Fiscal Interventions Research Articles

Monetary policy and financial economic growth

In this paper, we investigate the effectiveness of monetary policy in a modified neoclassical economic growth framework. We extend a two-asset model to a three-asset one by adding the bond market under the variation of parameters and show that the impact of monetary expansion on inflation is complete in the two-asset model but is not complete in the three-asset model. Moreover, we find that in both of these models, the impact of monetary policy (or equivalently inflation) on the economic growth is ambiguous due to the fiscal policy intervention, and public expectations play crucial roles for the effectiveness and transmission of monetary policy in economic growth models. Finally, we show that our models are stable.

Sweetened beverage taxes and changes in beverage price, imports and manufacturing: interrupted time series analysis in a middle-income country

BackgroundThe Pacific Island nation of Tonga (a middle-income country) introduced a sweetened beverage tax of T$0.50/L in 2013, with this increasing further in 2016 (to T$1.00/L), and in 2017 (T$1.50/L; US$0.02/oz). Given the potential importance of such types of fiscal intervention for preventing chronic disease, we aimed to evaluate the impact of these tax changes in Tonga.MethodsInterrupted time series analysis was used to examine monthly import volumes and quarterly price and manufacturing 1 year after each tax change, compared with a counterfactual based on existing trends. Autocorrelation was adjusted for when present, and adjustments were made for changes in GDP per capita, visitor numbers, season and T$/US$ exchange rate.ResultsIn the year after the 2013, 2016 and 2017 tax increases, the price of an indicator soft drink increased by 16.8% (95%CI: 6.3 to 29.6), 3.7% (− 0.6 to 8.3) and 17.6% (6.0 to 32.0) respectively. Imports of sweetened beverages decreased with changes of − 10.4% (− 23.6 to 9.0), − 30.3% (− 38.8 to − 20.5) and − 62.5% (− 73.1 to − 43.4) respectively. Juice imports changed by − 54.2% (− 93.2 to − 1.1), and sachet drinks by − 15.5% (− 67.8 to 88.3) after the 2017 tax increase. Tonga water bottling (T$) increased in value by 143% (69 to 334) after the 2016 tax increase and soft drink manufacturing increased by 20% (2 to 46, albeit 5% market share).ConclusionsConsistent with international evaluations of sugar-sweetened beverage taxes, the taxes in Tonga were associated with increased prices, decreased taxed beverages imports, and increased locally bottled water.

Interaction Effect of Lockdown with Economic and Fiscal Measures against COVID-19 on Social-Distancing Compliance: Evidence from Africa

The objective of this paper is to assess the impact of lockdown on human mobility based on a sample of Africa countries. Using a difference-in-difference (DiD) approach we find that lockdown causes a sharp decline in people's movement suggesting high compliance with social distancing requirements in countries under lockdown. Following the lockdown, workplace visits decrease by nearly 14 points of percentage in comparison to the baseline. We observe a similar decline concerning the visits in retail and recreation places or groceries and pharmacies. Inversely, the time spent at home increase by 6 points of percentage. These findings suggest that compliance with social-distancing requirements is higher in countries applying strict containment measures. More interestingly, this paper provides evidence that people's compliance with social-distancing measures is higher when combining lockdown measures with economic and fiscal interventions. We also find that access to the internet or increasing acquisition information about COVID-19 amplifies compliance with stay-at-home orders.

The Brazilian renewable energy policy framework: instrument design and coherence

ABSTRACTIn the context of Brazil's rising energy-related greenhouse gas (GHG) emissions, we develop a forward-looking analysis of the domestic renewable energy policy framework. We probe the overall effectiveness of this framework by focusing on instrument design (in terms of stringency and predictability) as well as policy coherence. We analyze the development of solar, wind and hydropower, as well as biodiesel and ethanol, in the period between 2003 and 2018. We find strong increases in stringency for biodiesel, solar and wind power, marginal ones for ethanol, and decreasing ones for hydropower. Predictability presents a consistent challenge for policy effectiveness, with the exception of biodiesel. Overall policy coherence improves with fossil fuel subsidy reductions after 2014, although the complex environmental licensing regime as well as ad hoc fiscal interventions and price controls in the fuel markets create tensions for biofuels expansion. The policy framework as it has evolved through the period under consideration is neither likely to slow down/reverse the growth trend in natural gas consumption for power generation, nor to significantly alter the fuel mix in light-vehicle transportation. Considering that improvements in the policy framework are partially driven by non-climate rationales, we conclude that rising energy-related GHG emissions will increasingly challenge Brazil's contribution to international temperature targets while diminishing its stature in global climate diplomacy.Key policy insightsRenewable energy policies in Brazil suffer from a lack of predictability.While recent reductions in fossil fuel subsidies have improved policy coherence, significant incoherencies between policy instruments impede renewable energy expansion.Increasingly ambitious expansion targets for solar and wind power will need to close the supply gap resulting from the relative decline of hydropower in order to avoid further increases in natural gas consumption.Although the Bolsonaro administration has not created substantial policy changes so far, it introduces additional uncertainties regarding long-term decarbonization, while also diminishing Brazil's diplomatic stature in international negotiations.

