Fiscal Regime Research Articles

Economic growth and sustainability of public finances: evidence from Morocco

ABSTRACT This study focuses on the sustainability of public finances in relation to economic growth in Morocco for the period from 1987 to 2019. We set out to explore therewith the non-linear relationship between government size, the level of fiscal discipline and economic growth. This issue at hand has attracted broad public interest and decision-makers’ attention in Morocco, especially after the financial crisis of 2008 and during the COVID-19 pandemic. In order to determine government optimal size, we apply the Hansen's approach which postulates the coexistence of different fiscal regimes conditioned by the public debt, government expenditures, and tax revenues in the form of a non-linear inverted-U curve. These regimes are separated by an optimal threshold maximizing economic growth below which the impact is positive and above which the impact becomes negative, as the rising side of the curve is interpreted as consequence of higher taxes providing more resources for public investment, which in turn promotes growth. Once the economy reaches the slippery side of the curve, more taxes and excessive public debt become more distortionary and negatively correlated with economic growth. Our findings indicate that Morocco is relatively in a prudential fiscal stance with recessive effects on growth.

Comparative Analysis of Global Petroleum and Gas Fiscal Regimes

Comparative Analysis of Global Petroleum and Gas Fiscal Regimes

Trajectories of an accountant professionʼs transformation in conditions of digitalization

The article analyses related to the harmonisation of the accounting system trends in an accountant and auditor professions of in the context of economic processes' globalization and digitalisation, and the cardinal transformation of the fiscal authorities, tax regimes and government structures work. The purpose of this paper is to assess an accountant and auditor professions' transformation under the impact of the dynamically developing and actively implemented modern technological and multifunctional digital information systems in the accounting process. The authors consider the relationship between the trajectories of an accountant and auditor professions' transformation and the theoretical and methodological approach's modification to the development of the accounting system. That relationship will allow moving to a new stage in the functioning of the accounting and control system and an accountant and auditor professions, while maintaining their relevance in competition with modern information systems. The paper identifies trends in the development of blockchain technology in the accounting and control sphere and the possibility of its application at certain stages of the formation of accounting information. Blockchain technology is a reliable and transparent, efficient mean for exchanging information between economic entities, forming the instrumental basis for the development of transactional accounting. The authors conclude that educational processes need to be adjusted taking an accountant and auditor professions' transformation, identify trajectories for restructuring the profession, and suggest appropriate new competencies, skills and ways of solving problems.

Indonesian Upstream Oil & Gas Governance for Sustainable Innovation

Indonesian oil reserves and production are greatly influenced by investment. The focus of the study is to evaluate governance options to boost investment through appropriate fiscal regime and non-fiscal policies. The main aspect of the fiscal regime to increase investment is cost recovery. When cost recovery is still interpreted as a burden on state finances and there is still a stigma that contractors commit fraud in cost recovery, it is then a big challenge for oil and gas contractors to maximize investment and for regulator in giving approval on budget. Flexible Split and First Trance Petroleum (FTP) are the 2nd highest priority to improve to accommodate dynamic situation on the oil industry such as oil price fluctuation and size of reserves. Incentives and windfall profit treatment are the other key issues on fiscal. Sufficient geological surveys and researches are crucial things to attract investment. The duration of a contract that is only 30 years is too short to maximize the contractors return because of lengthy period for exploration, construction and drillings prior production. Combination of NOC dominated and Separation of Power model seems to be the best governance model. Partnership between Pertamina and multi-national company will facilitate investment funding.

Does fiscal policy matter for stock-bond return correlation?

Switching between monetary and fiscal regimes is incorporated in a general-equilibrium model to explain three stylized facts: (1) a positive correlation of stock and bond returns in 1971–2001 and a negative correlation after 2001, (2) a negative correlation of consumption and inflation in 1971–2001 and a positive correlation after 2001, and (3) the coexistence of a positive bond risk premium and a negative correlation of stock and bond returns. While the technology shock drives the positive stock-bond and negative consumption-inflation correlations in the monetary regime, the investment shock drives the negative stock-bond and positive consumption-inflation correlations in the fiscal regime.

Peru: Technical Assistance Report—Proposals for the 2022 Tax Reform: Mining Sector Fiscal Regime, Capital Gains, and IGV on Digital Services

In October 2021, the MEF asked Congress for the delegation of powers to legislate on tax matters with the aim of increasing tax collections and doing so by adding progressivity to the Peruvian tax system. The initiative being developed by the MEF contains (tentatively, to date) around 40 specific measures—some administrative, others related to tax policy—that the MEF hopes will, as a whole, generate additional revenue for the treasury. The tax collection impact of quite a few of the measures (including those pertaining to the mining sector) has not been estimated, whereas the measures for which there is a calculation are estimated to bring in a little over 1 percent of GDP in revenues. Given Peru’s low level of tax collections, both relative to its own historical trends as well as those of other countries in the region, the amount expected to be collected with the proposed reform is modest. However, increasing tax collections by enhancing progressivity would appear to be the right approach.

