fiscal Policy and Human Development Index in Nigeria

The sustainable development goals that were rolled out and adjusted from the un-attainment of Millennium development goals of 2015, lacks a notable financial option and channel that would help developing countries like Nigeria to achieve goal 3, goal 4 and goal 8, which this study captured with the human development index. This study examines the effect of external financial flows, fiscal policy and human development index in Nigeria. The used the secondary data that was collected from World development indicators and Central bank of Statistical Bulletin. The period was between 1991 to 2022 bot year inclusive. The external financial flows was captured with foreign direct investment, foreign aid, remittances, net exports, external debt while fiscal policy was captured with government expenditure for education and government expenditure for health. The findings from the external financial flows revealed that foreign direct investment and remittances have a negative significant effect on human development index while net export have a positive significant human development index. The fiscal policy measures revealed that government expenditure on education have a positive significant effect on human development index while government expenditure on health have a negative significant effect on health. The Nigerian government should focus on policies that boost export sectors, especially those that add significant value to raw materials. This can be achieved through subsidies, tax incentives, and investment in infrastructure. The Nigerian government should allocate a larger portion of the national budget to education. This increase in funding should aim to address infrastructural deficits, enhance teacher training, and provide adequate learning materials. Implement robust mechanisms to ensure that health funds are used efficiently and transparently.

Strategic Operational Management in Regional Development: Analyzing the Efficiency and Effectiveness of Public Fiscal Policies in Banyumas, Indonesia

This research examines the strategic operational management of public fiscal policies and their impact on regional development in Banyumas, Indonesia. By analyzing the efficiency and effectiveness of the Regional Revenue and Expenditure Budget (RPP) and its influence on the Gross Regional Domestic Product (PDRB), this study aims to identify key strategic factors that enhance regional economic performance. Utilizing advanced statistical models and operational efficiency metrics, the study provides a comprehensive evaluation of how strategic fiscal management can drive sustainable regional growth. Operational management and strategic planning play pivotal roles in determining the efficiency and effectiveness of public fiscal policies, particularly in the context of regional development. This research seeks to investigate these dynamics within the Banyumas region of Indonesia, focusing on how strategic operational management of the Regional Revenue and Expenditure Budget (RPP) influences economic growth as measured by the Gross Regional Domestic Product (PDRB).

Research and Analysis of Effective Fiscal and Monetary Policy Response under the Background of International Financial Crisis

Research and Analysis of Effective Fiscal and Monetary Policy Response under the Background of International Financial Crisis

Fiscal Policy and Economic Resilience: The Impact of Government Consumption Alongside Oil and Non-Oil Revenues on Saudi Arabia’s GDP during Crises (1969–2022)

This study investigates the impact of Government Consumption (GC) on Saudi Arabia’s GDP during major economic crises from 1969 to 2022, focusing on periods marked by fluctuations in oil and non-oil revenues. By integrating these revenue streams, the research provides a more comprehensive analysis of fiscal policy effectiveness during economic downturns. Using an Autoregressive Distributed Lag (ARDL) model, the study reveals the complex role of Government Consumption (GC) in stabilizing and stimulating the Saudi economy amidst revenue volatility. Key findings indicate that while GC does not significantly influence GDP in the short term, its long-term effectiveness varies across different crises. Specifically, GC has acted as a buffer against immediate economic shocks during certain crises while providing a stimulus for economic recovery in others. During the 2020 COVID-19 pandemic, timely fiscal measures significantly boosted GDP, underscoring the importance of adaptive and proactive fiscal policies. Conversely, the 2014–2016 oil price collapse demonstrated that GC alone was insufficient to counteract economic downturns, emphasizing the need for diversified revenue strategies. These findings underscore the dual role of GC in economic stabilization and recovery. During the COVID-19 pandemic, GC played a crucial role in both mitigating negative economic impacts and supporting recovery efforts, showcasing its effectiveness in times of global disruptions. This demonstrates GC’s capability as an immediate buffer against economic shocks and a stimulus for economic recovery. In contrast, during the 2014–2016 oil price collapse, GC was less effective, indicating the limitations of relying solely on government spending without broader economic diversification. This highlights the necessity of diversified revenue strategies to complement fiscal measures for long-term economic resilience. The robustness of the findings was ensured through various diagnostic tests, including checks for autocorrelation, heteroskedasticity, and stationarity of residuals. The absence of significant autocorrelation and heteroskedasticity, along with the stationarity of differenced variables, confirms the validity of the econometric models used. The study contributes to the discourse on fiscal policy in oil-dependent economies by illustrating the critical role of diversified revenue strategies and adaptive fiscal measures in enhancing economic resilience. Recommendations are offered for policymakers to optimize fiscal strategies, ensuring robust economic recovery and long-term stability in volatile markets. This research highlights the necessity for Saudi Arabia to refine its fiscal policies towards greater economic diversification and stability.

