Fiscal Deficit Research Articles

Analisis Pengaruh Pembiayaan Surat Berharga Negara (SBN) Terhadap Tingkat Kemiskinan Indonesia: Masa Normal Dan Masa Pandemi Covid-19 (2020-2023)

When the country is experiencing a fiscal deficit, especially during a crisis, the issuance of government bonds is considered a necessity, predominantly to finance productive sectors. This paper aims to analyze the effect of financing originating from Government Bonds (SBN) on poverty levels in Indonesia. The analysis is carried out over a period from normal times (2012- 2019) to the Covid-19 pandemic crisis (2020-2022). The method of this study is explanatory research through a quantitative approach and multiple linear regression in this study using SPSS 25. The findings from this study are that there has been an increase in SBN and government allocation on social assistance spending. Generally, social assistance policies have also proven effective in reducing the percentage of poverty in the entire community, especially rural communities, yet have not been able to reduce urban poverty. Meanwhile, at the time of Covid 19 Pandemic, the increase of SBN cannot automatically eradicate poverty, as the social assistance budget does not have a significant effect on the percentage of poverty in urban areas.

Business Cycles in Africa: Unravelling the Dynamics of Sub-saharan Africa's Economic Growth

This research delves into the intricate dynamics of Africa's economic landscape against the backdrop of the global economic surge, surpassing rates unseen since the oil price shocks of the 1970s. The study shows a continuous period of robust global growth since 2004, characterized by low inflation and even distribution among nations, defying expectations given the increasing contribution of unstable emerging markets. The study sheds light on Africa's evolving economic scenario, marked by a growing awareness of sectoral fragmentation, oil price variation, and infrastructure development. Examining macroeconomic fundamentals in 2022, we note improvements in fiscal deficits but an increase in current account deficits, exchange rate fluctuations, and elevated inflation, driven by global factors. Moreover, the study unveils the enduring fragility of Africa's economic and social situation, affected by armed conflicts, unfavorable weather conditions, and declining trade. Despite abundant natural resources, the region contends with persistent poverty, positioning it as one of the most impoverished globally. The plots highlighted the historical economic gaps, emphasizing the formidable hurdles that have impeded Sub-Saharan Africa's growth, particularly in comparison to East Asia & Pacific and Latin America & Caribbean. The disparities underscore the need for strategic interventions, including diversifying export bases, strengthening fiscal management, and promoting inclusive growth. The study concludes with a call for coordinated efforts to address the complex challenges, fostering sustained and inclusive economic growth across the continent.

Fiscal Deficits and Inflation in Ghana

The Ghanaian economy has been faced with persistent fiscal deficits over the years and this affects other macroeconomic variables like inflation. This study therefore empirically examines the effect of fiscal deficit on inflation in Ghana. The study deployed a quantitative research design technique, the Autoregressive Distributed Lag (ARDL) cointegration test, and vector error correction models using annual data spanning 1976 to 2019 with 44 observations. Findings revealed that there is a significant and negative short and long-run relationship between fiscal deficits and inflation in Ghana, with unidirectional causality running from inflation to fiscal deficit. The study recommends that the Government of Ghana should endeavour to finance fiscal deficits mostly through external sources and non-banking methods like the issuance of bonds at the foreign financial market since non-banking borrowing has low inflationary effects.

Deficit financing and Macroeconomic Performance: the Nigeria experience

Due to the mixed order of integration, the study uses the ARDL model to examine the relationship between deficit financing and the performance of the macroeconomy proxy by GDP in Nigeria over a thirty-year period, from 1990 to 2019. In the model, the inflation rate, the government's fiscal deficit, and the domestic money supply served as stand-ins for deficit financing. And the outcome demonstrates that while the model satisfied the sufficient condition of stability, it failed the necessary condition due to an explosive divergence indicator. Additionally, the variables have a long-term relationship, and based on estimates from the long-run equation, all of the variables have a significant impact on the economy, with the domestic money supply having a positive effect and inflation and the government fiscal deficit having a negative impact.

