Fiscal Policy Research Articles

Impact of Disaggregated External Debt on Economic Growth: Evidence from Asian Developing Economies

Abstract This study investigate the impact of total and disaggregated external debt on economic growth, across 32 Asian developing economies (ADE) from 1995 to 2020. The study applied the generalized method of moments (GMM) and dynamic common correlated estimator (DCCE) with interaction terms of institutional quality and macroeconomic policy to address the non-linearity, across-country heterogeneity, cross-sectional dependence and endogneity. The empirical results indicate that total external debt and its types initially harm economic growth, except for commercial creditors’ debt, which has positive effects. Short-term, private, and multilateral debt show weaker negative associations compared to long-term, public, and bilateral debt. Incorporating interaction terms in non-linear models reveal a shift from negative to positive impacts, highlighting the importance of robust institutional quality and stable macroeconomic policy in mitigating adverse debt effects. Our findings underline the necessity of tailored policies accounting for specific impacts of different debt types on economic growth. Moreover, highlight the significance of institutional quality and macroeconomic policy standards to manage risks, optimize debt management practices, adjust fiscal policies, and foster sustainable economic growth. Future research should further investigate the broad impact of domestic debt in conjunction with external debt across different countries, time periods, and methodological approaches.

La gestión fiscal como presupuesto sustantivo y procesal de la responsabilidad fiscal

The concept of fiscal management is a presupposition of fiscal responsibility, and only to the extent that there is a conjunction between the conduct deployed by the agent (public or private) based on a constitutional, legal (in a material sense), statutory, regulatory or contractual competence or authorization, as the case may be, to administer or manage public assets, and the element of damage, the competence of the Fiscal Control Body to legitimately and validly promote the fiscal action through the correlative process will arise. Therefore, correctly identifying its content and legal structure is a task of capital importance that concerns, on the one hand, the legitimacy and institutional validity of the actions of the Comptroller’s Office and, on the other hand, the principle of legal certainty, in the sense that this guarantee of certainty and objective foreseeability is projected on the conduct of individuals (as eventual passive subjects of the fiscal action), in terms of equality, good faith, legitimate trust and, of course, under the iusfundamental plexus of due process (principles of legality and natural judge, among others). In this sense, an analysis of the fiscal management will be presented, which will allow us to unravel its configuration as a principle and rule of positive law, and as a transversal concept in fiscal responsibility, and the process itself, as well as its projection in the field of individuals, all by way of an interpretative statement, and in a context of legal reality.

Unlocking the potential of natural resources, fintech and fiscal policy for carbon neutrality; evidence from N-11 nations

By controlling the quantity of greenhouse gases in the natural environment, carbon neutrality is designed to reduce the adverse impacts of climate change. The specific goal can be attained by enforcing carbon dioxide elimination approaches, fostering the growth of fintech, fiscal policy tools, and funding in human development, along with the lowering of emissions. The current research analyzes the influence of the human development index (HDI), natural resources (NR), fintech (FT), and fiscal policy (FP) on carbon neutrality within the parameters of a policy structure. This task is performed with the objective of fulfilling the goals stated above. The ongoing research applies the innovative " General Method of Moment Quantile-based Regression (GMMQR)" and “Panel Quantile ARDL" techniques on a sample of N-11 nations to accomplish the goal. The outcomes support the idea that NR and FP function as pivotal factors in diminishing carbon neutrality. On the other hand, FT and HDI improve carbon neutrality. Moreover, in accordance with the heterogeneous panel causality test developed by Dumitrescu and hurlin (2012), NR, FP, HDI, and FT have been determined to have a unidirectional link with carbon neutrality. In regard to these findings, the research outlines a strategy designed to attain SDG 13 for the chosen nations. Decision-makers in these nations need to focus on policies that encourage the efficient use of natural resources. In addition, the chosen nations need to enhance their level of fintech to combat environmental degradation and achieve the targets of carbon neutrality.