Fiscal policy and sustainable development in sub-Saharan Africa: unveiling the role of information and communication technology (ICT)

Purpose The aim of this study is twofold. First, this study examines the effect of fiscal policy on sustainable development in sub-Saharan Africa (SSA). Second, this study also investigates the moderating role of information and communication technology (ICT) in fiscal policy–sustainable development nexus in SSA. Design/methodology/approach This study adopted a battery of econometric techniques such as the ordinary least square (OLS), the two-step system generalized method of moments, Driscoll and Kraay covariance matrix estimator and the dynamic panel threshold model. Findings This study found that fiscal policy, except for public spending on education do not promote sustainable development in SSA. However, the authors found that ICT promotes sustainable development in SSA, and that when fiscal policy interacts with ICT, the results show that ICT enhances the effectiveness of fiscal policy to promote sustainable development in SSA. Furthermore, this study uncovers the optimal levels of public spending on health and education, and public debts that engenders sustainable development in SSA. The research and policy implications are discussed. Originality/value This study assessed the role of ICT in fiscal policy–sustainable development nexus.

Information content and consensus effect of fiscal plans

This paper investigated the extent to which fiscal plans provide novel information to investors and induce consensus over governments’ fiscal forecasts. Based on the mandatory disclosure requirements of the Stability and Growth Pact, we documented that fiscal plans are generally informative, but investors interpret their content differently. We further showed that, while fiscal plans that foresee spending cuts during downturns have substantial information content, they cause opinion divergence. Although these findings are consistent with recent evidence on the contractionary and uncertain effects of procyclical fiscal policy during recessions, they cast doubt on governments’ ability to anchor fiscal expectations in these periods.

Efficiency and Welfare Effects of Fiscal Policy in Emerging Economies: The Case of Morocco

This paper studies the welfare cost of fiscal policy in developing economies where a significant fraction of the population is government spending-dependent, using as an example Morocco. We develop a Dynamic General Equilibrium model representing an economy populated by three types of households: Standard Ricardian households with access to the financial market, households who supply labor but have no access to the financial market, and non-active government-dependent households (who behave as hand-to-mouth agents). The paper computes welfare changes of different tax rates and alternative spending policies and quantifies the trade-off of fiscal policy across the different groups of agents. We find that: (i) Distortions from some taxes can be positive due to the presence of public inputs; (ii) Output efficiency can be gained by changing the tax mix while keeping constant fiscal revenues; and (iii) Social welfare gains can be obtained by increasing public investment and reducing government consumption and keeping lump-sum transfers constant.

Fiscal policy and inclusive growth in Nigeria

This study investigated the effect of fiscal policy on inclusive growth in Nigeria from 1985-2022. Secondary data on the human development index, the ratio of total tax revenue to GDP, total government expenditure, inequality, and government expenditure on infrastructure and education were sourced from the Central Bank of Nigeria (CBN) and the United Nations Development Programme (UNDP). The Autoregressive Distributed Lag (ARDL) technique was employed as the main analytical tool. The ARDL Bounds test showed that in the long run, government expenditure on infrastructure, and education, has a positive and insignificant relationship with inclusive growth (human development index) in Nigeria. Also, total government expenditure and the ratio of total tax revenue to GDP have a negative and insignificant relationship with inclusive growth (human development index) in Nigeria. Interestingly, inequality has a negative and significant relationship with inclusive growth (human development index) in Nigeria. In the short run, the ratio of total tax revenue to GDP and government expenditure on infrastructure has a negative and significant relationship with inclusive growth (human development index) in Nigeria. At the same time, government expenditure on education, total government expenditure, and inequality has a positive and significant relationship with inclusive growth (human development index) in Nigeria. These results highlight the vital role that responsible fiscal policy management plays in promoting sustainable development and inclusive growth. The study recommended a need to augment tax revenue, enhance capital investment, and address income inequality to bolster inclusive growth efforts in the country further.