Peru: Technical Assistance Report—Proposals for the 2022 Tax Reform: Mining Sector Fiscal Regime, Capital Gains, and IGV on Digital Services

In October 2021, the MEF asked Congress for the delegation of powers to legislate on tax matters with the aim of increasing tax collections and doing so by adding progressivity to the Peruvian tax system. The initiative being developed by the MEF contains (tentatively, to date) around 40 specific measures—some administrative, others related to tax policy—that the MEF hopes will, as a whole, generate additional revenue for the treasury. The tax collection impact of quite a few of the measures (including those pertaining to the mining sector) has not been estimated, whereas the measures for which there is a calculation are estimated to bring in a little over 1 percent of GDP in revenues. Given Peru’s low level of tax collections, both relative to its own historical trends as well as those of other countries in the region, the amount expected to be collected with the proposed reform is modest. However, increasing tax collections by enhancing progressivity would appear to be the right approach.

Taxation: A Vantage on the Reframing of the Economic Past

A Review of Fiscal Regimes and the Political Economy of Premodern States, edited by Andrew Monson and Walter Scheidel (Cambridge University Press, 2015), and Ancient Taxation: The Mechanics of Extraction in Comparative Perspective, edited by Jonathan Valk and Irene Soto Marín (New York University Press, 2021)

Fiscal Policy and Economic Growth: An Empirical Assessment In Fiscal Regimes In Nigeria (1970-2019)

This study examined the impact of fiscal policy on economic growth in Nigeria over the period 1970 to 2019, using annual data obtained from secondary sources. Specifically, the study examines the impact of government expenditure (capital and recurrent) on Nigeria’s gross domestic product in regulated and deregulated fiscal regime. The econometric techniques of ARDL and Bound Cointegration were used to analyze the data. The results obtained from the analyses show that government capital expenditure had a significant negative relationship with economic growth in Nigeria in the deregulated period but an insignificant effect in the regulated period; while government recurrent expenditure had a significant positive relationship with economic growth in Nigeria in the deregulated period and an insignificant effect in the regulated period. The regression coefficient of the dummy variable (Regime) was positively signed and significant implying that there is a significant difference in the impact of fiscal policy across the two periods (regulation and deregulation). Thus, the study concluded that fiscal policy is more effective in the deregulated period compared the regulated period. Among the recommendations of this study are that the government should avoid extravagant capital expenditure.

Fiscal Policy and Economic Growth: An Empirical Assessment in Fiscal Regimes in Nigeria (1970-2019)

Fiscal Policy and Economic Growth: An Empirical Assessment in Fiscal Regimes in Nigeria (1970-2019)

Fiscal Policy and Economic Growth: An Empirical Assessment in Fiscal Regimes in Nigeria (1970-2019)

Fiscal Policy and Economic Growth: An Empirical Assessment in Fiscal Regimes in Nigeria (1970-2019)

REGULATORY CONSTITUTIONAL COMPETENCES IN TAXATION: THE CANARY ISLANDS’ECONOMIC AND FISCAL REGIME IN SPAIN

This research work is based on the study of the transition process of the integration of the Canary Islands in the European Economic Community, also including the historical principles of the Economic and Fiscal Regime and its evolution, with the main objective of analyzing and identifying the modifications in the main law that regulates it and check its evolution and identify the areas that have been most affected, determining the effectiveness and contribution of current tax incentives in achieving the objectives for which they were designed within the powers regulated by the Spanish Constitution . The consolidation of its special economic situation within the Spanish internal order facilitated by community recognition in the evolution of the special economic situation of the Canary Islands will be highlighted, and that for its development it is necessary to study the economic situation of the Canary archipelago and to know the essential needs of trade with other regions. Additionally, indirect taxes such as the IGIC and the AIEM, subject to imports of goods in the Canary archipelago, will be analyzed.

Fiscal Regimes and the Exchange Rate

In this paper, we argue that the effect of monetary and fiscal policies on the exchange rate depends on the fiscal regime. A contractionary monetary (expansionary fiscal) shock can lead to a depreciation, rather than an appreciation, of the domestic currency if debt is not backed by future fiscal surpluses. We look at daily movements of the Brazilian real around policy announcements and find strong support for the existence of two regimes with opposite signs. The unconventional response of the exchange rate occurs when fiscal fundamentals are deteriorating and markets' concern about debt sustainability is rising. To rationalize these findings, we propose a model of sovereign default in which foreign investors are subject to higher haircuts and fiscal policy shifts between Ricardian and non-Ricardian regimes. In the latter, sovereign default risk drives the currency risk premium and affects how the exchange rate reacts to policy shocks.

