Expansionary Policy Research Articles

Coordination of Monetary and Fiscal Policies from a Game Theoretic Perspective

Under the backdrop of a highly intricate international environment and sluggish recovery of the global economy, it is crucial to delve into methods for bolstering national economic prowess and promoting economic prosperity and stability. Monetary policy and fiscal policy, as two primary macro-control tools, play a pivotal role in national progress, with their effective coordination becoming a significant issue. Game theory, a tool to mathematically model decisions made by different individuals through logical analysis, provides a solid theoretical foundation and practical framework for studying the issue. This paper utilizes game theory to model the coordination among the two policy-makers, the central banks and the governments while establishing a payoff matrix that reflects their utilities. During normal or recovery periods, this paper views it as a cooperative game, and the cooperative equilibrium will be that both policy-makers choose expansionary policies. During financial crisis, this paper views it as a non-cooperative game, and the Nash equilibrium will be that both policy-makers choose contractionary policies. Additionally, this paper selects specific examples from Brazilian history to validate the rationality of the model while confirming that the short-term equilibrium aligns with the modeling conclusions.

An Evaluation of Köprülü Fazıl Ahmed Pasha's Foreign Policy

Abstract Historiographical tradition has tended to view the Köprülü-era foreign policy as one of conscious expansion, fueled by religious fervor. The descriptions of the seventeenth-century Ottoman chroniclers to that effect influenced the researchers of the twenty-first-century, too. However, in the reports of European diplomatic representatives active in Istanbul at the time, we see that the expansionary policy in the Köprülü period was not actually a pre-planned phenomenon with religious motivations; it was more likely that the grand viziers responded to the urgent problems arising from the political conjuncture of the period. To be more precise, this study argues that events such as the Érsekújvár Expedition (1663), the Siege of Candia (1667-69), and the Campaign of Kamieniec (1672), which all took place during the reign of Köprülü Fazıl Ahmet Pasha (r. 1661-76), could not be explained by religious motivations alone. Instead, the present study argues that a better way to understand Fazıl Ahmed Pasha's foreign policy is interpreting it from an international relations perspective through the neoclassical realist parameters of the individual, state structure, and international system.

The Impact of Financial Development on Unemployment: The Case of the People’s Republic of China (PRC)

Research Originality: As a populous country with a population of 1.4 billion, China faces the imperative issue of employment. This paper focuses on the impact of financial credit and financial deposits on different levels of unemployment in an attempt to analyse the unemployment problem in China.Research Objectives: The paper explores the impact of financial development on unemployment in China.Research Methods: Using panel data from 31 provinces and cities in China (spanning from 2007 to 2021), categorizing unemployment situations, employing quantile regression models to assess the impact of financial development on different levels of unemployment in China.Empirical Results: The findings indicate a negative correlation between financial development and unemployment levels in China. The study reveals that financial credit significantly impacts unemployment in provinces where the economy is higher than average GDP. However, in regions where the economy is lower than average GDP, the impact of financial deposits on unemployment is significant.Implications: This study establishes that the adoption of financial expansionary policies by the government can reduce unemployment and help guide the formulation of more precise and effective economic policies.JEL Classification: G21, E24, C33, O53How to Cite:Yixin, L., Radzi, N.A.M., Ma, M., & Saidi, N.A., (2024). The Impact of Financial Development on Unemployment: The Case of the People’s Republic of China (PRC). Etikonomi, 23(2), 353 – 368. https://doi.org/10.15408/etk.v23i2.37997.

