Government Fiscal Policy Research Articles

Quadrilemma Not Trilemma: Fiscal Policy Matters

This paper examines the interactions between fiscal policy and the open economy macroeconomic policy trilemma in a small open economy dynamic stochastic general equilibrium model. I show that the trilemma policy regime choices require fiscal accommodation. Otherwise, when future budget surpluses fail to stabilize government liabilities, fiscal imbalance generates exchange rate depreciation, regardless of monetary and capital account policy regimes. In this active fiscal policy regime, fiscal and monetary policy interact to determine the magnitude of exchange rate depreciation, while monetary policy and capital controls manage the timing of the depreciation.

RANKINGS TAX AFFAIRS OFFICE OF THE EAST OF TEHRAN WITH THE TAX CAPACITY APPROACH USING TOPSIS METHOD

Taxation is the most important tool of the government's fiscal policy, which speeds up the process of economic growth, and constitutes one of the most major and most stable sources of income for governments. Comparison this source with other sources suggests that, whatever the contribution of taxes is more in provision of government expenditures, economic adverse effects are reduced, significantly. Accordingly, it is necessary to taxation problems, be analyzed by estimating the throughput and efficiency of the tax system, and practice, in order to overcome them, and to identify new ways of taxing, to reduce exist tax gap between tax revenues and tax capacity, by adopting the methods and measures. In the present study, as the regional study, is trying to rank Affairs tax Office of East of Tehran, by examining six factors influencing the actual capacity of tax, as amount of tax collecting, number of tax employees, etc, and testing their effectiveness with TOPSIS method, based on information from 2011, to evaluate the inter-organizational factors influence the capacity of the tax. In this study, researcher collected research data, without any kind of tampering, and with the help of interviews with tax experts, and visiting the tax affairs offices of East of the state. The results of the entropy technique, showed that the amount of collected taxes, with weight 0.2444, has the most importance, and the ratio of the number of records, compared with number of employees, with the weight of 0.0412, has the lowest importance among six identified indicators. Finally, it was determined that, among the tax Affairs Offices of East of Tehran, tax affairs office of Boomehen, with C A ₂*=0.7099, is the first, and tax affairs office of Pardis, with the C A ₁* =0.2493, is on the last place.

Improving the System of Fiscal Regulation in Regions of the North

This article studies the consequences of current government fiscal policy in the country’s northern regions, clarifies the priorities of institutional reforms in the fiscal sector, and argues for the most effective mechanisms of fiscal regulation.

Competition and Coordination in Two‐Tier Public Service Systems under Government Fiscal Policy

As a result of government budgetary limits and rapid market growth, many public service systems—such as health care—are characterized by extensive customer wait times that have become a serious problem. This problem might be solved by allowing private firms to enter these markets, which would provide customers with a choice between a free (governmental) public service provider (SP) and a fee‐charging (or “toll”) private SP. In such a two‐tier service system, the two SPs are differentiated by service quality and cost efficiency. This study focuses on the competition and coordination issues for two‐tier service systems with customers who are sensitive to both service quality and delay. The free system attempts to maximize its expected total customer utility with limited capacity, whereas the toll system attempts to maximize its profit. Neither goal is aligned with the social welfare goal of the public service. To achieve the social welfare goal, the government plays a crucial role in coordinating the two‐tier service system via the budget, the tradeoff of social members' goals, and tax‐subsidy policies. Using a mixed duopoly game, we establish Nash equilibrium strategies and identify the conditions for the existence of the two‐tier service system. We employ several interesting and counter‐intuitive managerial insights generated by the model to show that the public service can be delivered more efficiently via customer choice and SP competition. In addition, we show that a relatively low tax‐subsidy rate can almost perfectly coordinate the two SPs to achieve most of the maximum possible benefit of the two‐tier service system.

Oil Sector: Potential for Tax Incentives

The state of Russia’s oil sector is marked by a general deterioration of the oil extraction conditions owing to depletion of existing deposits in developed regions and significantly higher extraction costs at the new oil fields and tight oil deposits. In order to improve the situation, investments in the development of new oil fields are required as well as in deepened development of existing deposits with an improved refining margin. Government fiscal policy should contribute to the resolution of these issues including implementation of structural reform in the tax system and introduction of special excess-profit tax.

Peter Dietsch's Catching capital: the ethics of tax competition. New York: Oxford University Press, 2015, 280 pp.