Taxation of unprocessed sugar or sugar-added foods for reducing their consumption and preventing obesity or other adverse health outcomes.

Taxation of unprocessed sugar or sugar-added foods for reducing their consumption and preventing obesity or other adverse health outcomes.

Las Cortes valencianas y el cambio de las estructuras fiscales en el tránsito del siglo XIV al XV

On étudie ici le rôle joué par les Cortes dans la machinerie fiscale si compliquée du bas Moyen Age. Ce n'est pas seulement une analyse précise sur les éléments de chacun de ces impôts; c'est, en plus, un traité qui tente d'établir les causes qui les ont motivé, les sources qui les engendrèrent et quel a été leur utilité tout au long du XIVeme siècle et jusqu'a leur consolidation au XVeme, à travers l'examen des allocations (indemnités) extraordinaires qui ont été concédées. Situés, ces revenus, dans le contexte fiscal et historique qui les rendirent possible, dans un aperçu rapide de l'évolution des Cortes et de sa contribution a la Couronne, nous nous proposons un triple objectif centré sur l'analyse de la structure administrative de la Généralité, sur son organisation financière et sur le rôle que joue l'organisme dans la dynamique politique du règne. L'incapacité des finances royales, les limites que le monarque s'impose quant à la création d'impôts, le besoin d'effectifs et le recours continuel au règne, rendront possible son intervention politique et fiscale. Les Cortes participent a la concession d'une série de lois ou privilèges et à leur maintien, parvenant, parallèlement, à controler le don. Controle qui mènera, de lui-même, a la consolidation du conseil chargé de l'administrer: la Généralité.

ANALISIS KESEIMBANGAN TINGKAT SUKU BUNGA DAN GDP DI INDONESIA : TINJAUAN INTERAKSI KEBIJAKAN FISKAL DAN MONETER (1998 – 2011)

The aim of this study is to see how the equlibrium (internal balance) of interest rate and GDP created by the goods market (IS curve) and money market (LM). Then from the earlier internal balance, the study want to see how the fiscal and monetary policy affects the economy, particularly in influencing the internal balance when the two policies were interacted. The study was conducted with Two Stage Least Square (TSLS) method to finding IS – LM equation using time series data (1998 – 2011). Then do the trial and error to find an internal balance. After that the authors try to find the shift of IS – LM when there were policy intervention. The result showed that the earlier of internal balance is 7,79% for interest rate, and Rp. 438.011 billion for GDP. Based on estimation of time series data, the study concluded that, there is no equilbrium for internal balance when fiscal and monetary policy were interacted. When there is fiscal policy intervention, the result show that the policy effectively affect economic growth. While when there is monetary policy intervention, the result show that the economy not responsive to the policy. So when the fiscal and monetary policy were interacted, it can not be created the new equlibrium (internal balance).

La seguridad social chilena en pensiones y el principio de la solidaridad: evolución histórica y retos actuales

Este artículo analiza y desarrolla el principio de la solidaridad en el derecho de la seguridad social y cómo este se manifiesta en el sistema chileno de pensiones, establecido según las reglas de los seguros bismarckianos, evolucionando en cobertura y prestaciones hasta la reforma estructural de 1980, año en que nace un régimen de pensiones por capitalización individual, gestionado por administradoras de fondos de pensiones con cotizaciones de cargo del afiliado y baja presencia del Estado. La revisión que hacen los autores muestra que el sistema se mantiene con ese carácter hasta la implantación de las pensiones básicas y aportes “solidarios” complementarios a la pensión por capitalización, con intervención financiera fiscal e importante gestión pública. Y que luego en la segunda década de este siglo, se ha profundizado el debate por el bajo nivel de las pensiones y las necesidades de ajustes del sistema, tanto estructurales como paramétricos, lo que está determinado, entre otros aspectos, por el contenido que se atribuya al principio de la solidaridad. En los apartados que integran el estudio, los autores abordan la problemática de los principios, la conceptualización de la solidaridad y su recepción en la seguridad social chilena en pensiones, conclusiones y retos que se enfrentan en la actualidad.

