Fiscal Policy Instruments Research Articles

Transforming public finance under the impact of COVID-19

Devastating effects of the COVID-19 pandemic throughout the world enhance the societal requests for effective healthcare and social protection systems, modern education, and high-quality infrastructure. In Ukraine, education, healthcare, and social services have been chronically deteriorating, and the corona-crisis has further exacerbated their state and increased poverty in the country. The aim of this study is to reveal the main weaknesses of fiscal policy in Ukraine and to outline the prospects of public finance transformations under the impact of the COVID-19. To achieve this aim, the indicators of fiscal policy response to the pandemic in Ukraine are calculated and a comparative analysis of Ukraine’s public finance structure with the international patterns is undertaken. A moderate fiscal impulse and insufficient fiscal rescue package in Ukraine are shown. Moreover, the inconsistencies of anti-crisis fiscal policy instruments with the international best practice are revealed. Summarizing the available theoretical sources and recent applied research allows identifying the prospects of public finances transformations under the impact of the COVID-19 in a global context. Along with the obtained results of Ukraine’s fiscal sector analysis, these form the basis for shaping the fiscal policy response in Ukraine over the medium term. Proposals for public financing of Ukraine’s health care and educational sectors, of the social safety nets and infrastructures under the impact of the pandemic are developed. Offsetting measures from the expenditure and revenue sides of the budget are drawn up for closing the arising fiscal gaps.

CAUSALITY LINKAGES BETWEEN INCOME INEQUALITY AND FINANCIAL GLOBALIZATION FOR G7 COUNTRIES

The main aim of this study is to evaluate the causality linkages between income inequality and financial globalization for G7 countries over the period 1970-2015. The bootstrap panel Granger causality analysis by Kónya (2006) is used. The empirical results indicate that there is a causality linkage between income inequality and financial globalization in most of the G7 countries. Furthermore, it is shown that income tax has a significant role on the causality linkage. Hence, in order to reduce income inequality, policy makers should apply high taxes on top income, using fiscal policy instruments

Dynamic effects of fiscal and monetary policy instruments on environmental pollution in ASEAN.

This study aims to re-examine the impacts of monetary and fiscal policy on environmental quality in ASEAN countries from 1990 to 2019. We utilized the panel and time series NARDL approach to explore the long-run and short-run estimates at a regional level and country level. ASEAN regional-wise analysis shows that contractionary monetary policy reduces the CO2 emissions, while expansionary monetary policy enhances CO2 emissions in the long run. The long-run coefficient further confirms that expansionary fiscal policy mitigates CO2 emissions in ASEAN. The impact of expansionary monetary and fiscal policy on CO2 emissions is positive and significant, while contractionary monetary and fiscal policy have an insignificant impact on CO2 emissions in the short run. ASEAN country-wise analysis also reported the country-specific estimates for the short and long run. Some policies can redesign in light of these novel findings in ASEAN economies.

Zakat versus Taxation as Islamic Fiscal Policy Tool

Linking Islamic instrument like zakah with social responsibility and economic growth is an area which is often unspoken. As such, this research intends to find out the potential challenges zakah can face while it is used as fiscal policy tool which has link with Islamic socially responsible financing to economic growth to poverty alleviation mentioning few. Though many Muslim based countries using Tax as an alternative tool for government earning, zakah as a tool has broader spectrum from having impact on economic development to the role as an instrument for Islamic socially responsible finance. This research uses qualitative paradigm to analyze the literature. The research is based on a desk-based research. The findings of this research prove that there are challenges to establish zakah as prescribed in the revealed text which can be minimized through different actions. It is projected that properly executed plan to manage zakah could be used as an instrument of fiscal policy as well as an Islamic socially responsible financing instrument.

Analisis Kebijakan Fiskal dalam Perspektif Ekonomi Islam; Sebuah Kajian Historis Pada Masa Umar bin Khattab

Fiscal policy in the Islamic period underwent various developments, both progress, and setbacks. Umar bin Khattab became one of the successful caliphs in the economic field, especially in managing his public finances. This article aims to identify fiscal policies in the time of the Caliph Umar bin Khattab, starting from the budget policy system, the financial management and allocation system, and its success. The method used is a qualitative approach. The data source used is secondary data with library research techniques, namely by collecting data derived from books, research results, websites, and other relevant sources. Analysis of data using descriptive technical analysis. The results of the discussion showed that fiscal policy during the Caliph Umar bin Khattab used a balanced budget system that was managed through Baitul Maal. Fiscal policy instruments developed include zakat, infaq, sedkah, wakaf, ghanimah, fa'i, kharaj, jizyah, ushur, and khums. Meanwhile, in terms of expenditure on budget allocation based on a priority scale, then it is used to fulfill the needs of mustahik, defense and security, social and religious, and state administration.