An ARDL Approach to Investigate the Effectiveness of Fiscal and Monetary Policies in Making Bangladesh, A Role Model of Development

ABSTRACT: The purpose of the study is to analyze the relative efficacy of monetary and fiscal policies in fostering economic growth in Bangladesh concerning predictability, speed, and magnitude. Moreover, it aims to find the relationship between the economic boom of Bangladesh and two measures of macroeconomic management i.e., monetary and fiscal policy. The ARDL model and bound test are applied to examine the long-term link between monetary policy, fiscal policy, and economic growth. Data is obtained from the World Development Indicator (WDI) for Bangladesh for the period 1974 to 2022. Several diagnostics tests like CUSUM and CUSUMQ are used to identify both the strengths and weaknesses of the models. The findings demonstrated a long-term correlation between the two policies and economic growth. According to the calculated short-run coefficients, the short-term effect of fiscal policy is mentionable but the effect of monetary policy is negligible in the short term. But over time, the immediate effects become noteworthy. The long-term outcomes indicated that both fiscal and monetary policies have a favorable and substantial long-term impact on economic growth. The result shows fiscal policy is more effective compared to monetary policy for making Bangladesh, a role model of Bangladesh. Furthermore, all the diagnostics tests showed the stability of the estimated ARDL model. Expansionary fiscal and monetary policies lead to higher government spending and an increase in the money supply, which raises GDP levels. Conversely, if government spending and the money supply decline (contractionary fiscal and monetary policies), the GDP level falls. As a result, this study suggests using expansionary policies to boost Bangladesh’s economy.

L’immagine del Turco nelle cronache moldave in lingua slava

The Moldavian chronicles in the Slavic languages of the 15th–16th centuries expose the events of the country in a time of grave difficulties for the survival of the Christian states of Europe, threatened by the expansionary policy of the Ottoman Empire. The authors closely follow the progressive expansion of the Sublime Porte and the fall of boroughs, citadels, and cities (Gallipoli, Sofia, Veliko Tărnovo, Thessaloniki), as well as Chilia, Cetatea Albă, fortified Moldavian citadels. Naturally, the chroniclers rejoice for the rarest victories on the battlefield of the European sovereigns and the princes of Moldavia; they are saddened by the defeats suffered by Moldavian and, more generally, Christian arms. Above all, they fear that the new ‘paganism’ coming from the now subjugated Constantinople can suffocate the ancestral religion, although they do not neglect the dangerousness of other beliefs, such as the Lutheran, professed even by a prince. In the final analysis, the chronicler considers himself a scriba Dei who must educate the reader and strengthen him in the true faith, orthodoxy.

Development Pathways and the Political Economy of Maladaptation: The Case of Bioenergy as a Climate Strategy in Brazil

AbstractAlthough it is well known that large-scale bioenergy expansion erodes different environmental, social, and economic dimensions of sustainable development, in countries like Brazil, bioenergy is institutionalized as a flagship climate strategy aimed to cut down CO2 emissions in transport. These trade-offs have serious implications for climate change governance and sustainable development; however, conventional approaches have not yet properly explained this seeming paradox. This article addresses this gap from a critical development pathways approach to bioenergy as a maladaptive strategy in Brazil. I propose an analytical framework to observe how different ideas, interests, and institutions interplay in the historical institutionalization of bioenergy as a climate strategy. The analysis shows that bioenergy institutionalization has been driven by the endemic economic crisis in the sugar sector and governmental interests associated with security and developmental imperatives. The unsustainable co-evolution of development pathways and bioenergy, marked by deforestation, land colonization, and agricultural expansion, has narrowed the adaptation space in agriculture, gearing current climate policy towards path-dependent maladaptive strategies like bioenergy. Paradoxically, framing bioenergy as a climate strategy has been useful to justify more expansive policies in favor of the sugarcane industry, and to greenwash the Brazilian climate policy in the international arena of climate governance.

Contribution of hydro energy production, economic complexity and technological innovation in achieving an environmentally sustainable Asia

The impact of hydro energy production, economic complexity, urbanization, technological innovation and financial development on environmental sustainability between 1995 and 2017 is examined for a panel of thirteen Asian economies using two environmental proxies— their ecological footprint and CO2 emissions. The non-parametric Driscoll-Kraay standard error method and the Dumitrescu-Hurlin panel causality test are applied to the data. Our findings show that hydro energy production and technological innovation have a significant negative impact on the environment, thus promoting environmental sustainability. Economic complexity significantly lowers environmental sustainability while the non-linear effect of economic complexity favors environmental sustainability; this confirms the existence of an economic-complexity-based inverted-U-shaped environmental Kuznets curve hypothesis. Moreover, urbanization and financial development significantly decrease environmental sustainability. The results of our study confirm the feedback causality between hydro energy production and carbon dioxide emissions. We recommend expansionary policies regarding hydro energy production that are beneficial for substituting fossil fuel energy. This paves a path towards environmental sustainability in this era of global boiling.