Fiscal regimes and the exchange rate

Fiscal regimes and the exchange rate

Regime Effects of Fiscal Deficit Financing and Inflation Dynamics in Ghana

Fiscal deficit financing is confirmed in both theoretical and empirical literature to often lead to higher-than-expected inflation. The unsustainable regime of fiscal deficit financing in Ghana over the years had contributed to price instability in Ghana. Previous studies on deficit financing-inflation nexus in Ghana concentrated completely on linear and symmetric relation while ignoring the effect of regime of fiscal deficit financing on inflation. This study investigated the regime of fiscal deficit financing and its effects on inflation dynamics in Ghana over the 1980-2018 period. The Theory of Fiscal Price Level (TFPL) was adopted as the theoretical framework for the study. The TFPL highlighted the macroeconomic consequences of fiscal dominance over monetary policy actions and how it impacts on price stability due to the financing of government fiscal deficit in a country. The study employed Markov-Switching Regime Dynamic Model (MSRDM) to investigate the regime effects of fiscal deficit financing on inflation. The study revealed the presence of two fiscal regimes in Ghana and that the regime of fiscal deficit financing remained persistent over the study period. The paper further found that fiscal deficit financing had a stronger effect on inflation dynamics in Ghana in the higher regime of fiscal deficit financing while its impact on inflation in the lower regime of fiscal deficit financing remained relatively subdued. The paper recommends that the government of Ghana should adopt fiscal policy actions that could lead to the achievement and maintenance of fiscal sustainability and consolidation consistent with a low inflation regime going forward.

Investment Allocation with Capital Constraints. Comparison of Fiscal Regimes

The dramatic fall in oil prices after 2014 has led to more extensive capital rationing in international oil companies, and subsequent fierce competition between resource extraction countries to attract scarce investment. This situation is not adequately addressed by the large general literature on international taxation and multinational companies, since it fails to take account of capital rationing in its assumption that companies sanction all projects with a positive net present after-tax value. The paper examines the effect of tax design on international capital allocation when companies ration capital. We analyse capital allocation and government take for four equal oil projects in three different fiscal regimes: the U.S. GoM, UK upstream and Norway offshore. Implications for optimal tax design are discussed.

The Effects of Monetary Policy across Fiscal Regimes

The Effects of Monetary Policy across Fiscal Regimes

Fiscal Sustainability, Fiscal Debt and Economic Growth in the South Asian Region

The issue of fiscal sustainability in South Asia is paramount since the tide of economic liberalization in the 1980s and given its ballooning public debt. Using annual data for 1960–2019, we perform a battery of tests to determine fiscal sustainability in Sri Lanka, India, and Pakistan. We adopt the Bohn (1998) model by estimating a fiscal reaction function (FRF). The model is derived from the theoretical foundation that shows a sufficient condition for satisfying the intertemporal government budget constraint whereby the primary balance reacts positively to the lagged debt-to-GDP ratio. A positive response to the primary balance suggests that the government is counteracting the increase in fiscal debt. The results show evidence of fiscal sustainability for the model in all three countries. We relax the assumption of a constant-parameter linear fiscal rule and allow nonlinearity in the FRF by (1) incorporating the Markov-switching fiscal rule into the FRF and (2) estimating a time-varying parameter model of the FRF. The Markov-switching model identifies two fiscal regimes described by periods of sustainable and unsustainable fiscal policies. The model also yields transition probabilities and the expected duration of the regimes, which we use to evaluate the No-Ponzi game condition. The results show that while this condition is satisfied, the long-term debt-stabilizing condition fails to hold. The time-varying parameter model of the FRF shows different episodes when the primary balance reacts positively or negatively to the lagged debt-to-GDP ratio, corroborating the results of the Markov-switching model. We then examine the impact of fiscal debt on growth in these regimes using a threshold regression model. For fiscal debt above some threshold, that is 78 percent of the GDP in Sri Lanka, 67 percent of GDP in India and 58 percent in Pakistan, economic growth in these countries tends to decline. Our results suggest that while fiscal stance in these economies is sustainable, the governments need to curtail the growing fiscal debt below the optimal threshold level to promote economic growth.

Investigating the monetary and fiscal policy regimes dominance for inflation determination in Nigeria: a Bayesian TVP-VAR analysis

Investigating the monetary and fiscal policy regimes dominance for inflation determination in Nigeria: a Bayesian TVP-VAR analysis

Investigating the monetary and fiscal policy regimes dominance for inflation determination in Nigeria: a Bayesian TVP-VAR analysis

Investigating the monetary and fiscal policy regimes dominance for inflation determination in Nigeria: a Bayesian TVP-VAR analysis