Russia’s invasion of Ukraine and its impact on the economic performance of G20 countries

This paper aims to examine the impact of the Russia-Ukraine war on the performance of the Group of Twenty (G20) countries by analyzing the economic performance of these countries before and after the war, analyzing and measuring empirically from 2000 to 2022. The Russian invasion of Ukraine has prompted many researchers to study the impact of the conflict on the economic performance of the world’s most prosperous countries. Furthermore, the influence of global commerce has demonstrated that the Russia-Ukraine war has impacted the global trade imbalance, harming the economic performance of the 27 European Union (EU) nations (Misini & Tosuni, 2023b). The methodology is based on a comparison of each of the G20 country’s economic performance indexes (EPIs) to the countries of the EU. These countries’ performance will be evaluated using the most essential macroeconomic indicators: unemployment, inflation, fiscal deficit, and yearly economic growth. In addition, this paper will examine the influence of the Russia-Ukraine war on the economic performance of these countries (G20). The analysis employed dot plot analysis, descriptive statistical analysis, and regression to conduct a more scientific investigation. The findings reveal that nations with high inflation as a result of the Russia-Ukraine war had lower economic performance, while those with low inflation had higher economic performance. Countries with lower inflation have produced greater economic results. Turkey and Argentina have experienced significant swings in economic performance. Economic growth and the budget deficit have had a favorable impact on the G20 countries’ economic performance.

The impact of fiscal deficit on economic growth: An empirical study in selected MENA countries

The purpose of this article is to investigate how the fiscal deficit affects economic growth in five Middle Eastern and North African (MENA) countries: Bahrain, Algeria, Egypt, Morocco, and Jordan. These economies are bewildered by their high deficit levels, and their weak investment growth keeps them from achieving economic growth. This investigation, which spans the years 1995 through 2020, uses the ARDL (autoregressive distributed lag) methodology. The author selected four variables for this study: economic growth serves as the dependent variable, while the set of independent variables includes economic growth (GDPG), gross fixed capital formation as a percentage of GDP (GFCF), deficit as a percentage of GDP (DEFICIT), and inflation (INF). The long-run results showed that there is a negative link between economic growth and deficit; however, a positive relationship existed between inflation and economic growth. Gross fixed capital formation did not show any significant relationship with economic growth in the long run. In the short run, the results showed that inflation has a negative relationship with economic growth. The remaining variables, deficit, and gross fixed capital formation did not show a significant relationship with economic growth.

Empirical analysis of China's fiscal deficit, trade surplus and private sector savings based on historical data

Empirical analysis of China's fiscal deficit, trade surplus and private sector savings based on historical data

THE COVID-19 CONTAINMENT IN INDONESIA AND SOFT LAW: A RISK-TO-OBJECTIVE ANALYSIS

This article illustrates how Basel III, a soft law legal framework guiding how regulators supervise financial institutions in order to prevent and mitigate systemic financial crises, especially the requirement regarding the governance of sovereign debt, is being implemented in Indonesia. The analysis was done by scrutinising the relevant authority’s responses and monetary policy during COVID-19. Also, it examines whether the applicable regulations and other related policies align with the grand objectives of the financial sector. This article provides several important takeaways. First, benefiting from the soft traits of Basel III, the oversight authorities (OJK and BI) have tried to enshrine the government’s resilient and prudent financial state through flexibility. Second, instead of taking expansionary legal measures to stimulate the state’s income and limit the state’s expenses, BI and the government have worked together to contain the damage of the pandemic through a quasi-fiscal program (burden-sharing program, BSP). Third, the legislation of Law No. 3/2023 did not make the BI’s objective less risky. It also suggests that more could have been done to prevent the fiscal deficit, especially by the government, through fiscal consolidation (limiting or decreasing the state’s expenses).

Asymmetric Effects of Fiscal Deficit Financing and Inflation Dynamics in Ghana

Asymmetric Effects of Fiscal Deficit Financing and Inflation Dynamics in Ghana

Fiscal Deficit Inflation Nexus in Nigeria

Fiscal Deficit Inflation Nexus in Nigeria

Regime Effects of Fiscal Deficit Financing and Inflation Dynamics in Ghana

Regime Effects of Fiscal Deficit Financing and Inflation Dynamics in Ghana

Decoding the government budget puzzle

Purpose: The relationship between public expenditure and revenue that determines the budget balance in the explanation of budget deficits is very important. This study aimed to examine the association between public spending and income in Turkey. Methodology: This article applies the continuous wavelet transform method (CWT) to study the relation-ship between government revenues and expenditures in Turkey. The study, which covers the period 2006-2020, consists of monthly data. The following four CWT tools were used in the analysis: Wavelet Power Spectrum, Cross Wavelet Power, Wavelet Coherence, and Phase Difference. Results: The results of the study, controlling taxes rather than expenditures, play a key role in reducing fis-cal deficits in Turkey in the short term. It is revealed that the dynamics of the budget balance in the medium term can be explained by the spend-tax hypothesis and that the tax burden can be alleviated by spending cuts. In the long term, results were obtained that support the spend-tax hypothesis. Conclusion: The paper reveals that taxes play an important role in controlling budget deficits in the short run. It turns out that the dynamics of the budget balance can be explained in the medium term by expendi-ture cuts and then the tax burden can be alleviated. In the long run, implementing fiscal policies based on public spending rather than taxation will be more effective against budget deficits.