Causal Relationship between Fiscal Policy and Private Investment in Nigeria for the period 1986 -2019

This study investigated the causal relationship between fiscal policy and private investment in Nigeria (1986-2019) using secondary data from Statistical bulletin of Central Bank of Nigeria. The research work used the Granger Causality techniques to test the causal relationship between the independent variables (Tax revenue, Oil revenue, Total expenditure and Public debt) on the dependent variable (Private Investment) while VAR was used to test the short run relationship. The study found that fiscal policy instruments granger causes private investment in Nigeria within the period of the study. The study therefore advocates that Government should as necessity fully liberalized or privatized NNPC and the Power sector as these critical sectors will help the growth of the private sectors and reduce unemployment in the country. Nigerian Government ought to increase its spending on infrastructure, especially capital projects in the economy in order to bridge infrastructure gap in the country. Provision of tax incentives to private sectors by the Government should be encouraged, as this will help the growth of private investment in the country. Also, restructuring of the economy by manufacturing what we need should be encouraged by government because exporting commodity (raw material) means exporting jobs.

The Impact of Fiscal Policy on Income Inequality: A Case Study of Pakistan

This study investigates the impact of various fiscal policy instruments on the income inequality of Pakistan using an Auto Regressive Distributed Lag (ARDL) model on annual data. We find that direct taxes reduce income inequality, measured using the Gini index, while indirect taxes increase disparities. As the major portion of tax revenues are indirect taxes, the current tax regime of Pakistan does not achieve income redistribution. Similarly, development expenditures have significantly reduced income inequality, likely through the creation of employment opportunities. On the other hand, the overall fiscal deficit increases income inequality, due to a rising public debt financed by (regressive) indirect taxes. This study suggests that in the case of Pakistan, where direct taxes are low, a large shadow economy exists, and weak tax administration prevails, an increase in development expenditures and broadening of the tax base of direct taxes should be the main fiscal policy tools for income redistribution. Moreover, persistent high fiscal deficits in the long run should be avoided. Finally, governments should reduce educational inequalities and promote democratic values in the country in order to promote greater fairness in distribution of income.

ANALYSING THE IMPACT OF ECONOMIC POLICIES ON UNEMPLOYMENT AND POVERTY IN NIGERIA

This study is carried out to empirically examine the effect of economic policies on unemployment and poverty in Nigeria between 1970-2019. The persistent and high level of poverty in Nigeria accompanied by severe unemployment despite the adoption and implementation of various economic policies in terms of fiscal and monetary policies is the motivation behind this study. The objective of the study is to examine how effective economic policies have been in terms of fiscal and monetary policies in curbing unemployment and poverty incidence. The variables used are Poverty index (POV), Unemployment Rate (UMP), fiscal policy instruments in terms of Government expenditure (GEX), Tax and Public Debt, Monetary policy instruments in terms of monetary policy rate (MPR), interest rate (INR) and money supply (MS). Time series dynamic analysis was used to analyses the impact of these macroeconomic instruments on poverty and unemployment. The Auto Regressive Distributed Lag (ARDL) Model was used to examine the short-run, interim and long-run effect of economic policies on unemployment and poverty between 1970-2019. Preliminary test such as stationarity test, cointegration test and trend analysis were conducted before estimation. The evidences from various econometrics analyses from this study revealed that, macroeconomic policies such as money supply, government capital expenditure, unemployment rate and interest rate have a statistically significant impact on poverty level in Nigeria from 1970-2019. The implication of this is that an increase in money supply and government expenditure has a negative effect on poverty level but an increase in unemployment rate and inflation rate will lead to higher poverty level in Nigeria since unemployment rate has a positive and significant impact on poverty level. The recommendations made include; that, since government capital expenditure has a negative impact on poverty level, emphasis should be laid on increasing government capital expenditure especially those meant for development programs and projects to enhance employment which will in turn reduce poverty level in the country.

