Fiscal Policy Management Research Articles

Fiscal policy under alternative monetary policy regimes

In the particular policy framework of a monetary union, the management of fiscal policy becomes an issue of special relevance, because the fiscal discipline imposed by the monetary agreements could limit the scope of stabilization fiscal policies, and its implications on economic growth. In this paper we will review the theoretical implications of fiscal policy in open economies. But we will pay special attention to the particular case of monetary unions, in order to show the relevance of the macroeconomic model behind economic policy decisions.

Public debt and risk premium

PurposeThis analysis seeks to deal with the emerging economies and to reveal that, if the fiscal authority is accountable with a policy that stabilizes the public debt/GDP ratio, the consequence is a low Treasury bond risk premium.Design/methodology/approachBased on the purpose of this paper, a theoretical model is developed and empirical evidence through an autoregressive distributed lag (ADL) model, taking into account the Brazilian experience, is made.FindingsThe findings denote that domestic variables are responsible for determining the risk premium. Moreover, a correct management of the public debt and the use of primary surplus targets make for a good strategy for promoting a fall in the Treasury bond risk premium.Practical implicationsPrimary surplus and public debt/GDP ratio can be used as important tools for mitigating the Treasury bond risk premium.Originality/valueThe results of the paper give some new insights about the management of fiscal policy for developing countries.

The analysis of fiscal policy management in Romania: Lessons for emerging countries

Subsequently to the adheration to the European Union, Romania prepares itself for the last stage of integration admission, the economic and monetary union. In this context, the study analyzes the fiscal management performance in Romania, to what extent the fiscal policy is prepared to act as a sole instrument capable of absorbing the asymmetrical shocks and stabilize the national economy after entering the Euro zone. The efficiency of the fiscal policy has been analyzed taking into consideration a reaction function assessment of the fiscal policy, both the response of the actual budget balance and of the structural budget balance being tested to the shocks of the modification in the degree of public indebtness upon the output-gap and the previous values of the primary / structural budget balance. Thus, we have analyzed the sustainability degree of the Romanian public finances during the period 1999 – Q2 2008 and we have made recommendations for strengthening the role of the fiscal policy within the mix of the Romanian macroeconomic policies. Key words: Potential GDP, output-gap, cyclically budget balance, structural budget balance, fiscal reaction function, monetary integration.

Corporate social responsibility in Nigerian banking system

PurposeThe ongoing reforms in the Nigerian banking system have resulted to mega banks, driven by advanced competition. This has raised concerns about their social and environmental performance. The purpose of this paper is to agitate for the prioritization of corporate social responsibility (CSR) as the foremost condition for banking stability in the reforms.Design/methodology/approachThis paper draws largely from the theory of CSR, and reviews pertinent policies and practices in the Nigerian banking system.FindingsThe paper identifies self‐induced vices, regulatory laxity, inauspicious macro‐economic environment, and endemic corruption in the economy as the major constraints to the discharge of CSR in the Nigerian banking system.Practical implicationsIt may be necessary to restructure the Central Bank of Nigeria to clearly separate the roles of banks' supervision from fiscal policy management for a more effective economic, social and environmental viability of the banking system. Furthermore, the banking system should focus less exclusively on shareholders and financial measures of success to include all stakeholders' relationships in their mission to sustain competitive success in the future.Originality/valueIt is imperative that external regulation should be blended with conscious self‐regulations by the banking institutions for the reforms to effectively include the delivery of CSR. This should be anchored on effective corporate governance in the banking institutions in the system.

China's industrial revolution: challenges for a macroeconomic agenda

China's industrialization over the past 30 years has been an epochal event. As of 2000, the industrial sector's share of GDP has grown to be about two-third of the total. The share of agricultural sector of GDP has expectedly declined from 42.2% in 1970 to 11.9% in 2000. The sector's total output however continues to grow as productivity increases. Has the service sector grown enough to support the overall growth of the Chinese economy? China has earned her recognition as a foreign investment friendly economy. Foreign direct investment with 100% foreign ownership came in plenty, supported by a robust system of profit repatriation based on earnings in convertible currencies of exports of a part of newly manufactured products in China. China imported capital and paid for it by exports. China demonstrates a clear case of the import-export led model of industrialization and economic growth, not the simple export-led growth model, as discussed by some. This paper discusses that challenges ahead of China are overwhelming. We present three issues for immediate attention, (a) Can China sustain a rate of growth of GDP at an annual rate of 10% for an indefinite period? (b) How can China address the issues of income distribution across her 31 province and also amongst the various income groups in a given industrialized province/region? (c) Can China ensure progressive augmentation of high-tech oriented productivity of her workforce by way of ensuring building up of necessary human capital? It is argued that much of this can be accomplished by developing a macroeconomic framework with monetary and fiscal policy guidelines, well specified and transparent. Can China restructure its central bank, the Peoples Bank of China (PBOC)? A progressive money, banking and financial sector with ability to absorb shocks of an industrial economy must be in order. How about the fiscal policy management by the Government of China—its Ministry of Finance? Finally this paper argues that China's economic presence will help optimize the economic gains for the rest of the world. China has joined her Asian neighbors toward sponsoring Asian economic cooperation. Let the European Union paradigm be a learning model, and China has a leadership role to play in further developing Asia's continental economic regional model.

