Government Budget Balance Research Articles

Analyzing the impact of fiscal conditions on private health expenditures in OECD countries: a quantile ARDL investigation

Organization for Economic Co-operation and Development (OECD) countries have embraced the aim of universal health coverage, as established in Sustainable Development Goal (SDG) 3.8. This goal guarantees access to quality healthcare services without financial hardship or poverty. Additionally, it requires correct and adequate financing sources. A country with weak protection for its population tends to spend less on healthcare and experiences a high share of out-of-pocket payments (OOPs), increasing the likelihood of people falling into poverty. This study aims to understand the relationship and causal effects between macroeconomic and public fiscal conditions and private health expenditure in OECD countries between 1995 and 2019. We retrieved OECD data for 26 OECD countries for the period 1995–2019. Panel AutoRegressive Distributed Lag (PARDL) and panel quantile AutoRegressive Distributed Lag (PQARDL) models were estimated to examine the relationship between private health expenditures and macroeconomic and public fiscal variables. Our results reveal a positive influence of government debt and economic freedom on private health expenditures. They also show a negative influence of the government budget balance, government health expenditures, and economic growth on private health expenditures. These results collectively suggest that public fiscal conditions will likely impact private health expenditures. The findings of this study raise concerns about the equity and financial protection objectives of universal health coverage in OECD countries.

Capital flight Effects on Government Income and Budget Balance in Nigeria (2019-2030): A Dynamic SCGE Modelling Approach

This research analyse the dynamic effects of capital flight on government income and budget balance in Nigeria. The study used a dynamic structuralist computable general equilibrium (SCGE) model to run simulations that indicate the nature of capital flight effect on Nigerian government income and budget balance over the period 2019–2030. The findings show that a successive increase in capital flight in Nigeria will exerts a negative effect on government income and positive effect on government budget balance in the immediate, short, medium and very long term. This study concluded that the government income is vulnerable to capital flight and is affected by successive outflow of legal or illegal capital. On the basis of the findings, this study recommends the following strategies to curb capital flight from Nigeria, these include, plugging the holes through which money leaks, transparency and quality of bilateral trade data, checking the role of multinational corporations in trade misinvoicing, CBN should introduce selective, targeted, and time-bound capital controls to stem outflows, especially outflows through banking channels. Government should thus depend more on domestic borrowing as a means of supplementing its resources. Government and policymakers must establishment of well-functioning political and judicial institutions that will ensure political stability within a country and overly expansionary monetary and fiscal policies, an incompatible exchange-rate policy, and a repressive set of financial policies should be designed to divert resources toward the public.

Fiscal and current account imbalances: The cases of Germany and Portugal

AbstractWe investigate the bilateral relationship between government budget balances and current account balances for Germany and Portugal. We find that the response of the current account balance to the budget balance is greater in Portugal than in Germany. On the other hand, the response of the budget balance to the current balance is higher in Germany than in Portugal. In Germany and Portugal, a fiscal rules index has a negative impact on the current account balance and the government effectiveness index has a positive impact on the government balance. The public debt‐to‐GDP ratio positively affects the current account balance in Portugal while the output gap has a negative influence, and that is not the case in Germany. During the period of implementation of the external assistance programme in Portugal, the current account balance improved, while the government balance did not. Finally, Germany's output gap positively influences Portugal's fiscal position.

Determinants of market‐assessed sovereign default risk: Macroeconomic fundamentals or global shocks?

AbstractThis paper investigates the macroeconomic fundamentals that international investors consider crucial when assessing a country's default risk. Using panel data for 41 countries over the period 2002–2019, we find that the macroeconomic determinants of a sovereign credit default swap (CDS) are heterogeneous across developed and developing economies after controlling for potential endogeneity. While international investors consider government budget balance and inflation as crucial elements in the evaluation of the CDS of developed economies, more stress is placed on economic growth and foreign reserves in the assessment of the creditworthiness of developing economies. Furthermore, we document that better institutional quality reduces the sovereign default risk in both developed and developing economies. However, global shocks appear to have a strong impact in developing economies. The results remain robust to various specifications.

Political Budget Cycles in Early Versus Regular Elections: The Case of Serbia.

The paper analyses Political Budget Cycles in the context of a young post-communist democracy, Serbia. The authors deploy well-established methodological (time series) approaches to examine the general government budget balance (fiscal deficit) in conjunction with elections. The findings suggest that there is clear evidence of higher fiscal deficit prior to elections-however, this is the case only for regular (scheduled) elections and not so for snap (early called) elections. The paper contributes to the PBC literature by revealing different incumbent behaviour in regular versus early elections, thus highlighting the importance of distinguishing between these types of elections in the domain of PBC research.