Relationship between bank value, tax avoidance, and profitability

This study explores the intricate relationships between bank value, tax avoidance, and profitability, which significantly affect the stability and strategies of financial institutions worldwide. Understanding these connections is vital for comprehending the financial dynamics of banks, key players in economic growth and stability. The study focuses on these three factors due to their intertwined roles in shaping fiscal policy effectiveness, shareholder satisfaction, and overall financial health. The aim of this study is to explore the relationships between the bank value, tax avoidance and profitability aiming to clarify their interactions and their impact on the Jrdanian banks. Ordinary Least Squares regression analysis is employed using a mixed-methods approach, including quantitative regression analysis and qualitative assessments. The study results reveal a significant direct link between bank tax avoidance and profitability. The increase in Return on Assets is associated with a substantial increase in tax avoidance. In the expanded model, bank value and size did not exhibit statistically significant incremental information over profitability in explaining tax avoidance. Profitability emerges as a dominant factor, overshadowing the potential impact of size and value. The results underscore profitability as a key driver in bank tax strategies, highlighting a potential area for regulatory scrutiny and strategic realignment. In conclusion, the study underscores the pivotal influence of bank profitability on tax avoidance strategies. Policymakers, practitioners, and researchers are encouraged to recognize the prominence of profitability in formulating tax strategies.

Assessing Fiscal Policies’ Impact on Economic Recovery in African Nations Amid Financial and Pandemic Crises

This study investigates the impact of government fiscal policies on economic recovery in African nations amidst financial and pandemic crises. Through regression analysis and empirical evidence synthesis, it explores the dynamics of taxation revenue, non-taxation revenue, and government capital formation expenditure in driving resilience and growth. The findings underscore the critical role of effective fiscal policies in navigating crises, highlighting the need for evidence-based strategies to enhance economic recovery and development. Theoretical underpinnings rooted in Keynesian Economic Theory provide a robust framework for understanding the efficacy of fiscal interventions in fostering sustainable growth. The study contributes to theoretical refinement and offers practical insights for policymakers seeking to formulate adaptive fiscal strategies tailored to the unique socio-economic dynamics of African countries. Recommendations include prioritizing revenue generation strategies, enhancing tax compliance, optimizing non-tax revenue sources, and strategic investments in capital formation to foster long-term growth and resilience.

Sensitivity to changes in oil prices, tax returns and the cross-section of stock returns: The present situation for net-oil exporting economies

This study investigates the sensitivity of stock returns to changes in oil prices and tax returns in net-oil exporting economies, focusing on the Gulf Cooperation Council (GCC) countries from March 30, 2003 to March 30, 2022. The problem statement addresses the challenge of understanding the interplay between oil price fluctuations, tax policies, and stock market dynamics in these economies, which are heavily reliant on oil revenues. The aim of the study is to provide insights into how variations in oil prices and tax returns impact the cross-section of stock returns in the GCC region. The objectives include analyzing the econometric relationships between oil prices, tax policies, and stock market performance using an appropriate econometric model. The results reveal a significant sensitivity of stock returns to changes in oil prices and tax returns in the GCC countries during the specified period. The econometric model employed indicates strong correlations between fluctuations in oil prices, tax policies, and stock market movements, highlighting the intricate connections between these variables. Moreover, the study identifies specific sectors within the stock market that are particularly sensitive to oil price changes and tax policy adjustments. Policymakers in the GCC countries can use these insights to design more effective fiscal and economic policies aimed at enhancing market stability and investor confidence amidst dynamic oil market conditions.

Does reform policy of municipal bonds raise firm risk? A quasi-natural experiment from China

Does reform policy of municipal bonds increase firm risk? We address this question by examining the effects of the ‘Local Issuance and Local Repayment’ (LILR) reform policy launched by the Chinese central government on firm stock return volatility between 2009 and 2019. We find that the LILR reform policy increases the volatility of firms' stock returns. Possible explanations for the effect of reform policy are that it exacerbates firms' financial constraints and reduces the effectiveness of fiscal policy. Consistently, we find that the aggravating effect of reform policy is more pronounced in regions characterized by worse financial environment, worse fiscal condition, firms in growth and decline stages and in downstream and service and support industries. We provide empirical evidence from a Chinese quasi-natural experiment to address the long-term economic development issues of local government debts.