The Effects of Fossil Fuel Consumption-Related CO2 on Health Outcomes in South Africa

The consumption of fossil fuel significantly contributes to the growth of South Africa’s economy but produces carbon dioxide (CO2), which is detrimental to environmental sustainability with overall effects on health outcomes. This study sought to (i) examine the impacts of fossil energy consumption-related CO2 emissions on the under-five mortality and infant mortality rates in South Africa and (ii) analyse the causal relationship between fossil energy consumption, CO2 emissions, and mortality rates in South Africa. Linear and nonlinear ARDL bounds and the Toda–Yamamoto causality test were used to establish the equilibrium property in the long run and the causal effects of the models’ variables. Health outcome data include the under-five mortality rate (MTR1) and infant mortality rate (MTR2). Other explanatory variables include fossil energy consumption (FOC), inflation (Inf), carbon dioxide emissions (CO2), and government expenditure (GEH). It is evident from the results of linear ARDL that the first lag of the under-five mortality rate in the short run has a positive and significant impact on the under-five mortality rate in South Africa. Holding the other variables constant, the under-five mortality rate in South Africa would increase by 0.630% for every 1% increase in its lagged values. Fossil energy consumption has a positive and significant effect on the under-five mortality rate in South Africa. This significant relationship implies that a 1% increase in fossil energy consumption increases the under-five mortality rate per 1000 persons per year in South Africa by 0.418% in the short run, all things being equal. The results from the Toda–Yamamoto causality test revealed that there is no causality between the under-five mortality rate and both the consumption of fossil fuel and CO2 emissions in South Africa. The results from nonlinear ARDL presented four separate scenarios. In the short run, during increasing levels of CO2 in the initial period (lag of CO2), a 1% increase in CO2 would decrease the under-five mortality rate by 1.15%. During periods of decreasing levels of CO2 in the short run, a 1% increase in CO2 would increase the infant mortality rate by 0.66%. Again, during previous and current periods of decreasing levels of FEC, a 1% increase in FEC would increase the infant mortality rate by 0.45% and 0.32%, respectively. In the long run, during periods of increasing levels of CO2, a 1% increase in CO2 would decrease the infant mortality rate by 4.62% whereas during decreasing levels of CO2, a 1% increase in CO2 would increase the infant mortality rate by 2.3%. The risk posed by CO2 emissions and their effects on humans can then be minimised through a government expansionary policy within health programmes.

Educational Politics and Policy Change in Neoliberal Times: An Argumentative Discourse Analysis

<p>With the rise of neoliberal reforms and efforts to privatize education, there is a growing need to examine how actors and groups from the public and private sectors influence educational policy change together. In this article, we advance a critical approach to understanding the changing discursive space of educational politics by following discourses through an expansive policy network that goes beyond its traditional boundaries. Specifically, we draw on argumentative discourse analysis (ADA), which allows for the analysis of how and why various actors and groups come together to assign certain meanings to educational phenomena or problems, leading to policy responses or changes. Rooted in Foucault’s notions of discourse and power, ADA offers a unique approach to discourse analysis that can illuminate policy change through discourse coalitions. Three case studies from educational policy scholarship are discussed to illustrate the value and utility of ADA in future critical education policy studies.</p>

Balance sheet expansionary policies in the euro area: Macroeconomic impacts and a vulnerable versus non-vulnerable comparison

This paper investigates the impacts and heterogeneity of the ECB's large-scale asset purchasing programs of sovereign securities on real GDP, inflation, long-term sovereign bond yields, systemic stress, and the unemployment rate. A structural Bayesian VAR model with six endogenous variables was estimated for 11 euro area countries over the period 2012:M1 to 2023:M12. To provide robustness to the results, a structural panel BVAR model is estimated, enabling a straightforward comparison of impulse responses of vulnerable and non-vulnerable countries. The results suggest that the magnitudes of impulse responses were more favorable in countries that were more economically and financially vulnerable. These findings underscore that financial and economic distress was a source of heterogeneity in the responses to large scale asset purchases within the euro area.