Impacts of Budget Transparency on Economic and Political Outcomes

his article focuses on a review of literature on the impacts of budget/fiscal transparency on economic and political outcomes. It also considers the definitions and measurements of budget/fiscal transparency indices used in the literature reviewed – thirty-seven papers published in English, online, during the 2000–2021 period. The reviewed papers mostly deal with budget transparency at the national (central) government level, probably due to the problems of measurement at subnational – state, provincial, regional, local – government levels. Tables 1 and 2 systematise the economic and political outcomes and their various measures found in the reviewed literature, and the possibility of using them in further research. Among economic variables, the most pronounced impact is on government budget balance, debt, and expenditures. Governments with higher budget transparency are associated with better budget balance, credit ratings, budget estimation and forecasting, as well as with higher expenditures and revenues, underestimation of revenues and expenditures, lower borrowing costs, government debt, and inflation. The highest proven political impact of budget transparency is on corruption. Governments with higher levels of budget transparency are perceived as less corrupt, i.e. having better control of corruption, as well as higher government quality, effectiveness, and spending efficiency. Moreover, they have more popular governors and higher public participation.

Current Account targeting hypothesis versus twin deficit hypothesis: the European Monetary Union experience of Portugal

In this article, we study the relationship between the government budget balance and the current account balance for Portugal, using quarterly data from 1999 to 2019. On the one hand, the causality tests find a unidirectional relation running from the current account balance to the government budget balance. On the other hand, estimations show a bi-directional relationship between these variables, and the existence of a bilateral relationship between the structural components of both balances. Even so, the policy implication is that the use of fiscal policy to correct the external imbalance, especially in an economic crisis, is not substantial, due to the small size of the estimated impact. In addition, with an ARDL model, we find a negative long run relationship between the share of public consumption on GDP and the current account balance. As expected, the variation of real public consumption produces an adverse accumulated response on the current account balance. Finally, the investment rate negatively affects the cyclical component of the current account balance and contributes to the structural improvement of the budget balance.

Are non-performing loans sensitive to macroeconomic determinants? an empirical evidence from banking sector of SAARC countries

The study empirically investigates selected macroeconomic determinants of non-performing loans (NPLs) for a panel of 8 South Asian Association for Regional Cooperation countries (Afghanistan, Bangladesh, Bhutan, India, Nepal, Maldives, Pakistan, and Sri Lanka), using annual data for the period 2008–2019. To examine the association, this study, primarily, conducted the OLS model, fixed effect estimates, and random effect estimates and, eventually, applied robust fixed effect estimates to resolve the problem of heteroscedasticity. The empirical findings confirmed the previous findings, indicating a significant positive association with the government budget balance and a significant inverse relationship with GDP, sovereign debt, inflation rate, and money supply. To reduce the aggregate NPLs in the South Asian Association for Regional Cooperation economy, the respective country’s government should identify the financial sector’s vulnerabilities and, thereby, emphasize boosting the economic growth, ensuring a moderate level of money supply along with inflation rate. The findings are useful for formulating macro-prudential along with fiscal policies to avoid the subsequent NPLs shock in South Asian Association for Regional Cooperation countries.

The macroeconomic implications of zero growth: a post-Keynesian approach

This paper tries to clarify some important aspects of the zero-growth discussion, in particular the consistency of stable zero growth with positive profits and a positive real interest rate. Starting from an accounting perspective, the authors analyse the implications of zero growth and clarify the stability conditions of such an economy. This is complemented with a monetary circuit approach – which, like any model, has to respect the national income and financial accounting conventions. The latter allows the authors to show that a stationary economy, that is, an economy with zero net investment, is compatible with positive profits and interest rates. They also argue that a stationary economy does not generate systemic financial instability, in the sense of rising or falling financial-assets– or financial-liabilities–income ratios, if the financial balances of each macroeconomic sector are zero. In order to analyse the dynamic stability of such an economy, they make use of an autonomous demand-led growth model driven by government expenditures. They show that a stable stationary state, with zero growth, positive profits and a positive interest rate, is possible in that model. However, the stable adjustment of government-expenditures–capital and government-debt–capital ratios to their long-run equilibrium values requires specific maxima for the propensity to consume out of wealth and for the rate of interest, assuming a balanced government budget and zero retained earnings of the firm sector.

Do fiscal rules need budget transparency to be effective?

We examine whether fiscal rules’ impact on fiscal performance depends on budget transparency. Using panel data of 73 countries over the 2003–2013 period, we find that fiscal rules do not improve the government budget balance in case of low budget transparency. Furthermore, our results suggest that fiscal rules make (the success of) fiscal adjustments more likely but only when transparency is sufficiently high. These findings appear remarkably robust against including contextualizing factors that may influence the impact of fiscal rules and budget transparency. However, to detect fiscal rules' effect on fiscal adjustments, taking fiscal policy volatility into account is important.