Public Debt and Wealth Inequality

Fiscal interventions in the form of higher public debt depend on whether an economy is dynamically efficient or not, and thus on the tax burden of public debt. The consequence of such policy to wealth inequality is, however, largely unknown. This paper assesses the implications of public debt for wealth inequality using a stylized Diamond model. I find that public debt distributes wealth more unequally with particularly sever effects to wealth inequality. The findings can extend to a highly progressive tax system or when real interest rates are low. The increase in the after-tax wage inequality that is driven by the general equilibrium effects of public debt is the key factor explaining these results. The redistribution of resources across generations only comes to reinforce this latter effect by raising the bequest motive of the rich. The crowd-out of physical capital by public debt is the most important aspect behind the \textit{qualitative} and \textit{quantitative} implications of public debt on wealth inequality.

Global impact of loss of confidence in Asian emerging markets

AbstractWith the interest rate hike in the US and, more recently, in the UK, sudden stops in investments and capital reversals are apparent in the Asian emerging economies. A modelling approach is taken, using the G‐Cubed model, to simulate the potential global economic impacts, with a focus on Asia. The results demonstrate that myopic fiscal interventions in Asian emerging economies could result in short‐term stimulus, at the expense of long‐term growth. The stimulus in advanced economies too would be short‐lived, diverting the benefits to unintended fractions in the global economy. Advanced economies that minimally change their trade and investment patterns tend to avoid distortionary impacts of the crisis.

Dynamic Inefficiency and Fiscal Interventions in an Economy with Land and Transaction Costs

In the discussion whether real interest rates smaller than real growth rates can be taken as evidence of dynamic inefficiency that calls for fiscal interventions, a seemingly killing objection points to land, a non-produced durable asset in positive supply, as a reason why dynamic inefficiency can be ruled out. If real interest rates were expected to be below real growth rates forever, the value of land would be unbounded, which is incompatible with equilibrium. The paper shows that this objection is not robust to the presence of an arbitrarily small per-unit-of-value transaction cost. The paper also specifies fiscal interventions that provide for Pareto improvements even though they involve a resource cost. For the debate about public debt policy, the land argument is a red herring because it is incompatible with the presence of fiat money and debt denominated in units of fiat money.

Policy Responses to Modern Economic Crises

In March 2020, Jay Powell, Federal Reserve (Fed) chairperson, faced a daunting prospect that only a few months prior seemed like a remote possibility: massive expansion of the Fed's balance sheet. Over the past five years, the economy had experienced steady economic growth, permitting the Fed to reduce its balance sheet. The Fed's economists expected the trend to continue. But the rapidly spreading global coronavirus pandemic (known as COVID-19) had rendered moot all prior forecasts. In addition to the health crisis, the United States—and the world—faced the prospect of another economic crisis—just over 10 years after emerging from the largest recession since the Great Depression. How should Powell and his counterparts who ran fiscal policy respond to the crisis? And to what extent could the policy experiments implemented in response to the Great Recession of 2008 guide the monetary and fiscal policy interventions in response to the pandemic crisis? Excerpt UVA-GEM-0182 Rev. Oct. 28, 2020 Policy Responses to Modern Economic Crises In March 2020, Jay Powell, Federal Reserve (Fed) chairperson, faced a daunting prospect that only a few months prior seemed like a remote possibility: massive expansion of the Fed's balance sheet. Over the past five years, the economy had experienced steady economic growth, permitting the Fed to reduce its balance sheet (see Exhibit1 for the monetary base). The Fed's economists expected the trend to continue. But the rapidly spreading global coronavirus pandemic (known as COVID-19) had rendered moot all prior forecasts. In addition to the health crisis, the United States—and the world—faced the prospect of another economic crisis—just over 10 years after emerging from the largest recession since the Great Depression. How should Powell and his counterparts who ran fiscal policy respond to the crisis? And to what extent could the policy experiments implemented in response to the Great Recession of 2008 guide the monetary and fiscal policy interventions in response to the pandemic crisis? Global Financial Crisis As is characteristic of economic crises, the global financial crisis of 2008 came as a surprise that forced policymakers to adapt to evolving events. Mortgage delinquencies accelerated, and indices of national home prices started to decline in early 2007 (Exhibit 2). Lenders such as HSBC experienced large losses, and some filed for bankruptcy. Despite the issues in the housing market, policymakers at first maintained an optimistic outlook. On March 17, Fed Chairman Ben Bernanke stated: “We believe the effect of the troubles in the subprime sector on the broader housing market will likely be limited, and we do not expect significant spillovers from the subprime market to the rest of the economy or to the financial system.” . . .