Fiscal Policy Management in an Open Capital Regime

This paper argues that as countries open their capital regimes, the appropriate fiscal stance should become more conservative than when capital is immobile. Further fiscal adjustment may be necessary in the face of large and volatile capital flows. However, the required changes would be smaller. If a fiscal response is unavoidable, some elements of fiscal policy are easier to manipulate and less distortive than others. Determining the actual stance of fiscal policy is more difficult in an open capital regime, underscoring the need for transparency about fiscal rules. A more open capital environment also constrains the sustainable fiscal structure.

Fiscal Policy Management in an Open Capital Regime

This paper argues that as countries open their capital regimes, the appropriate fiscal stance should become more conservative than when capital is immobile. Further fiscal adjustment may be necessary in the face of large and volatile capital flows. However, the required changes would be smaller. If a fiscal response is unavoidable, some elements of fiscal policy are easier to manipulate and less distortive than others. Determining the actual stance of fiscal policy is more difficult in an open capital regime, underscoring the need for transparency about fiscal rules. A more open capital environment also constrains the sustainable fiscal structure.

95/06729 Low oil and gas prices: Why? How long? What consequences?

China's industrialization over the past 30 years has been an epochal event. As of 2000, the industrial sector's share of GDP has grown to be about two-third of the total. The share of agricultural sector of GDP has expectedly declined from 42.2% in 1970 to 11.9% in 2000. The sector's total output however continues to grow as productivity increases. Has the service sector grown enough to support the overall growth of the Chinese economy?China has earned her recognition as a foreign investment friendly economy. Foreign direct investment with 100% foreign ownership came in plenty, supported by a robust system of profit repatriation based on earnings in convertible currencies of exports of a part of newly manufactured products in China. China imported capital and paid for it by exports. China demonstrates a clear case of the import-export led model of industrialization and economic growth, not the simple export-led growth model, as discussed by some.This paper discusses that challenges ahead of China are overwhelming. We present three issues for immediate attention, (a) Can China sustain a rate of growth of GDP at an annual rate of 10% for an indefinite period? (b) How can China address the issues of income distribution across her 31 province and also amongst the various income groups in a given industrialized province/region? (c) Can China ensure progressive augmentation of high-tech oriented productivity of her workforce by way of ensuring building up of necessary human capital?It is argued that much of this can be accomplished by developing a macroeconomic framework with monetary and fiscal policy guidelines, well specified and transparent. Can China restructure its central bank, the Peoples Bank of China (PBOC)? A progressive money, banking and financial sector with ability to absorb shocks of an industrial economy must be in order. How about the fiscal policy management by the Government of China—its Ministry of Finance?Finally this paper argues that China's economic presence will help optimize the economic gains for the rest of the world. China has joined her Asian neighbors toward sponsoring Asian economic cooperation. Let the European Union paradigm be a learning model, and China has a leadership role to play in further developing Asia's continental economic regional model.

Electoral Competition and the Growth of Public Spending in 13 Industrial Democracies, 1950 to 1983

This article examines a theoretically important issue that has received surprisingly little attention: whether the process of democratic competition for public office has fueled the growth of domestic spending in the capitalist democracies since World War II. Probably because it is difficult to measure electoral competition in multiparty systems, existing comparative studies of public spending either ignore this question or use dubious measures of electoral competition. This study presents and tests some conceptually more appealing measures of competition. The results show a strong, robust relationship between improved indicators of electoral competition and the growth of domestic spending from 1950 to 1973 and 1973 to 1983. The study concludes by analyzing the implications of the findings for economic performance in the capitalist democracies and for the democratic management of fiscal policy.