Оподаткування і фіскальна соціологія: фінансова думка Заходу та уроки для України

Introduction. In the process of fair interaction between authorities and taxpayers, a relationship of trust is created. This trust ensures support for government fiscal initiatives from the business sector. Conversely, if the relationship is not transparent and equitable, it can lead to a passive or even negative attitude towards taxes, thereby reducing the efficiency of the tax system. Problem Statement. There is a gap in Ukrainian fiscal theory, which is still underdeveloped in terms of fiscal sociology. Compared to Western countries, where fiscal sociology has already become an integral part of economic analysis, in Ukraine this issue has been studied only by a narrow circle of scholars. This limitation necessitates a deeper study and integration of sociological approaches into financial science, because without it, Ukrainian researchers and policy makers lose the opportunity to gain a more complete understanding of the interaction between economic and social processes. The purpose is to substantiate the directions of integration of fiscal sociology into Ukrainian financial theory and to develop recommendations for its inclusion into Ukrainian financial practice. Methods. The methods used are systematic, structural-functional, comparative analysis, analogy, grouping, description, comparison and generalization. Results. It is proved that by integrating fiscal sociology, Ukrainian fiscal theory can benefit from a more nuanced understanding of the socio-economic factors influencing fiscal policy. Such integration could lead to more effective policy making and a deeper understanding of the economic challenges facing Ukraine. Conclusions. Ukrainian academics and policymakers should prioritize the interdisciplinary study of fiscal policy, taking into consideration the rich tradition of fiscal sociology in the West. Joint efforts should be made to develop tax policies that strengthen state legitimacy by addressing issues of fairness, transparency, and trust. Strategies for managing public debt and improving tax morale should be a central element of fiscal policy to ensure that Ukraine's financial system can withstand socioeconomic pressures and contribute to long-term stability and development.

On the limits of economic activity: bridging degrowth and modern monetary theory for socio-ecological sustainability and justice

This paper advances recent work exploring synergies and tensions between two schools of political-economic thought—degrowth and modern monetary theory (MMT)—and posits that this synergy warrants closer attention from International Political Economy and Environment (IPEE) scholars. Thus far, degrowth policies have largely been proposed upon the assumption that governments are limited in budgetary terms. MMT theorists have offered an alternative perspective on fiscal policy space but generally provide insufficient ecological considerations. This paper asks how each school’s underlying assumptions about the limits of economic activity might inform the other’s framework of action. We find that while there are tensions between the two schools’ economic philosophies, there are possibilities for cross-fertilization, which ought to interest IPEE scholars. MMT could engage degrowth’s perspective of ecological limits and global socio-ecological justice in its discussions about what economies can ‘afford’, whereas degrowth could use MMT insights to shift from a ‘pay for’ to a ‘resource’ frame, while centering abundance before limits. Meanwhile, IPEE can provide insights to an MMT-informed degrowth transition by grounding this debate in material analyses of class and power. Our findings suggest that degrowth and MMT could provide a normative direction for IPEE research centered around meeting material needs within planetary boundaries.

Challenges to Provision of Water at District Level by Local Government: the Case of Goromonzi District

This study investigated challenges undermining the provision of water in the Goromonzi District of Zimbabwe. Interviews were conducted on a sample of thirty respondents drawn from rural and rural-urban residents of the district to determine conditions that affect water provision at district level. Thematic and content analysis was used to analyse data. The findings reveal that some rural dwellers travel distances that exceed 2 kilometres to fetch water from boreholes, especially during the hot but dry months of the year. The results further revealed that some wells in homesteads dry up during the year, forcing the villagers to scout for water outside their villages. The Goromonzi Rural District Council bears the responsibility of constructing boreholes in the district. However, this task is shared between ward councillors and the local Member of Parliament who are expected to lobby for funding towards the constructing of boreholes in their areas of jurisdiction. The inflationary economy Zimbabwe is experiencing erodes the district’s capacity to implement community development projects, including borehole drilling. This study recommends the adoption of radical fiscal policies that could curb inflation, including the adoption of stable currency that is less susceptible to inflation.

Building Advanced Early Alarm Systems for Predicting Financial Crises: A Future Vision for Fiscal Policy in Iraq

The accelerating repercussions of financial crises that struck the world have significantly affected global economies in general and the banking sector in particular. These crises, characterized by banking failures, have prompted financial institutions to develop models, systems, and early warning indicators to predict banking crises and avoid the negative effects of cyclical fluctuations and unexpected shocks. This research aims to lay the foundation for an early warning system to monitor financial disturbances in Iraq. The goal is to identify financial imbalances, prevent the collapse of Iraqi financial institutions, and shield the economy from financial and monetary crises.