Exchange Rate Volatility and International Trade-in

This study investigates the impact of exchange rate volatilities on international trade in Nigeria. The research is carried under the assumption that exchange rate volatilities are deemed to impact on the volume of export and import trading activities. The study made use of Secondary data from 1996 to 2018. Econometric tools were used to ascertain relationships. The paper established a mixed result between the variables under review. While some of the tests did not provide adequate and predictive information on the relationship between exports, imports and real effective exchange rate, others did. The VAR model estimates indicate an inverse relationship between Export, Import and REER in current periods. A unit increase in export and import in a particular year leads to about 0.9% and 0.4% decrease in REER respectively. Variance decomposition analysis suggests that the shocks partially explain fluctuations in REER, as well as exports and imports. The Impulse response analysis indicates a negative association between export and real effective exchange rate while it was majorly positive for imports throughout the ten periods. The causal effect reveals that import causes exports but that exports do not granger cause imports. The ARCH modelling approach suggests the existence of a first-order Arch effect and a significant GARCH term. Though the Coefficient of GARCH in a mean term is negative; it produced a singular covariance which by itself is not unique. Results show evidence of volatility of REER clustering on import and export trading activities in Nigeria. This could have serious implications for growth in Nigeria, as a reduction in the growth of exports could reduce the foreign exchange earnings available for the financing of developmental projects. At the same time, a decline in imports could affect domestic production and consumption. It could also impinge negatively on the balance of payment positions for Nigeria. In line with these observations, monetary and fiscal interventions are required to mitigate the adverse effects since financial shocks often exacerbate exchange rate volatilities.

Mitigating the Socio-Economic Impacts of COVID-19; Role of Governments in Sub-Saharan Africa, Fiscal and Monetary Policy Perspectives

In this paper, we investigate the role of governments in mitigating the socio-economic impacts of COVID-19. We also try to evaluate the fiscal and monetary policy interventions by governments and assess how such policies could be sustained. Taking Ghana as a sample, this study reveals that, the coordinated applications of monetary and fiscal policies are lifesaving, preventing loss of incomes and jobs, protecting bankruptcies in businesses, and finally enhancing economic recovery. We propose a CCCRD Model which could serve as a global strategy for governments in the fight against COVID-19. Backing such policies with legislation could help in their sustenance.

Government Spending Multipliers in (Un)certain Times

We estimate the dynamic effects of government spending shocks, using time-varying volatility in US data modeled through a Markov switching process. We find that the average government spending multiplier is significantly and persistently above one, driven by a crowding-in of private consumption and non-residential investment. We rationalize the results empirically through a contemporaneously countercyclical response of government spending and an efficient weighting of observations inversely to their error variance. We then show that the multiplier is significantly smaller when volatility is high, consistent with theories predicting reduced effectiveness of fiscal interventions in uncertain times.

The importance of logistics and supply chains for pandemia conditions

The COVID-19 pandemic has introduced an unprecedented amount of uncertainty into the global economy as countries around the world battle growing troubles, implement broad social distancing strategies, and seek fiscal interventions to stabilize markets. What about logistics and supply chains in the market? Is there an impact of the COVID-19 virus on logisticians' obligations when securing market requirements in accordance with international business standards? Most entities have focused their attention on protecting employees, perceiving and managing risks that are threatening to business, and managing supply chain downtime due to efforts to curb the spread of virus coronas. The pervasive impact, now pandemic, on businesses and supply chains will be clearer in the coming period, while global economic recovery will depend on the impact of the affected countries to cope with the effects of the virus.

Государственный долг: новые риски в условиях кризиса COVID-19. Часть 1

The crisis associated with the COVID-19 pandemic has led to unprecedented fiscal interventions in all affected countries, including Russia. The sharp increase in unplanned budget spending in the context of the collapse of tax and export revenues created the threat of destabilization of public finances and of deployment of a debt spiral. The article presents the expert opinions on the economic impact of the growth of such debt and on the threshold value of debt relative to GDP, as well as on strategies that can prevent a debt crisis. Discusses the forecasts of the growth of budgetary expenditures and public debt, as well as the fiscal incentives applied in different countries.