KNOWLEDGE ECONOMY, GLOBALIZATION AND TAXATION: WHAT CAN THE STATE DO?

The article analyzes the State’s fiscal crisis and the impact on social inequalities in the global age. The old instruments of fiscal and monetary policy have lost much of their effectiveness, and they no longer allow capitalism to be governed at its present stage of development. The changes in the productive forces, modifying profoundly the economic structure, vary over time the effectiveness and the practicability of the macroeconomic regulation tools available for governments. The article sustains that is necessary to circumscribe the level of deep integration achieved by current economies to restore the redistributive action in modern democracies and to safeguard welfare systems, in order to face the effects of the technological restructuring underway. Globalisation, financialisation, and technological change are inextricably interconnected in cognitive capitalism and therefore require a unitary policy action to be adequately addressed by governments.

Analisis Pengaruh Alokasi DAK Masing-Masing Bidang Terhadap Tingkat Kemiskinan di Kabupaten Pandeglang dan Kabupaten Lebak

Fiscal decentralization is one of the government’s strategies to improve people’s welfare. The fiscal decentralization policy instrument that can directly affect the quality of local government spending is The Specific Allocation Fund (DAK). The DAK management in the financial aspect has a few problems, nonoptimal regional government performance and mismatched allocation and government needs. Proposal based The Specific Allocation Fund (DAK) hopefully could adjust the development priorities determined by regional conditions, government needs, and undeveloped villages with high-level poverty. Pandeglang and Lebak Regency are the region with the highest poverty level in Banten Province. This study aims to analyze the DAK effect of each sector on poverty in Pandeglang and Lebak Regency. The analysis used Geographical Weighted Regression (GWR) with DAK data for each field in 2018 and poverty data in 2019. The result showed that DAK variables in education, health, and agriculture tended not to reduce poverty rates. The DAK variable in the housing and settlement sector, the marine and fisheries sector, the tourism sector, and the market sector tended to reduce poverty. At the same time, the DAK variable in Road, sanitation, and village funds tended to reduce poverty levels in most districts. Based on the study, the poverty alleviation program in each district is adjusted to each of the DAK sectors that are influential. However, the result indicated that the adjustment of DAK sectors influenced the poverty alleviation program in every district in Pandeglang and Lebak Regency.

How do fiscal, monetary policies, and trade openness impact interest rates in India?

This study assesses the role of monetary, fiscal factors, and trade openness causing variations of nominal and real interest rates in India for the deregulated regime. The autoregressive distributive lag (ARDL) bounds testing approach to cointegration finds that deposit rate, lending rate, and real interest rate have long‐run associations with the monetary, fiscal policy instruments, and trade openness. The error correction model representation of the ARDL framework finds that the broad money supply negatively impacts the deposit rate and the real interest rate, while positive impacts of income on each of the three interest rates are noticed. The fiscal deficit has a significant short‐term negative impact on the deposit rate and has a positive impact on the real interest rate. The exchange rate and openness to trade lower interest rates. The econometric appraisal may be perceptive to keep interest rate in the desired trail through the judicious adjustments of the policy instruments and deficit management. The significant impact of openness to trade on interest rates is a critical issue that the macroeconomic policy may face more challenges.

Assessing the Economic Impact of the Coronavirus Pandemic on the Production and Distribution of Livestock Across Value Chain Approach: The Case of Kellem Wollega Zone, Oromia National Regional State, Ethiopia

The aim of the study was to assess the economic impact of the Coronavirus on the production and distribution of livestock across the value chain approach in the case of Kellem Wollega Zone, Oromia National Regional State, Ethiopia, based on a total survey of 320 farmers. Descriptive statistics were used to present the effects of the pandemic on the marketing and consumption of major crop production and dairy products in the study areas. Survey result indicated that about 160 small holder farmers those involved in agriculture in the study areas were impacted by COVID-19 crises because the revenue of the farmer were close to down from 25 per cent to 50 per cent. The survey results also indicated that more than 37 per cent of the sample households in the study area affected by the COVID-19 crisis on workforce reduced consumer confidence. Lower demand in virus-affected states across the world will be transferred down the value chain, affecting demand and production levels at each stage, even in areas not directly affected by the virus. It seems that logistical issues linked to the COVID-19 crisis are creating extra costs in the coffee marketing system. Logistical and administrative issues regarding to the COVID-19 during the production time in the study areas were very low to providing service particularly input and fertilizer for the farmers on the time. Therefore, this study recommends that both fiscal and monetary policy instruments introduced by the government to fight the pandemic shall be continued, enforced and implemented in a coordinated way to support the effectiveness of interventions until the economy recovers.