Electoral Cycles in Fiscal Rules: International Empirical Evidence

Abstract Using panel data from 99 countries over the period of 1985–2020, this study aims to uncover that fiscal rules work in electoral cycles. The results show that fiscal rules are less likely to be implemented in the pre-election year. We also find that this loosening in fiscal rules is especially prominent in cases when the incumbent political party can wield significant political power, where countries are less developed economically and politically, and where the management of fiscal rules is more likely to be exposed to discretionary interventions. Our findings are aligned with the opportunistic political budget cycles, in which politicians exploit fiscal policies and systems to serve their own political incentives. These results suggest that even fiscal rules, which are designed to prevent political pressure, are also subject to political process. (JEL codes: D72, D78, E32, E62, H11, and H60).

Macroeconomic Factors and Policy Dynamics Influencing FDI Flows from Arab Countries to Malaysia: A Qualitative Analysis (2018-2023)

This study examines the macroeconomic factors and policy dynamics influencing Foreign Direct Investment (FDI) flows from Arab countries to Malaysia during the period 2018-2023. Employing a qualitative research design, the study utilizes semi-structured interviews with key stakeholders, analysis of policy documents, and examination of economic data to provide a comprehensive understanding of this evolving economic relationship. The research reveals that Malaysia's economic resilience, robust GDP growth, and effective fiscal policies have been instrumental in attracting Arab FDI, despite global challenges such as the COVID-19 pandemic. Strategic policy initiatives, including targeted FDI incentives and bilateral trade agreements, have played a crucial role in facilitating investment flows. The study identifies key sectors attracting Arab investment, including real estate, Islamic banking and finance, oil and gas, and tourism. Malaysia's position as a global hub for Islamic financial services and halal industries emerges as a significant factor in its appeal to Arab investors. However, the research also highlights persistent challenges, such as regulatory hurdles, cultural and language barriers, and increasing regional competition. The study concludes that while Malaysia has successfully positioned itself as an attractive destination for Arab FDI, continued policy refinement and focus on high-value, knowledge-intensive sectors are necessary to maintain this position. The findings contribute to the growing body of literature on South-South economic cooperation and provide valuable insights for policymakers, investors, and researchers. Future research directions, including the need for quantitative analysis and comparative studies with other Southeast Asian countries, are suggested to further enhance understanding of these complex investment dynamics.

ANALISIS PENGARUH UTANG DOMESTIK DAN UTANG LUAR NEGERI TERHADAP PERTUMBUHAN EKONOMI DI INDONESIA PADA TAHUN 2014 - 2023

During the period of 2014-2023, Indonesia government set a target for average economic growth of 5.2% for 2014-2020 and 6% for 2020-2025. In order to achieve that, the fiscal policy adopted by the government is by utilizing debt. Based on Keynesian view, the government can incur debt to finance government budget deficits and stimulate economic growth. This research employs the ordinary least squares (OLS) method because it seeks to analyze the relationship between the variables of quarterly increase of GDP, quarterly increase of domestic debt growth, and quarterly foreign debt. Based on the estimation results of the model conducted in the research, the result show that the variables of quarterly domestic debt growth and quarterly foreign debt growth can only explain a 14.49% increase in quarterly GDP value. Simultaneously, domestic debt and foreign debt do not affect economic growth. Partially, an increase per quarter in domestic debt has a significant negative effect on the increase in quarterly GDP value, while an increase per quarter in foreign debt has a positive but not significant effect on the increase of quarterly GDP value.

Macro-Economic Policy Coordination and Macro-Economic Instability in Pakistan

This study is intended to examine the impact of macroeconomic policies on macroeconomic instability in Pakistan. This study used time series data for the period of 1990 to 2022. To deal with the stationarity of the data ADF and PP tests are used which suggest the use of ARDL. The existence of a long-run relationship is confirmed by the Bound test. The impact of fiscal & monetary policy is found to be significant in the long run. The impact of the fiscal policy variable (GEXP) on macroeconomic instability (MI) negatively means that an increase in GEXP (expansionary fiscal policy) leads to a decrease in MI while the impact of monetary policy variable IR (tight monetary policy) is found positive and significant in the long run means that the impact of tight monetary policy leads to increase MI. Similarly, the impact of expansionary fiscal policy on MI is effective but the monetary policy variable is effective in the short run. The impact of domestic investment is found to be negative and significant means that an increase in domestic investment leads to a decrease in MI. Therefore this study suggests that special attention should be paid to fiscal and monetary policies to deal with MI in Pakistan.