Assessment of extreme temperature to fiscal pressure in China

This paper investigates the impact of climate change on government fiscal pressure using local governments’ fiscal data in China from 2000 to 2020. While previous studies have extensively explored the effects of climate change on individuals and economies, there has been limited research on the negative effects of climate change from a government fiscal perspective. Our study makes contributions by using county-level fiscal data in China, allowing for a detailed examination of the fiscal implications of weather extremes. Moreover, we comprehensively analyze the underlying mechanisms involving population mobility, industrial structure, and electricity consumption. The empirical results indicate that each additional day of extreme temperature in a year leads to a CNY 0.002 billion increase in the general public budget deficit, which is equivalent to 0.1093% of the local fiscal deficit. Furthermore, local governments heavily reliant on agriculture, experiencing low electricity consumption, and significant population outflows face even greater challenges. Notably, medical insurance and the “province-managing-county” reform program emerge as crucial mitigating factors against fiscal pressures. By providing a thorough assessment of climate change’s fiscal impact on local governments, this research contributes to the theoretical foundation for governmental initiatives aimed at reducing carbon emissions.

Пакистан – Международный валютный фонд: помощь или вызов экономическому суверенитету?

Pakistan has faced economic challenges in recent years amid rising global crude oil prices and hydrocarbon import bills: free fall of the rupee, high interest rates, elevated fiscal deficits, 37% inflation, falling stock market, and as a result – shrinking industrial production and elimination of social welfare spending. The borrowings from the IMF, China, and Gulf countries to restore foreign exchange reserves and lack of capability to return them convinced the military-civil authorities in 2023 to declare a threat to the country’s economic sovereignty. The 2019 IMF financial assistance program approved the allocation of 6.5 billion USD until 2023. In 2023, the Fund approved an additional Stand-By Agreement in the amount of 3 billion USD. Basic requirements of the IMF included tightening of credit and financial policy; conducting reforms to improve budgetary discipline and broaden the tax base; reducing public debt; etc. The authorities took a number of urgent measures, first of all, they increased electricity tariffs and the amount of collected taxes. Pakistani society has been critical of the IMF’s demands, especially the increases in electricity tariffs and cuts in social benefits, accusing the IMF of making Pakistan a victim of a debt trap, like many other developing countries. In 2020–2021, the five COVID-19 pandemic waves in Pakistan and then the devastating flood in the country made the situation even more complicated. Challenges in the economy were aggravated by the fierce internal struggle of political opponents. The economic reforms carried out by the three subsequent governments in 2018–2022, headed by prime ministers Imran Khan, Shehbaz Sharif, and Anwaar Haq Kakar, were inconsistent and contradictory, which provoked criticism on the part of the IMF.

Gold Price and Inflation Relationship in India: Empirical Study

Abstract: This empirical study investigates the complex relationship between gold prices and inflation in India, a country where gold is deeply entrenched not only as an economic asset but also as a cultural symbol. Recognizing gold's unique position in the Indian context, this research explores how global economic trends and domestic cultural practices converge to influence gold prices. The study utilizes examining key economic indicators such as crude oil prices, exchange rates, trade and fiscal deficits, and their interplay with gold prices. Employing unit root tests like KPSS and Ng-Perron, followed by Johansen’s cointegration analysis and Granger causality tests, the research uncovers significant long-term equilibrium relationships and directional influences among these variables. The findings reveal the multifaceted nature of gold in India, influenced by both global economic conditions and socio-cultural factors, offering insights crucial for policymakers and investors alike. This study contributes to a deeper understanding of the gold market in India, highlighting its role as an inflation hedge and its cultural significance, thereby enriching the broader discourse on gold in the global economic landscape.

The Impact of Quantitative Easing on The U.S. Economy

Quantitative easing has had a profound impact on various aspects of the US economy, including social welfare and wealth disparities, education reforms, changes in government fiscal strategies and financial regulation, alterations in consumption savings and investment patterns, as well as corporate strategy adjustments. Additionally, this policy has significantly influenced academia, policymaking, and public discourse. The recession was not limited to the financial markets but affected all sectors of society. In a low-interest-rate environment, capital seeking higher returns flooded into the stock and real estate markets leading to soaring prices. While excessive borrowing and spending may stimulate short-term economic growth; it could trigger a credit crunch that would further depress growth in the long run. In the current global low-interest rate environment, higher education institutions have the option of obtaining funds through debt financing; however, they must remain vigilant to fluctuations in tuition and educational burden. Collaboration between governments, educational institutions, employers and students is crucial for mitigating this crisis. Vocational education has become a more cost-effective and adaptable alternative due to its lower tuition fees. Furthermore, quantitative easing may impose constraints on future government policymaking regarding debt-related issues. The government should closely monitor changes in inflationary pressures, take measures to contain the threat of high inflation to economic stability, and prevent long-term debt accumulation from leading to fiscal deficits and cuts in public services.