The asymmetric effects of fiscal policy on inflation and economic activity in post-communist European countries

ABSTRACT Fiscal policy plays an important role in stimulating economic activity, but it also has a significant influence in securing monetary stability in an economy. Our study aims to analyse the asymmetric effects of fiscal policy on inflation and economic activity on twelve post-communist European countries that are associated with the European Union (EU) by either membership or by being members of the Eastern European Partnership (EaP). We explore the asymmetric effects on inflation and economic activity by using a Pooled Mean Group (PMG) estimator. The results show that in the long run, the fiscal policy instrument negatively influences both inflation and economic activity; in the short run, the effects are not significant. A Nonlinear Autoregressive Distributed Lag (NARDL) model was estimated individually for each country. Our main findings are that the cumulative impact of fiscal policy generates an inflationary growth effect for the EU countries in our sample.

The nexus of sectoral-based CO2 emissions and fiscal policy instruments in the light of Belt and Road Initiative.

Climate change due to global warming is becoming a major global issue over the past few decades. The emission of carbon dioxide (CO2) and other greenhouse gasses cause global warming. Most carbon emissions come from energy sectors, whereas transportation, industrial, and residential sectors are among the chief contributors. The present study investigates the effect of fiscal policy instruments, economic development, and foreign direct investment (FDI) on the sectoral emissions in Belt and Road Initiative (BRI) countries. The data used in this study is taken from the World Development Indicators (WDI) for the period between 2000 and 2018. Dynamic ordinary least squares (DOLS) and fully modified ordinary least squares (FMOLS) have been used to analyze the long-run impact of fiscal policy instruments, economic development, and FDI on CO2 emissions from transportation, energy, and industrial sectors. Furthermore, the pairwise Dumitrescu and Hurlin panel causality test was used to authorize the causal relationship among the variables under consideration. The results reveal that fiscal policy instruments, per capita gross domestic product, FDI, and CO2 emissions show a strong correlation in the industrial, electrical, and transportation sectors. Furthermore, it is shown that public spending is a more reliable tool to reduce CO2 emissions in the transportation and industrial sectors in the BRI region. This study provides useful information for policy-makers on taking preventive and corrective measures to reduce CO2 emissions in different sectors and promote sustainable development.

Public Debt Management and Macroeconomics Policies Coordination: Evidence from Jordan

This study aimed to analyze the effects of fiscal and monetary policies interactions on public debt in Jordan during (1970 – 2019). Using Vector Error Correction Model (VECM) derived from VAR (Vector Auto regression), and examine dynamic interactions between economic variables over time, by Appling Impulse Response Function, and Variance Decomposition. The results indicated that the fiscal policy instruments affect public debt in two different directions, the expansion of government expenditure positively affect public debt, while tax revenues reduce indebtedness. The monetary policy instruments affect public debt in the same directions, as the results indicated that the central bank in controlling money supply and managing interest rate helps the fiscal authority in reducing the public debt in Jordan. The results confirm the strongest impact of government expenditure on public debt in Jordan. The study recommends the necessity of rationalizing government expenditures and combating tax evasion. In addition, more coordination between fiscal and monetary policies.

The Norwegian Vehicle Electrification Policy and Its Implicit Price of Carbon

The rapid market uptake of battery and hybrid electric cars in Norway is unparalleled. We examine the fiscal policy instruments behind this development. In essence, the Norwegian policy consists in taxing internal combustion engine vehicles rather than subsidizing electric ones. There are 14 different fiscal incentives in place bearing on vehicles, fuel, or road use. All of them are in some way CO2-differentiated. In the tradition of positive economics, we derive the price of carbon implicit in each policy instrument and in the total package of taxes and subsidies. The price of carbon characterizing the trade-off between conventional and battery electric cars in Norway as of 2019 exceeds €1370 per ton of CO2. For light and heavy-duty commercial vehicles the corresponding prices have been conservatively estimated at €640 and €200 per ton of CO2, respectively. In addition, the penalty incurred by automakers for not meeting their 2020/2021 target under EU Regulation 2019/631 corresponds to a carbon price of the order of €340 per ton of CO2. As compared to the price of emission allowances in the European cap-and-trade system, the price of carbon paid by automakers and Norwegian motorists is one or two orders of magnitude higher.