Inflation, Fiscal Policy, and Inequality: The Impact of the Post‐Pandemic Price Surge and Fiscal Measures on European Households

AbstractFollowing the inflation surge in the aftermath of the pandemic crisis, Euro Area governments adopted a large array of fiscal measures to cushion its impact on households. The inflationary shock and related fiscal measures affected households differently depending on their country, their consumption patterns, and their position in the income distribution. This paper uncovers the aggregate and distributional impact of this inflationary shock, as well as the impact of the government measures aimed at supporting households and containing prices. The analysis is carried out for 2022 and includes Germany, France, Italy, Spain, Portugal, and Greece. Our work confirms that the purchasing power and welfare of low‐income households was more severely affected than that of high‐income households. Fiscal measures contributed significantly to closing this gap, though with country differences. However, most fiscal measures were not particularly targeted at low‐income households, implying a low cost‐effectiveness in protecting the poorest in some countries.

The evolution of Japanese real GDP components in the time–frequency domain: The disappearance of the investment accelerator effect?

AbstractUnderstanding the interaction between national income GDP expenditure components is a key part of the study of the macroeconomics of any country. The general aim of this study is to explore this interaction between the GDP expenditure components in the time–frequency domain for the country of Japan, obtain some stylized facts and then compare them with those of the United States. The main result shows that the cyclical interactions between consumption and investment are typical of an “accelerator” effect and operate at several different frequencies, but that the several different cycles evident in the data phase out in the 1990s, once secular stagnation started to take hold. We hypothesize that Japan's investment drivers then changed to be dependent on the external sector by the 2000s. A secondary result is that Japanese fiscal policy appears to have been largely ineffective in terms of creating cyclical interactions with other GDP components.

Államháztartási kiadások alakulása populista kormányok alatt Kelet-Közép-Európában

Since the 2010s, a populist turn has been taking place in Central and Eastern Europe, and consequently populist parties have assumed control over the respective governments. In the literature, populist rule has been characterised with a) an irresponsible fiscal policy which ignores the budget constraint; and b) a biased redistribution policy that deliberately divides society into two antagonistic groups. Our analysis, covering the period between 2010 and 2022, demonstrates that populist governments in the region – generally speaking – have not relied on the accumulation of public deficit and debt; they, have, in fact, not differed from their non-populist peers with regard to fiscal discipline. Nevertheless, incumbent populist parties have used a conscious redistribution policy in their spending activities by favouring certain groups in society. Yet the spending preferences of populist parties in the region do show discrepancies as well; therefore, no single type of fiscal programme can be identified in the studied period.

Winter is Coming: A Tale of Two Futures – Entrepreneurial State or Creative Destruction?

This paper aims to explore the fundamental principles of sound monetary policy, fiscal prudence, and entrepreneurial innovation, which have historically supported the economic prosperity of nations. It seeks to identify the factors leading to an impending financial crisis and proposes countermeasures based on market liberalization and individual entrepreneurial resilience. Using a critical analysis of prevailing economic conditions, this paper evaluates the unchecked expansion of the monetary supply, fiscal policies, and government interventions. The methodology includes a review of historical economic trends and the application of theoretical frameworks concerning monetary policy, fiscal responsibility, and market innovation. The research identifies that the unchecked expansion of the monetary supply has contributed to inflationary pressures, diminished savings incentives, and led to the misallocation of capital. In addition, fiscal looseness and increased government intervention have exacerbated these economic vulnerabilities, creating conditions ripe for an economic crisis of substantial magnitude, possibly surpassing previous crises such as the Great Recession and the COVID-19 pandemic. The paper concludes that this impending crisis is not an unforeseeable "black swan" event but rather one with clear warning signs that require immediate action. The findings advocate for a departure from interventionist policies and emphasize the importance of returning to foundational economic principles, including market liberalization and fostering individual creativity and entrepreneurial innovation. This paper serves as a timely call for policymakers to address these challenges before the full impact of the crisis is realized.