Inflation a risk in Bolivia: in the face of natural gas and NIR deaccumulation and the vulnerability of foreign debt and fiscal deficit

El objetivo de este artículo, es ofrecer una visión general del modelo económico, social comunitario y productivo de Bolivia desde el 2006 al 2022, el modelo busca principalmente mantener los precios estables, es decir una inflación baja con un control en los precios nacionales a través del tipo de cambio fijo y en los precios internacionales con la subvención de carburantes que se ven afectadas por el precio del petróleo. Todo ello, soportado por las variables macroeconómicas que estudiaremos, como el desplome de los ingresos de divisas o dólares a través de la exportación de gas natural y los ahorros por la desacumulación del oro, divisas y derechos especiales de giro, como también del aumento de los gastos por la deuda externa, el gasto público en el aparato estatal con niveles de déficit fiscales y las subvenciones de la importaciones de carburantes de diésel y gasolina especialmente, cada una de estas variables afectaron a los ahorros del país a través de las reservas internacionales netas, tal como nos reflejan los datos históricos. Además, que Bolivia se caracteriza por no potenciar la investigación, desarrollo, tecnología y la innovación, el conocimiento con el capital humano cualificado y la productividad, lo que desemboco en un alto nivel informal laboral y desempleo, con una insuficiente sostenibilidad productiva en moneda extranjera dólares, infiriendo en temas de políticas públicas en el corto, mediano y largo plazo en el PIB.

Does Pakistan's Fiscal Deficit Curb Economic Growth? An ARDL Bound Testing Methodology

This study examines Pakistan's fiscal deficit dilemma with an emphasis on economic development. The ARDL technique was used to analyze secondary data from 1982 to 2020 for the study. The results suggest that fiscal deficits financed by debt may involve only the allocation of financial capitals from the private firms to the public sector and can hurt economic development. According to the study, Pakistan's fiscal deficit is the result of ineffectiveness in the tax structure and a high proportion of unproductive outlays, including security, debt repayment, and needless parliamentary spending. The research also includes recommendations for addressing the deficit problem. The primary objective of government policies is to restrict excessive domestic credit expansion to evade the contrary impact of fiscal deficit. Additionally, the authorities must reduce the loaning rate to encourage a vigorous investment climate, which will increase employment prospects and government income.

What broke the pearl of the Indian ocean? The causes of the Sri Lankan economic crisis and its policy implications

Sri Lanka unilaterally defaulted on its external debt in April 2022, exposing its long-standing economic and financial vulnerabilities and igniting a series of inter-related multiple economic crises—fiscal, debt, currency, inflation, and balance of payments—as well as a vast socio-political upheaval. This paper analyses the economic crisis and its various dimensions to understand the sources of the crisis and draw policy implications. The role of fiscal balances and public debt in the crisis, along with debt sustainability, international sovereign bonds, liquidity crisis, and currency collapse, are analyzed. The root cause of Sri Lanka’s economic crisis was running persistent and large fiscal deficits, which were increasingly financed by unsustainable public debt, particularly foreign commercial borrowings. A substantial reduction and reprofiling of debt through restructuring of both domestic and foreign debt to ensure debt sustainability, meaningful fiscal policy reforms anchored by revenue increases and expenditure rationalization to reduce fiscal deficits, and deep growth-enhancing structural reforms are necessary for medium-term rescue and recovery and long-term growth and stability of Sri Lanka. The findings provide important policy lessons for other emerging markets and middle-income economies.

Cuba’s Monetary Reform and Triple-Digit Inflation

AbstractDiverse elements have driven inflation in the Cuban economy in the early 2020s, but the big-bang devaluation of the peso in 2021—the key measure that unlocks monetary reform—stands out as the main determinant. Analysis indicates that the inflation rate ranged between 174% and 700%, well above the government’s 2021 consumer price index estimate (77%) and closer to the deflator of household consumption derived from the national income accounts (442%). Even with this larger inflation, there is room for a real depreciation of the peso in the short term. The relative rise of tradable goods prices and incomplete pass-through from the exchange rate to inflation create new incentives and enhance financial transparency in the short term. However, the absence of sufficient structural reforms, the complex macroeconomic scenario, and the persistence of high fiscal deficit, inflation, and devaluation of the peso in the informal market after 2021 put most of the potential benefits of the monetary reform at risk. Monetary instability is a deep, continuing problem.