Do independent fiscal institutions cause better fiscal outcomes in the European Union?

This paper explores the budgetary implications of the independent fiscal institutions (IFIs) in the European Union (EU). We employ a dynamic panel model for the period 2000–2019 and find that these fiscal watchdogs have a positive and significant influence not only on government budget balance for the EU member states, resulting in smaller government budget deficits, but also on countries’ compliance with fiscal rules, results that hold across alternative fiscal balances. IFIs appear to have a beneficial impact on fiscal performance and compliance with numerical targets in countries with poorly designed fiscal responsibility norms but weaker influence when fiscal rules are less binding (well-designed fiscal rules). The findings remain significant regardless the year of accession to the EU (old vs. new members) or euro-area status (euro-area vs. non-euro-area members). However, we document that IFIs play a larger role in countries that established these monitoring bodies before 2013, indicating that experience matters in IFI performance. Also, our findings show that the influence of IFIs remains if we take into account institutional reforms in which their mandates were extended with different powers and tasks, which has a positive and significant effect on fiscal balances. Moreover, we find that, under the circumstance of systemic and banking crises, these institutions are associated with improved fiscal outcomes, reflecting their increased concern about the path of public finances and their role in reducing budgetary forecasting biases. Our results are robust to a variety of specifications and models, including alternative measures of the government budget balance and after controlling for a set of institutional characteristics and for potential endogeneity in the estimations.

A Data-Driven Approach for Electric Energy Equipment Using Wireless Sensing Technology in the Context of Carbon Neutrality

In this paper, we use wireless sensing technology to conduct an in-depth study and analysis of data-driven power energy equipment in the context of carbon neutrality. For the high-order uncertainty of renewable energy power generation and the nonlinearity of the tidal equation, a set of orthogonal bases under arbitrary probability space can be constructed by itself using the high-order information of renewable energy power generation statistics, and then, polynomials fit the state variables such as voltage in the tidal equation using the orthogonal bases and calculate the fitting parameters using the stochastic Gallatin integration method. Based on the analysis of the online monitoring project of the main power equipment in the substation, a substation power equipment condition monitoring system is designed to realize the real-time monitoring of the temperature status of power equipment, substation smoke and temperature, and humidity environment, and the feasibility and advanced of the system are verified by elaborating the analysis. Using wireless transmission to send real-time temperature information to the monitoring background, the infrared thermal imaging online monitoring system is designed around the front-end data acquisition system, transmission network, background data processing, and display module. Saving-investment equilibrium means that total investment equals total savings; government budget balance can be achieved through government savings or deficits. When both supply chain approaches enter into the same environmental competition, the added value that consumers value the product because of the carbon-neutral approach becomes smaller in the coefficient constraint of green effort investment cost due to the competition between the two supply chains, which in turn increases the green investment cost of the supply chain with the green effort carbon-neutral approach, indicating that in the case of competition, consumers, when faced with two products produced by two supply chains, are interested in the product with the carbon-neutral approach has less value-added, and some of the demand is shifted to the product not produced with the carbon-neutral approach.

Are tax revenue elasticities consistent with a balanced government budget? An analysis and implications for six CEE countries

Tax revenue elasticities are an important parameter in the management of the revenue side of the government budget as they provide information about the impact of economic growth on tax revenues and fiscal sustainability. A growing number of empirical studies have estimated such elasticities or buoyancies for different countries using various methods. This paper follows a novel approach of deriving tax revenue elasticities that are consistent with a balanced budget for six Central and Eastern European countries using data over the period 1995-2019. These derived elasticities were then compared to actual estimates reported in other studies. The main conclusion from this comparison is that, for most cases considered, tax revenues were responsive enough to economic growth to support fiscal sustainability.

A Keynesian Revolution or Austerity? The IMF and the COVID-19 Crisis

This commentary for the “Political Economy Section COVID-19 Collection’’ discusses ideational continuity and change at the International Monetary Fund (IMF) in the context of the COVID-19 pandemic. It argues that, despite an initial advice to increase the government spending, the Fund has later reverted back to the market orthodoxy recommending fiscal discipline and balanced government budget in the longer-term. The piece argues that, although a global crisis and increased government spending by influential member states such as the United States might have prompted an ideational shift at the Fund, a lack of clear theorization of longer-term Keynesian policies in academic circles and in the economics profession, prevented a paradigmatic change at the Fund.