Review of Peter Dietsch's Catching capital: the ethics of competition. New York: Oxford University Press, 2015, 280 pp.This excellent book explores normative issues related to competition among states and proposes solutions to core problems identified. The two main questions which the book tackles are: What, if anything, is wrong with competition? And, if there is something ethically problematic, what should be done? Dietsch argues that evasion and the shifting of profits to low-tax jurisdictions represent egregious forms of free-riding on the part of capital owners and one of the most blatant injustices of modern economic societies. We need to get a grip on them (p. 223). As far as I am aware, this is the only book-length normative assessment of competition available and, as such, it makes a highly original contribution to important literatures. This work, principally in economic philosophy, blends issues and insights from at least four different disciplines, namely political philosophy, economics, political sciences, and international law. It is accessibly written and aims to reach a broad audience including philosophers, economists, political scientists, law theorists, along with policymakers and members of international organizations. It is centrally focused on the normative underpinnings of how the international regime should be organized. But it also offers concrete proposals about how to create institutions and policies that would best match the theoretical analysis and bring its core normative insights into being.Dietsch argues that enormous private wealth is hidden in havens and restoring fiscal control to states will require more effectively catching this capital, so that those who have a right to capital are able to do this effectively. We have to reform the international fiscal policy regimes so that effective taxation is possible. These goals require answering a number of core questions.If some coordination in policy is required to respond to competition, what will be the implications for states' fiscal sovereignty? Can one regulate competition without calling for an outright harmonization of rates? If so, how should we strike a balance between the fiscal autonomy of one particular state and the externalities this autonomy creates for other states? And supposing that reforming the system through multilateral regulation of competition is not politically feasible, are there compensatory duties that the winners of competition owe the losers? Last but not least, could it be that regulating competition will be economically inefficient (p. 7)?So, to begin the sketch of his answers to some of these questions, what kinds of competition are worrisome? Dietsch identifies three kinds. First, states compete for foreign direct investment which involves relocation of real economic activity. Second, there is competition for portfolio capital. Individuals shiftsome of their wealth in the form of cash deposits, equity, and security holdings offshore-which in fact means nothing other than 'abroad' in the financial world-in order to avoid paying capital gains tax (p. 3). Approximately 10% of European wealth is held offshore, while the figure for Latin America is 50%, and the Middle East, 70% (p. 3). Third, states also compete for paper profits of multinational enterprises (MNEs). Using a staggering array of methods (such as manipulative transfer pricing schemes), MNEs shiftprofits from high to low rate jurisdictions. As one example, in 2009 Google Inc. was able to shiftprofits through Ireland, the Netherlands and Bermuda to cut its taxes dramatically to around 2.4%, far below the US corporate rate of 35%. So successful are these methods that 39% of Fortune 500 companies that were profitable for each year between 2008 and 2013 paid zero (or less) in one or more of those 5 years. Indeed, such practices have become an essential part of being competitive. …

Optimal Taxation of Banks in Financial Sector Regulation in Uzbekistan: Practical Approach

Global financial crisis made most of advanced and developing economies review and re-examine the relevance of fiscal and banking policy regimes. Existing fiscal gap and financial market disorders led to the introduction of new taxes and mandatory fees for banks for double edged reasons – bridging the fiscal gap and bank capital regulation. In a harsh economic condition most banks required the governments to rethink the taxation policy for financial institutions. Most policymakers and researchers are devising diverse proposals on optimal taxation which meet the needs of both parties. This paper studies the international bank taxation policies and recent development, and examines the opportunities of introduction of optimal taxation for banks in banking system of Uzbekistan.

Nigeria’s Current Account Determination under Changes in Government Fiscal Policy and Exchange Rate Volatility (1970-2015)

Nigeria’s Current Account Determination under Changes in Government Fiscal Policy and Exchange Rate Volatility (1970-2015)

The Analysis of Domestic Debt Asymmetry in Turkey by Regime Switching Models

Abstract Domestic debt is an important tool of government finance for the economies which are vulnerable to budget deficits arising from government expenditures exceeding revenues. This tool used for government fiscal policy is a determinant of macroeconomic stability due to the effects on growth, employment and investment variables. In this context, the analysis of domestic debt dynamics has a vital importance especially for developing economies. As a developing economy for Turkey, the deterioration of fiscal balance after 1990's has led to a consistent increase in domestic debt. Aftermath of 2001 crises, domestic debt was restrained by the fiscal discipline which came into prominence by “Transition to Strong Economic Program”. In this regard, our study examines the structure of domestic debt process in Turkish economy over the period 1998-2015. Firstly, we investigate the linearity of the domestic debt series. Following the examination of non-linearity, we analyze the transition characteristics of domestic debt series by means of STAR (Smooth Transition Autoregressive) model.

