Fiscal Adjustment Programs Research Articles

Impact of sustainable tax revenue and expenditure on the achievement of sustainable development goals in some selected African countries

The study examined the impact of Sustainable Tax Revenue and Expenditure on the achievement of Sustainable Development Goals in African countries using secondary data. The dataset was extracted from the World Development Indicators database. The large gap between developed and developing countries when comparing the probability of them achieving the SDGs was the main motivation behind this study. Data retrieved from 45 countries comprised of both African and developed countries for the period 2010–2020 was analyzed using the Generalized Method of Moments technique. The results revealed that the coefficients of grants received, various forms of taxes, and other revenue have a positive effect on economic growth but a negative effect on poverty and unemployment for African and developed countries. This finding suggests that improvements in tax revenue generation, grants and other revenue accumulation across different sources boost economic performance and the welfare of individuals in the analyzed countries. The outcome is an indication that accumulating more grants from different sources will help to achieve sustainable development, improve financial stability, contributes to the economic growth and development in these countries. This study can guide policymakers, governments, international institutions, revenue bodies such as SARS and other stakeholders in their various planning and other decision-making endeavors. Governments and other policymakers must ensure the efficient generation and sustainable utilization of revenue generated from taxes and other revenues to spur the growth and development of their countries. They should have Growth-Sustainability-Oriented Fiscal Adjustment Programs and Sustainable Government Expenditure that can help push and redirect governments to achieve the SDGs in Africa.

Minimum wage in Greece and Southern Europe: Towards a new model for shaping labour relations

The article focuses on the institution of the general minimum wage in Greece and Southern Europe during the economic recession and up to the present day. The economic crisis and the way it was dealt with by European and international institutions led not only to constraints in social expenditure but also restrictive income policies, among other things. Especially in countries that found themselves involved in ‘fiscal adjustment programmes’, like Greece, Spain, and Portugal, the whole of the labour market and labour relations became the arena for radical reforms. The declared targets were increasing flexibility in the labour market, decreasing labour force costs, gradually decentralizing collective agreements, changing the way wages are determined, and strengthening of flexible forms of work. Our study examines the changes in the established method of determining minimum wage in the countries of Southern Europe that were part of fiscal adjustment programmes.

Total factor productivity (TFP) and fiscal consolidation: How harmful is austerity?

Departing from the expansionary austerity literature, this study assesses empirically whether fiscal consolidation propagates changes in the supply side of the economy that can potentially influence total factor productivity (TFP). Using a panel dataset of 26 OECD countries over the period 1980–2016 and employing panel vector autoregressive and panel cointegration techniques, we present evidence of both short-run and long-run negative effects of fiscal consolidation on TFP. The short-run impact is disproportionately more damaging for the TFP of low debt countries, while, contrary to the expansionary austerity thesis, our empirical results would advise against spending-driven fiscal consolidation, since such consolidation undermines capacity, due to the importance of government spending in shaping productive capital. Our results have serious policy implications for the implementation and design of fiscal adjustment programmes.

Uninsured citizens in the period of the Greek economic crisis: Health, income, housing. The case of an Attica Region Municipality.

Introduction: In Greece, the implementation of the Fiscal Adjustment Programs was combined with policies of economic austerity resulting in high levels of unemployment and exclusion from health insurance for a large proportion of the population. Aim: This study explores the demographic and socio-economic characteristics and the health status of the uninsured citizens in one of the biggest Municipalities in Attica region. The study covers the period 2012-2016, during the economic crisis in Greece. Methods: Data stemming from official documents, from individual files of 1,738 uninsured citizens were processed. Possible associations between population characteristics and chronic disease categories were examined, using the chi-square test and univariable/multivariable analysis for chronic disease as an outcome. Results: Almost forty-two percent (41.7%) of the study population suffered from a chronic disease; with the 48% of those patients having zero real annual income and 60.4% being hosted by a relative or an acquaintance. Of the sample diagnosed with a mental illness 71% lived as guests to friends or relatives. Diagnosis with cancer appeared to be more related to zero income, compared to other chronic disease categories (72.7%, p <0.001). In the multivariable model, male gender (OR=1.70 95% CI: 1.35-2.13), age (OR=1.03 95% CI: 1.02-1.04) and guest status (OR=1.57 95% CI: 1.24-2.00) were associated with a chronic disease. Conclusions: In Greece, in the midst of the economic crisis, uninsured citizens with chronic illness are called upon to manage their health problem with zero income and housing problems. A key strategy to address such a prospect of further health degradation of the particular population group can only be the strengthening and reorganization of the provision of social protection and health services around a primary care model developed and functioning at community level, with as its basic principle, universal and equal access to it, for all citizens.