Impacts of US Interest Rates on Growth, Income Distribution, and Macroeconomic Policy Space in Developing Countries: A SFC Supermultiplier Model

ABSTRACT This paper presents a stock-flow-consistent model in which growth is led by exports, government consumption, and consumption out of interest. It considers domestic and external debt dynamics and gross capital flows. The balance of payments constraint serves as a ceiling but not a floor for growth. Countries may choose to not fully use their external space to decrease public debts or accumulate international reserves. The model is applied to a comparative dynamics exercise to explore how a hike in foreign interest rates may impact growth and income distribution in a developing country under different policy responses. The shock forces the country to apply at least one contractionary macroeconomic policy or lose its reserves. Contractionary monetary policy may be the only tool to avoid external disequilibrium after the shock for countries with open capital accounts. Financial flows may impose trade-offs between short and long run policy objectives. Accumulated international reserves helps maintain expansionary policies and higher average growth rates after external shocks by providing liquidity in foreign currency.

Asymmetric effects of macro policies on women’s and men’s incomes. An empirical investigation of the eurozone crisis in a gender perspective

We study how macro policies affected women’s and men’s incomes during the financial crisis in Europe. We consider the monetary stance, proxied by benchmark interest rates, and the fiscal stance, measured by the variation in public expenditures and public revenues, and investigate how they are associated to women’s and men’s labor and capital incomes, using microdata for 27 European countries between 2008 and 2016. We individualize household-level data by considering four scenarios of intra-household sharing of resources. We also explore how and to what extent macro-policies affect the distribution of labour incomes for men and women by applying a conditional quantile regression approach. Results highlight that the ECB’s expansionary policies had a positive effect on both labor and capital incomes for both men and women, while austerity policies had a mixed impact. Reductions in public expenditure had the effect of reducing labor incomes for both men and women, particularly at the median of the wage and labor distributions. In contrast, increases in public revenues benefited capital incomes, for all income quantiles.

Opportunities and Challenges Associated with the Uptake of Residential Clean Fuel Usage.

Almost 3 billion people worldwide use solid fuel for cooking and heating. This review examines (i) household energy practices and infrastructures and their influence on fuel usage in different contexts; (ii) barriers in adoption of household clean energy technologies and uses in diverse settings and population groups and (iii) potential air pollution exposure reduction in homes through using processed fuel. Population health burden from solid fuel combustion-derived particulate air pollution has been estimated in several low- and middle-income countries. However, such studies have not been carried out in high income countries (e.g., UK). Irrespective of the region, fuel prices are the most dominant factor influencing the choice of fuel. Laboratory studies suggest processed fuel - pellets and briquettes - reduce particulate matter emissions by 70-80% and can be a promising alternative. Adoption of clean fuels for domestic energy needs facilitates progress towards five of the UN Sustainable Development Goals (SDGs). There is evidence that a variety of factors, including cost savings, encourage and hinder such uptake. These factors include price fluctuations, expenses, and the usage of clean fuels. Due to their distinct development scenarios, more expansive policy frameworks, and political economies of energy, these determinants are localized in character and differ significantly amongst economies. Therefore, in order to create innovative plans for the adoption of clean fuel use, strategies centred on local settings must be developed while keeping broad socio-technical and socio-economic issues in mind. Solid fuel processing - pelletization and briquetting - have the potential to reach Liquefied Petroleum Gas (LPG)-like emissions, and could be a potential strategy to mitigate exposure to household air pollution.