The Impact of Government Fiscal Policy on Nonprofit Growth: A Cross-County Panel Study Testing the Social Origins Theory

The Impact of Government Fiscal Policy on Nonprofit Growth: A Cross-County Panel Study Testing the Social Origins Theory

Fiscal Stimulus in Economic Unions: What Role for States?

Executive SummaryThe Great Recession and the subsequent passage of the American Recovery and Reinvestment Act returned fiscal policy and, particularly, the importance of state and local governments to the center stage of macroeconomic policymaking. This paper addresses three questions for the design of intergovernmental macroeconomic fiscal policies. First, are such policies necessary? Analysis of US state fiscal policies shows state deficits (in particular from tax cuts) can stimulate state economies in the short run, but that there are significant job spillovers to neighboring states. Central government fiscal policies can best internalize these spillovers. Second, what central government fiscal policies are most effective for stimulating income and job growth? A structural vector autoregression (SVAR) analysis for the US aggregate economy from 1960 to 2010 shows federal tax cuts and transfers to households and firms and intergovernmental transfers to states for lower-income assistance both are effectiv...

Fiscal policy in an open economy

AbstractThis paper analyzes the quantitative macroeconomic implications of a fiscal policy regime based on exogenous tax rates paths and public debt/GDP target in an open economy. In this setup, government spending accommodates tax revenues and target deficits. In particular, we concentrate on pre-announced tax cuts, as well as on the adoption of a lower debt target – following policies conducted in Israel during the 2000s. We construct a model where domestic production requires imported inputs, and simulate the effects of these policies. The analysis focuses on the dynamics generated by the announcements of these policy steps, followed by their implementation. The model has the implication that a credible announcement of a future tax cut has an expansionary effect on impact, similar in nature to the effects of productivity shocks. Also, the model implies that the announcement of a lower public debt/GDP target has a contractionary effect, while it’s implementation leads to higher output in the long-run.

Fiscal Policy and Economic Growth in Nigeria

This article aims at determining the impact of various components of fiscal policy on the Nigerian economy. We simply used descriptive statistics to show contribution of government fiscal policy to economic growth, and to ascertain and explain growth rates, and an ordinary least square (OLS) in a multiple form to ascertain the relationship between economic growth and government expenditure components after ensuring data stationarity. Findings revealed that total government expenditures have tended to increase with government revenue, with expenditures peaking faster than revenue. Investment expenditures were much lower than recurrent expenditures evidencing the poor growth in the country’s economy. Hence, there is some evidence of positive correlation between government expenditure on economic services and economic growth. Therefore, in public spending, it is important to note that the effectiveness of the private sector depends on the stability and predictability of the public incentive framework, which promotes or crowds out private investment.

Manajemen Zakat di Indonesia dan Brunei Darussalam

This book describes a comparative zakat management, especially going to explain about the government's fiscal policy part of Indonesia and Brunei Darussalam on development programs and poverty reduction with charity instruments in both countries. For the sake of economy, zakat distributed for the mustahik poverty alleviation. Even the results of this research will test the theory of income distribution in the form of direct cash assistance in the form of money, materials, or other objects that are consumptive, and compared with the economic aid in the form of zakat that is productive. In addition, this book has an important meaning to analyse the effectiveness of the management of zakat by the government through regulation and the establishment of zakat management institutions.

Learning about fiscal policy and the effects of policy uncertainty

In this paper we ask how uncertainty about fiscal policy affects the impact of fiscal policy changes on the economy when the government tries to counteract a deep recession. The agents in our model are uncertain about the conduct of fiscal policy and act as econometricians by estimating fiscal policy rules that might change over time.We find that assuming that agents are not instantaneously aware of the new fiscal policy regime in place leads to substantially more volatility in the short run and persistent differences in average outcomes. We highlight issues that can arise when a policymaker wants to announce a policy change. From a methodological perspective, we introduce a novel way to model learning in the face of discrete policy changes.

Learning About Fiscal Policy and the Effects of Policy Uncertainty

The recent crisis in the United States has often been associated with substantial amounts of policy uncertainty. In this paper we ask how uncertainty about fiscal policy affects the impact of fiscal policy changes on the economy when the government tries to counteract a deep recession. The agents in our model act as econometricians by estimating the policy rules for the different fiscal policy instruments, which include distortionary tax rates. Comparing the outcomes in our model to those under full-information rational expectations, we find that assuming that agents are not instantaneously aware of the new fiscal policy regime (or policy rule) in place leads to substantially more volatility in the short run and persistent differences in average outcomes.