A competing risks tale on successful and unsuccessful fiscal consolidations

This paper analyses the transitions out of fiscal consolidations using annual data for 17 industrial countries over the period 1975-2013 and applying a discrete-time competing risks duration model. Our approach allows us to distinguish the factors behind a successful or an unsuccessful end of fiscal consolidation episodes. The results show that economic and political factors, the size and typology of fiscal adjustments and the occurrence of crises explain the differences in the length and the success/failure of fiscal consolidations. Moreover, while fiscal adjustment programmes that end successfully display positive duration dependence, those that end in an unsuccessful manner are not duration dependent.

Limits on government spending: evidence of manipulation from Brazilian municipalities

ABSTRACT This paper adopts a data-driven approach to detect manipulation in the statements of personnel expenses of Brazilian municipalities used by the Courts of Accounts to verify compliance with the limits determined by the Fiscal Responsibility Law. First, it tests the null hypotheses that the empirical density is continuous at the three legal cut-offs, and shows a large discontinuity at the threshold that brings about the most severe penalties. Next, it investigates whether sorting is attained through fiscal adjustment programmes or by changing accounting practices. The histogram obtained from an alternative data source, which is not so prone to manipulation, is undoubtedly smoother. There is also evidence that public officials overstate deductions from gross spending to avoid the legal sanctions.

Determinants of Trust in Institutions in Times of Crisis: Survey‐Based Evidence from the European Union

AbstractWe employ Eurobarometer micro‐level data on trust in institutions, in order to explore its determinants, considering socio‐demographic characteristics, and macroeconomic indicators. The main contribution of our analysis is the investigation of the potential impact of sovereign credit rating episodes and the adoption of bail‐out programmes. We find that trust in institutions is substantially eroded in countries that experience downgrade episodes and participate in fiscal adjustment programmes while it is significantly strengthened following credit rating upgrades.

Fiscal Adjustment Programs versus Socially Sustainable Competitiveness in EU Countries

After implementing harsh austerity measures during 2008–2011, in the period 2012–2014 the fiscal adjustment programs also involved social equity measures, the quantitative fiscal consolidation being changed into a qualitative one—a reduction of the structural budget deficit accompanied by an improvement of social sustainability indicators. The 2015–2017 period shows mixed evolutions in terms of social progress brought by the recovery of the economic potential lost during the crisis. This research analyzes the sustainability of economic competitiveness dynamics from a social viewpoint during 2012–2014. In this paper, we analyze the way in which the economic and social components of fiscal adjustment programs are dynamically balanced in 24 EU member states. We identify four clusters of countries depending on the relationship between fiscal consolidation/fiscal stimulation and the social dynamics of the sustainability adjusted global competitiveness index. We found that under the pressure of “fiscal adjustment fatigue” caused by tough austerity programs in the period 2008–2011, most of the European countries completed the fiscal adjustment packages with measures to improve the social situation between 2012 and 2017. The fiscal consolidation programs have become more balanced from the perspective of the combination of budgetary austerity—social equity measures. Furthermore, we analyze how some countries on the EU periphery (Central and Eastern Europe, Baltic countries and Portugal, Ireland and Greece, countries that have joined the EU with a lower level of development) are experiencing or not an improvement in the social sustainability generated by the measures aimed at stimulating the economic growth implemented during 2012–2017. To conclude, we proposed a few pillars that could be integrated if an “ideal adjustment program” is to be achieved.

The Greek Debt Crisis: Like the Enigma of Sphinx. An Estimation of the Probability of Default

The present study deals with the Greek debt crisis and tries to shed light on its determinants, going back to its origins, while examining its negative effects following the burst of the global financial crisis that still plagues the country. This paper also examines the efforts taken to deal with it, a combination of Greek austerity measures and strong financial aid from foreign institutions. Moreover, a probability of default assessment is performed in order to emphasize the fact that, even if the macroeconomic assumptions underpinning the fiscal adjustment program prove realistic and effective, Greek sovereign debt is far from viable and the financial situation of the public sector will remain fragile, having a long and difficult road to follow. Finally, it is pointed out that long term and permanent measures have to be taken in order to address the long-standing weaknesses of the economy and get rid of the vice of default for good, as well as the establishment of a stable political and economic environment.

