Fiscal Stimulus Research Articles

Policy Socialization and Business Strategy Direction of Eco-Tourism

This study aims to estimate the losses of tourism-related sectors and businesses to take recovery steps by disseminating policies and strategic directions. This study uses the Seasonal Autoregressive Integrated Moving Average (SARIMA) to calculate losses. This study indicates that the average percentage of losses in the tourism sector from January to August 2020 is 68% (9,508 million USD) to 69% (10,328 million USD). Several sectors experienced losses, especially accommodation (2978 to 3235 million USD); food and beverages (1750 to 1900 million USD); and shopping (1530 to 1662 million USD). Business actors need to know the socialization of government policies such as fiscal stimulus, CHSE (Cleanliness Health Safety Sustainability) certification, and market reactivation. The direction of the right strategy is also carried out, such as product innovation, improvement of health protocols, digitization, and certification.How to Cite:Esquivias, M. A., Sugiharti, L., Rohmawati, H., & Jaya, I.M.L.M. (2022). Policy Socialization And Business Strategy Direction Of Eco-Tourism. Etikonomi, 21(1), 193-212. https://doi.org/10.15408/etk.v21i1.23068.

A Money‐Financed Fiscal Stimulus: Redistribution and Social Welfare

AbstractWe analyze the redistribution channel of a money‐financed fiscal stimulus (MFFS) versus debt‐financed fiscal stimulus (DFFS) in a Borrower–Saver framework. The redistribution channel is larger when we consider an MFFS and borrowers are the main beneficiaries. A liquidity trap scenario amplifies the differences between an MFFS and a DFFS. The redistribution channel makes an MFFS effective at having an expansionary effect in the medium run, despite the adverse scenario. We show, however, that an MFFS increases the consumption gap between the two agents by redistributing income from savers to borrowers. Thus, an MFFS results detrimental for welfare when the welfare function is approximated around the efficient steady state.

Unpacking the COVID-19 rescue and recovery spending: an assessment of implications on greenhouse gas emissions towards 2030 for key emitters

This paper analyses how fiscal stimulus spending in response to the COVID-19 pandemic supports the low-carbon transition. We developed a new framework to categorise rescue and recovery spending measures according to their level of greenness and their type of expected impact on greenhouse gas emissions. This framework allows to better capture how measures’ emission impacts may unfold over time and to identify the share of fiscal spending missing robust conditions or incentives to be considered low carbon. We assess nearly 2500 measures announced by 26 emitters as of May 2021, representing around 67% of global GHG emissions excluding land use in 2019. Our findings show that the largest share (35%) of spending with potential GHG emission implications went to measures that cannot be explicitly coded as high-carbon or low-carbon but substantiate current business-as-usual practice (‘supporting the status quo’). Our assessment reveals the different magnitudes to which the emitters have missed the opportunity for a green recovery. Low-carbon spending is sizeable (22%) across countries. However, almost two-thirds will likely rather unfold its impact over time. This fiscal spending may trigger emissions reductions through enabling or catalytic causal effects over time but will not necessarily lead to direct emission reduction impacts before 2030.

Counterfactual analysis among Covid-19: fiscal and monetary policy for green economic recovery

This study examines fiscal-monetary policy links in America across a time period that includes the recent global economic crisis and the COVID-19 emergency. Hypotheses deviate that regulatory administrations are permanent and calculate fiscal policy yearly percentage rate and budgetary regulations which are likely to change between two governments. Additionally, study uses the VAR technique to evaluate the effects of financial initiatives similar to those undertaken in the aftermath of the Covid-19 outbreak. Results discovered that fiscal policy is more successful than monetary policy, and that lavishing on public debt helps increase short-run economic performance. People argue that concerns about a rapid rise in prices as a result of fiscal stimulus are unfounded because the US economy was not close to full employment or full use of funds prior to the global epidemic, and the dissemination processes that could contribute to accelerating rising prices are not always in place. As a result, with the withdrawal of monetary stimulus, the favourable effects on actual GDP and real private expenditure are gone. Long-term mortgage rates have risen, money invested has decreased, and prices have risen, raising concerns about the banking system's inflationary tendency.