The Development of Corporate Social Responsibility in the Context of Overcoming a Welfare State Crisis: a Theoretical and Empirical Analysis

The current social crisis, caused by the negative consequences of globalization, labor migration, and an aging population, requires the state’s role in economic and social spheres to be reconsidered. In order to achieve and maintain sustainable economic growth, the pressing social problems, such as poverty, hunger, discrimination, and the unequal distribution of income, should be solved. Under these circumstances, the paper investigates the process of forming a welfare state to evaluate the role of current states in this period of social crisis. To achieve the aim, the following methods were used: historical and systematic analysis of the scientific literature and socio-economic conditions of the evolution of theoretical approaches of the welfare state, and the causes and characteristics of the present social crisis; cluster analysis of European countries to find similar patterns based on the level of corporate social responsibility (CSR) development, state social expenditures, and the government budget balance. The paper contains a detailed analysis and discussion of the formation of a welfare state. The study concludes that the process of delegating some state social services to the private sector in the form of CSR can be considered an efficient mechanism to eliminate and overcome the current social crisis through the accumulation of social capital. At the same time, the results of the cluster analysis of European countries demonstrated the importance of CSR development as a compensator for the negative effects of a public welfare crisis and for solving pressing social problems in most European countries. Specific features of post-socialist countries in the context of social orientation of state policy and the development of CSR are highlighted.

Fiscal Rules for Natural Disaster- and Climate Change-Prone Small States

How should small states formulate a countercyclical fiscal policy to achieve economic stability and fiscal sustainability when they are prone to natural disasters, climate change, commodity price changes, and uncertain donor grants? We study how natural disasters and climate change affect long-term debt dynamics, and we propose cutting-edge fiscal policy rules. We find the primacy of a recurrent expenditure rule based on non-resource and non-grant revenue, interdependently determined by government debt and budget balance targets with expected disaster shocks. This innovative fiscal rule is classified as a natural disaster-resilient fiscal rule, which comprises a plethora of new advantages compared to existing fiscal rules. This new type of fiscal rule can be called as the third-generation fiscal rule. It encompasses natural disasters and climate change, uses budget data only, avoids the need for escape clauses, and operates on a timely basis. Our rule-based fiscal policy framework is practically applicable for many developing countries facing an increasing frequency and impact of devastating natural hazards, and climatic change.

Sustainable Debt Policy Rules and Growth in a Small Open Economy Model: Is a Balanced Government Budget Worthwhile?

In this paper, our objective is to analyze sustainable debt policy rules and economic growth using a model of endogenous economic growth theory. For the government, it is possible to run into debt, but the primary surplus is a positive linear function of the debt-to-GDP ratio which guarantees that public debt is sustainable. We analyze different sustainable debt policies in this small open economy model of endogenous growth with public capital accumulation, as well we take transitions into account. We investigate the characteristics and stability of the steady state, and we analyze the effects on welfare for the different debt policies.

Activity of Eugeniusz Kwiatkowski as Deputy Prime Minister and Minister of Treasury in Years 1935–1939

Eugeniusz Kwiatkowski acted as deputy prime minister and minister of treasury between October 13, 1935 to September 1939, directing the state economy and treasury matters. Kwiatkowski’s economic policy of the period 1935–1939 can be called a policy of careful mechanism of „giving impetus” to economy. This was achieved specifically in government’s investment policies compliant with government budget balance and investment initiatives, the construction of The Central Industrial District, the development of Warsaw Industrial Region and the investment in Communication Ministry.

Twin Deficits in Developing Economies

This paper provides new evidence of the existence and magnitude of the “twin deficits” in developing economies. It finds that 1 % of GDP unanticipated increase in the government budget balance improves, on average, the current account balance by 0.8 percentage point of GDP. This effect is substantially larger than that obtained using standard measures of fiscal impulse, such as the cyclically-adjusted budget balance. The results point to some heterogeneity across countries and over time. There is suggestive evidence that the effect tends to be larger: (i) during recessions; (ii) in countries that are more open to trade; (iii) that have less flexible exchange rate regimes; and (iv) with lower initial public debt-to-GDP ratios.

A macroeconomic simulation for Greece in the wake of its government debt crisis

This paper simulates the macroeconomics of Greece following its 2009 government debt crisis that precipitated a 4-year depression with stagnant growth since. A model of aggregate supply and demand estimated with quarterly data from 2003 to 2018 is constrained to a balanced government budget, outside euro exchange rate, and exogenous international interest rate. Dynamic stochastic simulations starting in 2011 capture the effects of less erratic government spending, quicker transition to debit cards, and returning investment sentiment to the pre-crisis level. Simulations track the path of income along with the trade balance, tax revenue, price level, and equilibrium quantity of money.