Fiscal Multipliers with Financial Fragmentation Risk and Interactions with Monetary Policy

We quantify the size of fiscal multipliers under financial fragmentation risk and demonstrate how non-standard monetary policy can support the macroeconomic transmission of fiscal interventions. We employ a DSGE model with financial frictions whereby the interplay of corporate, banks and sovereign solvency risk affect the transmission of fiscal policy. The output multiplier of fiscal expansion is found to be significantly dampened by tighter financial conditions in case households are less certain about implicit and explicit state-guarantees for the banking system, or banks are weakly capitalized and highly exposed to the government sector. In this context, we show that central bank asset purchases or liquidity operations designed to ensure favourable bank funding conditions can restore fiscal multipliers. JEL Classification: E44, E52, E62

ГОСУДАРСТВЕННЫЙ ДОЛГ: НОВЫЕ РИСКИ В УСЛОВИЯХ КРИЗИСА COVID-19. ЧАСТЬ 2

The crisis associated with the COVID-19 pandemic has led to unprecedented fiscal interventions in all affected countries, including Russia. A sharp increase in unplanned budget expenditures, in the face of a collapse of tax and export revenues, has created a threat of public finances destabilisation and debt spiral launch. The article presents expert opinions on the impact of debt growth on the economy, the threshold of debt towards GDP, and strategies that can prevent a debt crisis. Forecasts of growth in budget expenditures and public debt, as well as fiscal incentives applied in some countries are discussed.

Understanding changes in soft drinks marketing after introduction of the UK Soft Drinks Industry Levy: developing a theory of change by use of concept mapping and stakeholder interviews

BackgroundIn 2018, the UK government introduced a Soft Drinks Industry Levy (SDIL) to reduce the consumption of sugary drinks and their health consequences. Taxes on sugary drinks might prompt changes in associated marketing, but whether and how this happens, and the implications for health, are unclear. To inform exploration of changes in sugary drinks marketing that might result from the SDIL, we developed a theory of change by use of concept mapping and stakeholder interviews. MethodsWe used concept mapping, an inductive technique, to develop an initial theory. We then elaborated this theory on the basis of one-to-one telephone interviews with six representatives of each of industry, academia, and civil society (total n=18), who had experience of strategic decision-making or marketing by sugary drinks firms. Interviewees were recruited using seed and snowballing sampling. Interviews explored motivations for and manifestations of changes in soft drink marketing. Interviews were transcribed verbatim and thematically analysed. To maximise trustworthiness, four transcripts were double-coded, the revised theory was informally peer reviewed, three transcripts were excluded from initial coding to allow comparison with the revised theory, and the resultant theory was validated by interviewees. FindingsThe initial theory described strategic planning and decision-making followed by the analysis and selection of specific marketing responses. After analysis of interviews we developed this concept into an iterative and circular theory of marketing change. Briefly, firms change marketing by reviewing their internal and external context, identifying a catalyst, deciding their brand positioning, and then selecting a combination of strategies to enact this positioning. Resultant changes in purchasing feed back into factors internal and external to the firm. Ethics approval was granted by the University of Cambridge Humanities and Social Sciences Research Ethics Committee. InterpretationThese findings extend understanding of industry responses to sugary drinks taxes and might be relevant for understanding of industry responses to fiscal interventions more generally. Our theory highlights that soft drinks firms are continually evolving, consider many external factors in addition to the SDIL, and think about marketing more broadly than just advertising. Our research was based on one case study of the SDIL; interviews were done 1 year after implementation of the levy. Future work should prospectively test our theory in alternative contexts. FundingJA and MW are funded by the Centre for Diet and Activity Research, a UK Clinical Research Collaboration Public Health Research Centre of Excellence. Funding from the British Heart Foundation, Cancer Research UK, Economic and Social Research Council, Medical Research Council, the National Institute for Health Research, and the Wellcome Trust, under the auspices of the UK Clinical Research Collaboration, is gratefully acknowledged. TP, JA and MW are funded by a grant from NIHR (16/130/01) to evaluate the UK Soft Drinks Industry Levy. HF receives funding for her PhD studentship from Public Health England and the Economic and Social Research Council. LL and FG are employed by Public Health England. MW holds an honorary consultant in public health contract with PHE. These funding sources had no direct role in the writing of the manuscript or decision to submit for publication.