Asymmetric effects of fiscal policy on inflation in Kenya

Asymmetric effects of fiscal policy on inflation in Kenya

Deciphering the non-linear nexus between government size and inflation in MENA countries: an application of dynamic-panel threshold model

Contradictory to conventional economic theory, which foresees any increase in the size of government as inflationary, this article provides evidence that the reaction of price levels to changes in the size of government is nonlinear. The price levels do not necessarily increase in response to a rise in the size of the government but only up to a certain threshold or optimal level. Accordingly, this paper utilizes the dynamic panel threshold model to examine the threshold effects of government size (measured as government final consumption expenditure as a proportion of GDP) on inflation using a sample of 10 selected MENA countries from 1980 to 2019. The findings of this study stand out in several ways. First, the results support the nonlinear relationship between government size and inflation in the study area. Second, the government size’s estimated threshold level is equivalent to 12.46%. Third, government size negatively impacts inflation in the regime of small governments up to the threshold level. The impact turns positive once the government size goes beyond the threshold level in a regime of large size of government. These findings have ramifications for the conduct of fiscal policy. Policymakers in the MENA region can increase the size of government till it reaches the threshold level without exerting any upward pressure on price levels.

Energy price surges and inflation: Fiscal policy to the rescue?

Motivated by the fiscal policy measures taken by euro zone governments during the 2021/2022 energy crisis, we examine their ability to counter inflationary surges resulting from energy price hikes in energy-importing economies. We use a calibrated small-open economy model in which monetary policy fixes the exchange rate. Subsidies on the sale of energy and on firms' energy expenditures are among the most effective instruments. They reduce marginal costs and limit the pass-through of the price hike which attenuates inflation and stabilizes output and the current account. While inflation indexation of prices aggravates the adverse effects, it renders consumption tax cuts more effective as they attenuate the shock's domestic circulation.

Municipalities at the crossroads: Deciphering the nexus between municipal insolvencies and international investment mandates

AbstractNavigating the convergence of domestic governance and international investment law presents multifaceted challenges in an ever‐globalizing world. The recent bankruptcy of the Birmingham City Council in September 2023, burdened by substantial debt from equal pay claims, serves as a poignant example, illustrating the potential widespread effects of local financial crises on international investment protections and obligations. The discourse explores the complexities arising from municipal insolvencies and the implications of such local fiscal policies on international investment obligations. The lens of international arbitral tribunals sheds light on the dilemmas faced when local realities vie with global responsibilities, especially concerning investor protections and Bilateral Investment Treaties. Decentralized states add another layer of intricacy, balancing regional policies with overarching international commitments. As the landscape of international investment law transforms, both state entities and investors must understand and adapt to the evolving interplay. The synthesis of these two realms is crucial in today's globalized era. Through proactive policy‐making, stakeholder dialogues, and a keen understanding of both local and global dynamics, a harmonious fusion of domestic objectives and international obligations can be achieved.

Unlocking sustainable development: Evaluating the impact of monetary and fiscal policies on ecological footprint in India

India's rapid economic growth underscores the increased necessity of pursuing the paradigms of sustainable development. However, concerns over environmental sustainability have risen in tandem with the country's aspirational goals for economic progress. Therefore, a crucial aspect of managing this is to create a balance between economic prosperity and environmental quality, wherein comprehending how fiscal and monetary policies affect India's ecological footprint becomes an utmost priority. In this vein, this study evaluates the impact of fiscal and monetary policies on India's ecological footprint while controlling for economic growth, squared economic growth, and renewable energy consumption between 1990 and 2022. Given the complexity of these links and well-suitability for examining both short-term dynamics and long-term relationships, this study employs the Autoregressive Distributed Lag (ARDL) model as its methodology for the empirical analysis. Thus, the findings indicate a significant long-term relationship between India's ecological footprint, fiscal policy, monetary policy, economic growth, squared economic growth, and renewable energy consumption while considering the ecological footprint as the dependent variable. Surprisingly, fiscal policy demonstrates insignificat negligible impacts on the ecological footprint in both the short and long run. Conversely, the result underscores that monetary policy effectively curbs the ecological footprint in both the short and long run. Furthermore, the study validates the Environmental Kuznets Curve (EKC) hypothesis in the long run. However, no evidence supports the EKC hypothesis in the short run. Besides, the outcome unveils that renewable energy consumption reduces the ecological footprint with no temporal differences. Hence, the policy implications derived from these findings emphasize the crucial role of monetary policy and integrating renewable energy strategies into policy frameworks for achieving sustainable development outcomes, in addition to the other policy interventions that prioritize ecological conservation alongside economic development, ensuring a balanced approach to solve environmental and economic challenges in India.