Total Factor Productivity (TFP) and Fiscal Consolidation: How Harmful is Austerity?

Departing from the expansionary austerity literature, this study assesses empirically whether fiscal consolidation propagates changes in the supply side of the economy that can potentially influence total factor productivity. Using a panel dataset of 26 OECD countries over the period 1980-2016 and employing panel vector autoregressive and error correction model specifications, we present evidence of both short-run and long-run negative effects of fiscal consolidation on TFP. The short-run impact is disproportionately more damaging for the TFP of low debt countries, while, contrary to the expansionary austerity thesis, our empirical results would advise against spending-driven fiscal consolidation, since such consolidation undermines capacity due to the importance of government spending in shaping productive capital. Our results have serious policy implications for the implementation and design of fiscal adjustment programmes.

Local Government and Citizen in the Period of Crisis in Greece

Greece has been under fiscal surveillance since 2010, due to the economic recession and the fiscal adjustment program agreed between Greece, the European Commission, the European Central Bank and the International Monetary Fund. The economic recession and the measures taken as a result of this adjustment had a serious impact on Greek society, a large part of which is at risk of poverty or below the poverty line. Local government has suffered the consequences of the economic crisis, yet it has taken initiatives to coordinate actions of volunteer groups, that were activated during this period, to address social problems.

ADMINISTRATIVE REFORMS AND THE EUROZONE CRISIS: A COMPARATIVE STUDY OF GREECE AND PORTUGAL

The Eurozone crisis that erupted in late 2009 had a strong impact on the countries of the EU periphery, triggering a range of fiscal and structural adjustments at all levels of government. Greece and Portugal were most affected by the crisis and embarked on fiscal consolidation programmes in exchange for the external financial assistance packages. Public administration was a key reform area where large-scale adjustments needed to be made in a relatively short period of time. This paper seeks to assess the impact of the fiscal adjustment programmes on the Greek and Portuguese public administrations. Drawing on empirical evidence from the period 2009-2016, the effect of the initiated policies is analyzed with reference to quantitative and qualitative indicators. The findings of the comparative study highlight certain similarities and differences in the way that austerity policies affected the domestic administrative systems. The paper also offers some possible explanations for the observed variations in the outcomes and the prospects of the reform programmes.

“Voting with their Feet” in Times of Crisis: The Case of Southern Europe

Abstract The paper assesses the effect of economic sentiment when combined with the fiscal surplus offered on a Tiebout like migration process, taking place among potential southern European migrants in times of crisis. With an extended sample to incorporate the latest data available and by focusing on the region that was, and still is most heavily affected by the economic crisis, we employ a conditional logit model to find that locational choices are determined by public policies as those are offered to potential migrants in the form of public spending and taxes, the perception of economic opportunities as they are expressed through economic sentiment indicators, while the effect of labor market conditions is consistent and highly relevant. As most of the countries of Southern Europe have entered fiscal adjustment programmes, the discussion becomes particularly relevant as it adds a new dimension to the on-going and heated debate of a significant brain drain from the south to the north of Europe. JEL Cla...

Greek Sovereign Debt Crisis: Causes, Fiscal Adjustment Programs and Lessons for Croatia

Greek Sovereign Debt Crisis: Causes, Fiscal Adjustment Programs and Lessons for Croatia

Greek Sovereign Debt Crisis: Causes, Fiscal Adjustment Programs and Lessons for Croatia

This paper investigates the factors that have led to the Greek sovereign debt crisis in order to derive policy lessons for Croatia and other highly indebted countries. In the first years after euro adoption, it seemed that membership in the monetary union facilitated a catching-up process for Greece, given that it enjoyed high growth rates and a rapid convergence of per capita income. However, the global crisis has revealed that the previous economic expansion was an unsustainable process based on excessive inflow of debt-creating foreign capital. In this paper, it is argued that the government sector contributed the most to the rising vulnerability of the Greek economy. Data are presented showing that extensive government borrowing was the main factor behind the rapid accumulation of Greece's external debt, which made it highly vulnerable to external shocks. Besides the procyclical fiscal policy, some other factors also contributed to the overheating of economic activity in Greece. Hence, this paper reviews the literature that deals with the compression of peripheral countries' sovereign bond yields after the creation of the monetary union, the doubtful suitability of the ECB's expansionary policy stance from the perspective of then booming peripheral states, and the institutional shortcomings of the EMU. The main motivation of this paper is to identify the key roots of the Greek debt crisis in order to derive lessons for policy-makers in Croatia. Since the beginning of the recession in 2008, Croatia has seen a significant deterioration in fiscal fundamentals, with high public debt becoming the main source of macroeconomic vulnerability. Reducing the debt-to-GDP ratio has emerged as a key policy challenge that needs to be addressed in order to reduce the likelihood of a debt crisis.