Bibliometric Exploration of the Relationship between Fiscal Policy and Macroeconomic Stability

This research explores the relationship between fiscal policy and macroeconomic stability through in-depth bibliometric analysis, utilizing articles from various academic databases. Focusing on Indonesia, this study identifies trends, patterns and empirical evidence showing the impact of various fiscal policy tools on key macroeconomic indicators such as GDP growth, inflation rates and unemployment rates. Through a methodology that includes data collection, processing, descriptive analysis, and visualization, this research provides insights into the effectiveness of fiscal policy in stabilizing the economy as well as its interaction with monetary policy. The results show that effective coordination between fiscal and monetary policies is crucial for macroeconomic stability, especially in the face of economic crises. From a bibliometric perspective, this analysis also reveals underexplored research areas that have potential for further investigation.

Financial Development, Financial Openness, and Policy Effectiveness

This study explores how financial development and openness influence the effectiveness of fiscal and monetary policies. An analysis of data from about 100 countries between 1980 and 2018 reveals that both financial openness and development weaken the impact of monetary and fiscal policies. Our results further show that financial development in a country diminishes policy effectiveness depending on the country’s level of financial development; specifically, the more developed a country, the less effective the policies would be. Additionally, through a detailed examination employing a dynamic panel GMM approach, the study investigates the global repercussions of economic downturns in the US and how financial maturity shapes policy effectiveness during these times. We also discuss some policy implications that show that the positive impacts of monetary policy on output growth are lessened during crisis periods, and policymakers should act accordingly.

ASSESSMENT OF PUBLIC DEBT SUSTAINABILITY IN DEVELOPING COUNTRIES, TAKING INTO ACCOUNT THE STRUCTURE OF PUBLIC SPENDING AND INTERTEMPORAL CONSUMER BEHAVIOR

The paper estimates the sustainability of public debt in developing countries from 1990 to 2021 drawing on fiscal response function. The author proposes the modification of the Ramsey model that considers both saving behavior of the population and the structure of government spending in terms of their influence on fiscal policy effects. The findings are tested on the example of developing countries including the Russian Federation. We verify the model's conclusions in two stages. At the first stage, based on indicators of government expenditures’ structure and savings rate, we identify country clusters using the k-means method. At the second stage, for a certain groups of countries, we econometrically estimate the so-called fiscal response function, that is, the reaction of primary budget balance to debt accumulation in the previous period. We make estimates for panel data using a fixed effects model, as well as the generalized method of moments for a dynamic panel. Based on the estimates obtained, for a group of countries similar to Russia in terms of savings rates and the share of productive expenditures in the total share of government expenditures, there is a significant positive coefficient of the reaction of the primary budget balance to changes in public debt in the previous period. Thus, fiscal sustainability is achieved for the selected group of countries at the federal level during the period under review. However, risks at a regional level may, if events develop unfavorably, have a shock effect on the federal budget that requires an additional analysis of regional debt sustainability.

FISCAL POLICY ON ECOLOGICAL FOOTPRINT IN NIGERIA: AN EMPIRICAL INVESTIGATION

In recent times, the challenges of government policy formulation to achieve desired objectives and maintaining a sustainable environment without inhibiting human well-being is still an issue of debate among scholars in the literature. Many factors have been identified as culpable of environmental humiliation, but the government policy as a factor is more often than not ignored. However, the government formulates policies most especially fiscal policy that involve the collection of revenue through taxation and expenditure on infrastructural facilities, industrialization, mechanization, urbanization, etc to achieve sustained economic growth without recur to the effect of the policy on ecological footprint and its effects on human well-being in the society. Thus, this study uses the ARDL econometric approach on annual time series data extending from 1981 to 2022 to investigate the effect of fiscal policy on the ecological footprint in Nigeria. The variables used in the study include ecological footprint proxied by comprehensive measures of environmental degradation (dependent variable), government tax revenue and expenditure (independent variable), population, and technological changes proxied by industrial activities are the control variables. The study's findings indicate that fiscal policy variables are both positively and negatively related to ecological footprint and are statically significant. Specifically, government tax revenue reduces ecological footprint while government expenditure escalates the environmental degradation in Nigeria during the period under review and they are all significant statistically at 1% and 5% respectively. Considering these results, the research concludes that fiscal policy formulation has a noteworthy effect in determining changes in the ecological footprint in Nigeria. Given the effect of tax and government spending policy on infrastructure and industrialization, the government should formulate policies that are environmentally friendly and increase budgetary allocation to control and manage environmental challenges that inhabit the well-being of the citizens. By implication, the economic growth policy which invariably leads to ecological footprint challenges should be properly looked at to reduce ecological footprint in Nigeria.