SUBSTANTIATION OF PRIORITY OF ACHIEVING THE GOALS OF SUSTAINABLE DEVELOPMENT IN THE IMPLEMENTATION OF FISCAL POLICY

Introduction. With the approval of the global process of sustainable development increases the need for its research support. In this context, it is important to systematically use the instru ments of fiscal policy in achieving the goals of sustainable development, which will have a positive effect not only on a global scale, but also improve the socio-economic situation in Ukraine. The purpose of the article is to investigate the relationship between fiscal policy and sustainable development, to argue the priority of using the tools of fiscal policy in achieving the goals of sustainable development, as well as to assess the effectiveness of their use in achieving these goals. Methods. In the exploration of fiscal policy to achieve the goals of sustainable development used general and special methods, namely: comparison, grouping, graphical and tabular analysis. Results. It is substantiated that fiscal policy has a significant potential in ensuring sustainable development, being a kind of public policy, it has an impact on socio-economic processes taking place in the country. It is argued that in Ukrainian practice the use of fiscal policy tools does not provide progress in achieving sustainable development goals. The use of tax and expenditure regulation, as well as the instrument of debt finance occurs in the absence of a strategy for their coordination and subordination to the same target parameters. This leads to growing social gaps and imbalances, worsens the economic situation and the environment. It is proved that achieving the goals of sustainable development will help to improve the socioeconomic situation in Ukraine and the state of public finances. Perspectives. Further research should be aimed at finding ways to achieve defined global goals of sustainable development by rationalizing of government decisions on the synergistic use of fiscal policy instruments.

The Fiscal Policy Instruments and the Economic Prosperity in Jordan

The Fiscal Policy Instruments and the Economic Prosperity in Jordan

Wyzwania polityki fiskalnej dla państw Unii Europejskiej w dobie pandemii COVID-19

The aim of the article is to explore the size and the structure of fiscal packages, implemented in response to the crisis caused by COVID-19, from the point of view of their impact on the security and stability of public finance. The first section provides an overview of the economic theory on the role of fiscal policy, including the causes of fiscal intervention. Next, difficulties in conducting fiscal policy under the conditions of pandemic are presented. In addition, fiscal instruments and their size are analysed in the context of their influence on budget results. In conclusion, it is claimed that fiscal packages should be temporary and targeted in order not to create a permanent burden on public finance, ensuring budget neutrality in the medium term. The empirical analysis expands the current knowledge on potential effects of fiscal policy implemented under the crisis conditions and low interest rates, when macroeconomic stabilisation can only be ensured through fiscal policy instruments, despite the accompanying fiscal costs related to the increase in public debt.

Empirical analysis of the fuzzy system model of financial expenditure economic effect

In order to analyze the effects of active fiscal policy implemented in China in the context of tax and fee reduction, this paper adopts a dynamic stochastic general equilibrium model with microeconomic foundations to study the economic effects of fiscal policy based on a comprehensive consideration of the previous literature. The empirical study based on Matlab software finds that: first, active fiscal policy has a boosting effect on the economy and can stimulate the level of output to rise in the short run; second, different fiscal policy instruments have different impact mechanisms on economic variables, and the impact paths of government consumption spending and investment spending are completely inconsistent; third, the economic effects of government tax cut policies are better than government spending policies, and structural tax cut policy is softer than universal tax cuts; fourth, expansionary government investment spending has the most significant effect on output stimulation and has a very long-term impact on output level. Through the above model analysis, this paper argues that fiscal policy should play a greater role in supporting industrial restructuring, giving full play to the long-term advantages of the interest rate effect on the basis of satisfying society’s short-term needs and pursuing prosperous economic development, increasing investment in public resource areas, deepening industrial structural reforms, offsetting negative supply shocks brought by trade frictions and cross-border investment, raising long-term output levels and increasing employment opportunities.