How democratic institutions dealt with COVID-19: A case study of the United States of America and France

This paper analyses the democratic institutions of the United States and France, regarding the media, science, and politics relating to COVID-19 pandemic. As democratic institutions are central to this paper, it is extensively defined, avoiding any possible vagueness that an incoherent definition might provide. Furthermore, the conditions that resulted from the COVID-19 virus are analysed, focusing on the fiscal stimulus and public health protocols, and comparing them in relation to both the United States and France. The focus shifts to the drugs hydroxychloroquine and remdesivir, exploring the conditions around the drugs, analysing and comparing the actions institutions have taken within the respective nations, as well as between the nations. The institutions that are key in both nations include the presidential offices and the representatives of the presidents. The Food and Drug Administration (FDA) in the United States, the CS-COVID council that was created to handle the protocols and regulations in France, The decentralised Federal government of the United States, and the centralised Unitary State of France are critical in the comparison of the institutions and actions relating to the pandemic.

Has Germany’s temporary VAT rates cut as part of the COVID-19 fiscal stimulus boosted growth?

On 3 June 2020, the German government announced a EUR 130 billion fiscal stimulus package to stimulate market demand and jumpstart the economy in the wake of the COVID-19 pandemic lockdown in the spring of 2020. The most prominent measure of this package is an unconventional fiscal policy in the form of a temporary VAT rates cut for six months, from 1 July to 31 December 2020. Employing a dynamic stochastic general equilibrium (DSGE) framework, we study the efficiency of the VAT tax rates cut for ameliorating the consequences of the pandemic recession. The simulation of the calibrated DSGE model yields a tax policy-induced real GDP increase of about 0.3% points for 2020.

The Impact of Government Stimulus Packages Towards Business Survival During Covid-19 Among Small and Medium Enterprises in Sabah

he purpose of this study is to examine the impact of government fiscal stimulus packages amounting RM100 billion for SMEs during the first wave of covid-19 to provide greater assistance to SMEs in sustaining business operations and preserving jobs, as well as to support growth in current economic conditions. This paper analyses the business survival during Covid-19 by examining two determinants, namely government grants and financial assistance. Total number of 150 questionnaires distributed and 120 were returned. The respondents were selected from SMEs directory database and those who have been participated in SME@University program. The data were collected and analysed using Statistical Package for the Social Science (SPSS 26) and SmartPLS to analyse, and hypothesis testing. The study confirms that there are significant and positive impact between government stimulus packages towards business survival among SMEs in Sabah. The findings of this study have useful implication to help strengthen the government business survival approaches to support SMEs in Sabah during the pandemic outbreak. This paper, apart from its contribution to the entrepreneurship research, has useful implications for government in managing Covid-19 stimulus packages to SMEs in Sabah.

Fiscal Stimulus and Commercial Bank Lending Under COVID-19

We investigate the implications of extra-normal government spending under the COVID-19 pandemic for commercial bank lending growth between 2019Q4 and 2020Q4 in a large sample of over 3000 banks from 71 countries. We control for pre-pandemic structural factors, bank characteristics and government debt. To address the likely endogeneity of government assistance under the pandemic, we instrument for extra-normal spending using disparities in pre-existing national political characteristics for identification. Our results indicate that while higher government spending was associated with higher commercial bank lending, higher public debt going into the crisis weakened the expansionary effects of higher spending on bank lending at economically and statistically significant levels. Moreover, this sensitivity is higher among weaker banks, suggesting that bank lending responses to government spending under COVID-19 reflected the perceived implications of such spending for government assistance of the banking sector going forward. Our results are robust to a variety of sensitivity analyses, including perturbations in specification, sample, and estimation methodology.

Hysteresis and fiscal stimulus in a recession

The COVID-19 pandemic initiated a deep global recession, and with interest rates at very low levels, warrants consideration of the efficacy of different forms of fiscal stimulus in response. History reveals that deep recessions may cause output and total factor productivity (TFP) hysteresis, a permanent or highly persistent fall in the levels of output and TFP relative to pre-recession trends. This article analyses the output and welfare multipliers of fiscal stimulus during a recession using a macro model with TFP and output hysteresis. We find that transfer payments, public consumption and investment all have high output and welfare multipliers due to their positive effects on TFP in a recessionary environment. However, public investment has the highest output and welfare multipliers, because it has a more positive impact on labour productivity due to the increase in the public capital stock.

Locally financed and outside financed regional fiscal multipliers

The size of regional fiscal multipliers determines the efficacy of fiscal stimulus, the costs of fiscal austerity and whether countercyclical fiscal policy is more effective at the federal or local level. This paper studies fiscal multipliers in regions of a monetary union—US states, Eurozone members, or countries with a hard exchange-rate peg—and how multipliers are affected by the way spending is financed: local deficit financing, local tax financing or outside financing (federal or foreign aid). I present analytical and quantitative government purchase and transfer multipliers using a New Keynesian model consistent with estimated transfer multipliers in Pennings (2021), focusing on the persistence of the fiscal shock. I find that at business-cycle frequencies, financing has little effect on impact multipliers: outside-financed multipliers are only about 0.07–0.16 larger than local deficit-financed multipliers. This suggests efforts to enable local countercyclical fiscal policy may be a partial substitute for greater fiscal centralization or foreign financing.