The Spondylus beads from El Molino (Puerta de Corral Quemado, Catamarca, Argentina): Analysis and implications for the study of local power in Inka times

The purpose of this paper is to present the analysis of a set of Spondylus beads found in El Molino (Puerta de Corral Quemado, Dept. of Belén, province of Catamarca, Argentina) –3000 km south of Tumbes–, a local residential pre-Inka site, with evidence of Inka influence during the 15th century CE. Given that the presence of objects manufactured in Spondylus in Chile and Argentina is nearly restricted to the capacochas −Inka burial ceremonies of children and young maidens dressed in fine textiles at the top of the snow-capped peaks of the Andes−, the discovery of these beads in El Molino acquires special relevance. We present the description of the raw material, the reconstruction of possible manufacturing techniques, the analysis of the morphometry and the comparison with other sets of beads. The implications of this discovery at a local and regional scale, taking into account the symbolic and strategic importance of this resource for the Inka expansive policy, are discussed. It is proposed that the site could have been a space of local power, where an elite group, that organized the manufacture of prestigious goods, was benefited by the mechanisms of hierarchization and legitimation of political power promoted by the state.

Defending the Austrian Interpretation of the 1920-21 Depression: Reply to Borazan

In Newman (2016), I argued that the Federal Reserve’s monetary expansion in 1919 generated an inflationary boom that forced it to raise interest rates, thereby precipitating a sharp contraction in 1920. Recovery began because businesses cut nominal wages, and this occurred before the Fed’s 1921–22 easing reached the economy. In contrast, Borazan (2023) attributes the boom to government spending and speculative inventory investment and the recovery to an “administrative decree” about the return to expansionary monetary policy, among other contributors. This reply argues, first, that Borazan’s analysis ignores the role of the Fed’s expansionary policy in causing the boom and the resultant inflation. Second, I show the inapplicability of Borazan’s administrative decree and revisit the importance of market-based wage cuts in generating the recovery.

Monetary Policy Between Stability and Growth

Abstract The global financial crisis and the coronavirus pandemic were marked by expansionary policies of key central banks in an attempt to stop the recession. The degree of expansiveness of monetary policy was unprecedented. As a result of expansionary policies, global inflation has been present since 2021. The change in the macroeconomic environment has led to a turnaround in monetary policy pursuits and a rapid rise in reference interest rates. The FED reacted much faster than the ECB and that is why inflation was lower in the USA compared to the euro area. All announcements for 2023 point to the continuation of contractionary policies. The subject of the paper’s analysis is the monetary policy of key central banks, as well as expectations for the next period. The paper raises the question of whether central banks have gone from one extreme of overly expansionary monetary policy to the other extreme of overly contractionary monetary policy and whether such policies carry the risk of reoccurrence of recession. The paper also contains recommendations for improving existing monetary policy regimes, as well as for creating a completely new monetary policy regime which will be based on two nominal anchors.

The effect of oil price and macroeconomic factors on inflation rate in Azerbaijan: The application of time-varying coefficient VAR model and Granger causality analysis

This study analyzes inflation dynamics in Azerbaijan, focusing on the impact of oil price fluctuations and macroeconomic variables using advanced econometric methods, specifically a time-varying coefficient vector autoregressive model and time-varying Granger causality analysis. The research identifies significant inflation inertia, where past inflation rates shape future expectations. The relationship between oil prices and inflation has evolved, with contractionary policies mitigating the inflationary effects of rising oil prices after 2011, but oil price volatility and external inflationary pressures resurfacing post-2021. Azerbaijan’s exchange rate policy reduced inflation by lowering import prices before 2017, but its effectiveness has since weakened. Fiscal policy, particularly changes in M2, has played a key role in inflation dynamics, with contractionary measures after 2015 reducing inflation, while expansionary policies in 2022 reignited inflation. The study also shows that growth in the non-oil sector helps alleviate inflation, though its influence has diminished over time. The study concludes that effective policy measures are essential to manage inflation inertia, reduce dependence on oil revenues, and strengthen economic resilience in a rapidly changing global landscape.