Greek Sovereign Debt & Deficit: Caught between Scylla & Charybdis. Determinants, Evolution & Effects on the Economy in Pre & Post Crisis Era. An Empirical Study with Policy Aspects

The present study deals with Greek sovereign debt and tries to shed light on its determinants while examining its evolution and severe impact following the global financial crisis that still plagues the country. This paper considers the Greek debt crisis and the efforts taken to deal with it, a combination of Greek austerity measures and strong financial aid from foreign institutions. It also provides a brief examination of public debt formation in the Eurozone countries, emphasizing in ones with the biggest debt ratios. The empirical analysis stresses that, even if the macroeconomic assumptions underpinning the fiscal adjustment program prove realistic and effective, the financial situation of the public sector will remain fragile and has a long way to run. Simultaneously, the enigma of a viable solution to the fiscal problem of Greece won’t be solved unless long term and permanent measures are engaged in order to address the long-standing weaknesses of the economy. It is also pointed out that a stable political and economic environment must be ensured alongside with the attraction of investments and world cooperation.

Crisis-Induced Fiscal Restructuring in Europe

Vigorous debate over the effectiveness of the fiscal adjustment programmes for the crisis-stricken countries in the eurozone has grown quite polarised. In this Forum, several experts use analytical, evidence-based approaches to gauge the effectiveness of these programmes. The role played by the estimates of the fiscal multipliers that the Commission, IMF and ECB used to structure the adjustment programmes is crucial to this debate. If these multipliers were underestimated, as the IMF itself claims, then the negative impact of the fiscal restructuring on already fragile economies would also have been underestimated. Several authors examine the available evidence to determine whether the adjustments programmes were flawed from the outset. Another contribution analyses the effectiveness of structural reforms when monetary policy rates are near the zero lower bound. A final paper uses a case study of Ireland’s recovery thus far to examine the actual effects that the programmes have had on the crisis-stricken countries’ economies.

Reassessing the Role and Modalities of Fiscal Policy in Advanced Economies

This paper investigates how developments during and after the 2008–09 crisis have changed economists’ and policymakers’ views on: (i) fiscal risks and fiscal sustainability; (ii) the effectiveness of fiscal policy as a countercyclical tool; (iii) the appropriate design of fiscal adjustment programs; and (iv) the role of fiscal institutions.

The determinants of public expenditure and expenditure on education in particular in a selection of African countries

This study reports on research aimed at measuring the drivers behind public expenditure with specific reference to education expenditure in Africa. The empirical estimations are carried out using a public choice model on a panel of 15 selected African countries over the period 1995-2004. The results show that government expenditure on education is resilient to shocks and the education sector is not seriously affected by allocative changes that favour corruption. Expenditure on education in the countries included in the study generally complies with the guidelines set by the IMF in terms of their fiscal adjustment programs.

How to Restructure Greek Debt

Plan A for addressing the Greek debt crisis has taken the form of a €110 billion financial support package for Greece announced by the European Union and the International Monetary Fund on May 2, 2010. A significant part of that €110 billion, if and when it is disbursed, will be used to repay maturing Greek debt obligations, in full and on time. The success of Plan A is not inevitable; among other things, it will require the Greeks to accept - and to stick to - a harsh fiscal adjustment program for several years.If Plan A does not prosper, what are the alternatives? And how quickly could a Plan B be mobilized and executed?This paper outlines the elements of one possible Plan B, a restructuring of Greece’s roughly €300 billion of government debt. Prior sovereign debt restructurings provide considerable guidance for how such a restructuring might be shaped. But several key features of the Greek debt stock could make this operation significantly different from any previous sovereign debt workouts.To be sure, a restructuring of Greek debt will not relieve the country from the painful prospect of significant fiscal adjustment, nor will it displace the need for financial support from the official sector. But it may change how some of those funds are spent (for example, backstopping the domestic banking system as opposed to paying off maturing debt in full).This paper does not speculate about whether a restructuring of Greek debt will in fact become necessary or politically feasible. It focuses only on the how, not the whether or the when, of such a debt restructuring.