Modeling potential impact of COVID-19 pandemic on global electric vehicle supply chain

SummaryThe on-going COVID-19 pandemic and consequent lockdowns cast significant impacts on global economy in the short run. Their impact on stability of global electric vehicles (EVs) supply chain and thus our climate ambition in the long run, however, remains hitherto largely unexplored. We aim to address this gap based on an integrated model framework, including assessing supply risks of 17 selected core commodities throughout the EV supply chain and further applying the supply constraints to project future EV sales until 2030. Our model results under three pandemic development scenarios indicate that if the pandemic is effectively contained before 2024, the global EV industry will recover without fundamentally scathed and thus can maintain the same growth trend as in the no-pandemic scenario by 2030. We suggest that fiscal stimulus in the postpandemic era should be directed more toward upgrading the quality of battery products, rather than expanding the production capacity.

US Fiscal Stimulus and Value of Dollar

Our study examines the impact of government stimulus spending on the US dollar’s exchange rate. We apply the VECM model on US data from 1980 to 2020 with US dollar’s exchange rate as the dependent variable and the quantity of domestic money supply, amount of domestic government purchases, quantity of money supplied by the foreign country (China), and the foreign country’s output as independent variables. Our study finds that, while the long-run impact of US fiscal stimulus spending on the dollar’s exchange rate is negative, it has no effect in the short run. Also, the coefficient associated with the error￾correction term, ECT, is negative but insignificant at 5% significance level, which implies that any short￾term fluctuation in the US dollar’s exchange rate will not be adjusted toward its long-run value.

The COVID-19 pandemic, consumption and sovereign credit risk: Cross-country evidence

Many recent studies investigate the economic effect of the COVID-19 pandemic in multiple aspects, while whether and how the sovereign credit risk reacts to the shock is still underexplored. Using a sample of forty developed and developing countries and employing staggered difference-in-differences models, we find that the sovereign credit risk measured by sovereign credit default swap spreads significantly increases after the COVID-19 pandemic outbreak, and the adverse effect is more pronounced for short-term credit risk. The reason is that the pandemic causes severe concerns about aggregate consumption contraction in addition to the fiscal capacity and the volatility of exports. We also find that fiscal stimuli stabilizing consumer spending alleviate the adverse effect of the COVID-19 pandemic, while debt relief does not matter. Overall, practitioners and policy makers should attach more importance to consumption and its recovery during the pandemic when making decisions.

COVID-19 and the Energy Sector Development in ASEAN Countries: Assessing the Role of Fiscal Measures for Green Recovery Trajectory

The COVID-19 pandemic has had wide ramifications on many sectors, including energy sector. This draws the interest of numerous scholars who have sought to investigate the impact of the pandemic on the energy sector as well as the prospects for a green recovery trajectory. However, few of these authors have considered the role of fiscal stimulus that governments have provided in the context of green recoveries. This study aims to fill that gap, focusing on the case of ASEAN member states (AMS). For this purpose, we employ both statistical data from official sources and qualitative evidence collected through interviews and Focus Group Discussions (FGD) with officials from ASEAN countries. This study finds that green recovery stimulus in AMS is still limited. Although some of the fiscal supports that ASEAN countries have launched have had indirect effects on energy, policy makers in the region have not prioritized the green recovery at the center of recovery path. A major factor is fiscal limitations that force the governments of ASEAN countries to focus on strengthening the health sector and supporting vulnerable groups. Accordingly, this analysis highlights the importance of exploring other funding opportunities, including grants and concessional financing, to support green recovery in the region.