Діагностика та оцінка впливу фінансово-економічних криз на розвиток банківської системи України

The aim of the article is to develop the theoretical foundations for diagnosing and assessing the impact of financial and economic crises on the stability of functioning of the banking system of Ukraine. The article identifies the main financial and economic crises from 1998 to 2022, as well as assesses the consequences of their impact on the banking system of Ukraine. The main causes of financial and economic crises have been systematized, it has been found that an effective instrument for counteracting the consequences of financial and economic crises on the banking system of Ukraine is the introduction by the National Bank of Ukraine of the inflation targeting regime to maintain the stability of the Hryvnia. The dynamics of changes in the NBU discount rate for 2014–2023 is studied and the NBU’s application of restrictive policy measures in 2015, 2018 and 2022, as well as expansionary policy measures in 2020 to financially stabilize the banking system is verified. It is proved that changes in the NBU discount rate directly affect the cost of loans and deposits. The structure is assessed and the balance of payments of the country for 2015–2022 is calculated, the excess of imports over exports is determined, also determined is the existing deficit of the balance of payments, which leads to a decrease in the country’s foreign exchange reserves, the outflow of currency from the country and the devaluation of the Hryvnia in general. It is proved that during the periods of financial and economic crises there is an increase in the profitability of the NBU. An assessment of the indicators of financial stability of the banking system has been provided and the main trends in their changes over the past five years have been diagnosed (currency exchange rate stability, structure of banking resources, financial results of banks and their compliance with prudential standards, settlements of the NBU with the State Budget of Ukraine, obligations to the IMF, business activity, financial stability, liquidity, solvency of banks, etc.). The article identifies and substantiates the key problems of functioning and development of the banking system of Ukraine, taking into account the destructive consequences of financial and economic crises, also further prospects for research on the chosen topic of scientific work are outlined.

The Implications of A Recessionary Trend in An Economy and The Role That Monetary Policy, Through Government Intervention, Helps Rectify The Same

This paper delves into the different consequences of a recession and economic downturns through different case studies such as the lost decades in Japan and the Stock market crash in the USA in 2007. Moreover through these case studies the paper establishes a link between financial markets and monetary policy as most recent recession have either been caused by financial crisis or have been preceded by them."As such it explores how the prevalent theoretical framework of monetary policy during the times of Friedman, which tasked monetary policy with fluctuating short term interest rates to meet inflation targets and further be stable in the long term to foster economic growth and feed consumer expectation, has now been usurped by governments to act as a stabiliser of economic downturns such as a recession. Through these case studies it offers a critique of recent expansionary policies undertaken in Japan that have often ignored the long time gap inconsistency problem of Japan which has lead to unconventional yet inconsistent monetary actions in Japan being unable to solve the recession. This critique is furthered through its comparison tot he actions of the FED that suggest monetary policy is best used aggressively over the long term to foster consumer expectations and thus return confidence in the economy and the credit system after a recession. This is supported by different IMF investigations discussed in the paper which reveal the importance of aggressive monetary policy with the support of fiscal stimulus to best solve a recession. Finally this paper then seeks to determine the implications of a recessionary trend in an economy and the role that Monetary policy, through government intervention, helps rectify the same.

Financial Development and Poverty in Selected West African Countries: A Mediating Role of Institutional Quality

This study examines the dynamic relationship between financial development (FD), institutional quality (INS), and poverty (POV) to determine whether financial development can either reduce or exacerbate poverty while including the mediating role of institutional quality in selected West African countries from 1986–2021. However, the study used the cross-sectional augmented-autoregressive distributed lags (CS-ARDL) technique and the second-generation unit root (CADF and CIPS) test for stationarity due to the cross-sectional dependence in the series. The results showed that FD has a positive (non-significant) impact on POV in the short run and a negative (statistically non-significant) in the long term. In contrast, INQ and POV have a negative (statistically non-significant) and inverse relationship. FD*INS has a negative coefficient in the short run and a positive in the long term; this implies that FD and INQ complement and substitute each other in the short and long term, respectively. The study shows that GDP per capita and government expenditure positively impact poverty in the short run, indicating the effectiveness of expansionary policy in reducing poverty. The study suggests improving governance and regulatory institutions to boost financial sector growth and enhance welfare for low-income people by providing easy access to finance.