COVID-19 pandemic and risk dynamics of financial markets in G7 countries

PurposeThe purpose of this study is twofold: to examine the effects of the COVID-19 pandemic on the risk dynamics of stock and bond markets in G7 countries; and to examine if the stock-bond risk dynamics can be linked to government measures to contain the pandemic.Design/methodology/approachTo examine the pandemic impact on the risk dynamics of the bond and stock markets, this study chooses G7 countries for their efficient financial market properties. This study uses standard generalized autoregressive conditional heteroskedasticity (GARCH) (1,1) and exponential GARCH (1,1) models to determine the most volatile and sensitive market, most persistent market during the crisis and the leverage effect between stock and bond markets. This study then uses a panel study to investigate whether this volatility in stock and bond markets is affected by the COVID-19 cases and various government responses (fiscal stimulus packages, monetary policy, emergency investment in health care and vaccine investment).FindingsThe findings of the study confirm that the bad news of the pandemic is causing higher volatility than good news for all seven stock markets. Canadian stock and bond markets are the most volatile, and Italian bond and stock markets are the most sensitive G7 countries. Japan has shown the highest persistence, and the stock market exhibits higher leverage than the bond market. Fiscal stimulus packages are helping to reduce bond market volatility, but none of these measures are effective in the stock market.Research limitations/implicationsThe pandemic is still spreading, and the rate at which it spreads wildly will always pose a limitation to any attempt to examine its full effect.Practical implicationsInvestigation of market volatility will help policymakers and market players formulate the best strategies to overcome and exit the crisis and plan post-pandemic solutions. It provides valuable insights for investors to rebalance their portfolios during highly volatile markets while preserving their risk appetite and investment objectives.Originality/valueThe paper provides evidence on the impact of the pandemic-induced crisis and the respective government responses on the volatility of competing capital markets (stock and bond) in countries that are considered most efficient in reflecting news.

Fiscal stimulus packages to COVID-19: The role of informality.

In this paper, we use a novel cross‐country dataset to investigate the relationship between the prevalence of the shadow economy and fiscal policy responses to the economic crisis induced by the pandemic. The finding is that countries with a relatively larger shadow economy before the pandemic have adopted a smaller fiscal policy package. The results are robust to different econometric specifications, including an instrumental variable estimation. This reinforces the wider literature that countries (especially those with larger shadow economies) generally follow a procyclical policy as opposed to the optimal and countercyclical one.

On the relationship between fiscal multipliers and population aging in Japan: Theory and empirics

Recent literature has pointed out that the effect of fiscal policy possibly depends on the aging structure. This paper contributes to the literature by approaching this issue from both empirical and theoretical perspectives. We first examine how population aging affects the efficacy of fiscal stimulus by using panel data from Japan, the world's fastest aging country, and reveal that a government spending shock becomes less effective as the aging rate increases. Then, we construct the theoretical model with heterogeneous agents to replicate our empirical evidence and conduct counterfactual simulation to identify the source of state-dependency. The counterfactual analysis highlights the role of the supply channel through which workers under a liquidity constraint can benefit from increased disposable income induced by a government spending shock. This suggests that promoting labor market participation by elderly people can increase the effectiveness of a government spending shock amid a rapidly aging society.

Frontiers: Impact of Stay-at-Home-Orders and Cost-of-Living on Stimulus Response: Evidence from the CARES Act

During the 2020 COVID-19 epidemic, the U.S. Congress passed the CARES Act that (among other measures) provides direct payments to households. Using a large debit cards database, we analyze consumer expenditures following the stimulus payments. We observe zip code level daily transactions (approximately 12 million cards) before and immediately following the disbursements of stimulus checks. Empirical analysis exploits geographical variation in timing of federal deposits to identify marginal propensity to consume (MPC) for stimulus payments. We estimate between 0.29 (excluding banking) and 0.51 (all spend) of the rebate is spent within a few days of receipt. We find large cross-sectional heterogeneity with MPC estimates that are three times higher in magnitude in the most densely populated urban areas with higher cost-of-living. In areas with more restricted movement during the pandemic (as measured by Google workplace mobility), MPC estimates are approximately 60% higher. We reanalyze data from previous fiscal initiatives (2001 tax rebates and the 2008 fiscal stimulus) and find similar geographical differences. Collectively our results highlight an important shortcoming in fiscal policies that ignore local environment, particularly cross-sectional differences in cost-of-living across the United States.

ROLE OF FISCAL POLICY IN STIMULATING THE ECONOMIC RECOVERY OF THE WESTERN BALKAN COUNTRIES

The crisis caused by the coronavirus pandemic has raised the question of the role and possibilities of fiscal policy in mitigating its current effects and accelerating postpandemic recovery. This issue is relevant for all economies without exception, bearing in mind that aid packages to the population and the economy are predominantly based on fiscal stimulus. For this reason, the issue of the efficiency of expansionary fiscal policy has been raised again, taking into account the specific macroeconomic circumstances in which most economies find themselves. Therefore, the subject of this paper is the analysis of the optimal structure of the expansionary fiscal policy, with particular emphasis on the Western Balkans region, in the context of resolving the current macroeconomic consequences of the crisis and the possibility of providing both short and medium-term growth. Based on the analysis of specific macroeconomic circumstances in the countries of the Western Balkans, conclusions were reached as to which fiscal policy instrument can be used to achieve the previously described goals.

COVID‐19, trade and trade policy

COVID‐19, trade and trade policy