Exploring Government Budget Deficit and Economic Growth: Evidence from Vietnam's Economic Miracle

: Government actions influence a country's economic performance. However, the debate about the effects of government budget deficit on economic growth remains unsettled. On the one hand, deficit is believed to trigger high tax rates, which can decrease productivity and deter private investment. On the other, deficit spending is assumed to complement business investment and stimulate economic productivity. This article assesses the probability of such claims for the Vietnamese government's fiscal policy between 1989 and 2011. After the introduction of the Doi Moi reform policy in the late 1990s, Vietnam has witnessed high economic growth. Yet, its government's deficit pattern is among the highest in Southeast Asia. The findings demonstrate that in the case of Vietnam, government deficits had no direct effects on the country's economic productivity between 1989 and 2011. Instead, the article discovers that foreign direct investment (FDI) played an important role in Vietnam's economic productivity over the same period, while real interest rates adversely affect growth. This article concludes that rather than an expansion of the public sector through government spending deficit, Vietnam requires administrative and regulatory reforms to ensure an efficient use of government resources, a continuous flow of foreign capital, and consistent economic growth.

Does slow growth lead to rising inequality? Some theoretical reflections and numerical simulations

This paper explores the hypothesis (most notably made by French economist Thomas Piketty) that slow growth rates lead to rising inequality. If true, this hypothesis would pose serious challenges to achieving ‘prosperity without growth’ or meeting the ambitions of those who call for an intentional slowing down of growth on ecological grounds. It would also create problems of social justice in the context of a ‘secular stagnation’. The paper describes a closed, demand-driven, stock-flow consistent model of Savings, Inequality and Growth in a Macroeconomic framework (SIGMA) with exogenous growth and savings rates. SIGMA is used to examine the evolution of inequality in the context of declining economic growth. Contrary to the general hypothesis, we find that inequality does not necessarily increase as growth slows down. In fact, there are certain conditions under which inequality can be reduced significantly, or even eliminated entirely, as growth declines. The paper discusses the implications of this finding for questions of employment, government fiscal policy and the politics of de-growth.

Assessment of the Impact of Fiscal Policy Operations on Stock Price Performance: Empirical Evidence from Nigeria

This paper examines the relationship between Government fiscal policy measures and stock prices in Nigeria during the period 1985 – 2012. Employing OLS, co-integration, error correction mechanism (ECM), Granger Causality and impulse response and variance decomposition techniques on fiscal policy – stock prices model patterned after a multivariate regression, the study found a significant and negative impact of Public expenditure on stock prices, while Government Domestic Debt Outstanding exerts a significant and positive influence on stock prices. The study also reports a significant and positive relationship between Non-Oil Revenue and stock prices while the two-period and three-period lagged values of broad money supply have significant relationship with stock prices. The Granger causality tests reveal that Stock prices lead changes in Public Expenditure, Domestic Debt and Money Supply respectively while Non-Oil Revenue leads changes in stock prices. The results of both the IRF and VDC analysis reveal that own shocks represent the dominant source of variation in the forecast errors of the variables. The paper therefore recommends that appropriate fiscal policies should be designed and implemented on account of the significant and profound impact of fiscal policies on stock market prices.

THE INDONESIAN INTER-REGIONAL SOCIAL ACCOUNTING MATRIX FOR FISCAL DECENTRALISATION ANALYSIS

Disparities in development have long been a crucial issue in Indonesia. With regard to the new structure of the Indonesian government, it is of great interest to determine whether Indonesia should further decentralise its budget, and if so, what consequences this would have on the national economy overall. This paper develops a simple economic tool — that is an inter-regional social accounting matrix (IRSAM) multiplier — to analyse the impacts of further decentralising government fiscal policy on regional and national performances. Our simulations show the following. First, reducing gaps among regional economies and boosting the national economy through a higher fiscal transfer strategy might not achieve the same end; i.e. providing a higher transfer to regions that are lagging behind (Sulawesi and Eastern Indonesia) would most likely reduce gaps among regional economies, but might impact negatively on the national economy overall. Second, in general, a more decentralised fiscal system would benefit households in Sulawesi and Eastern Indonesia, whereas the same cannot be said for Java-Bali, Sumatra, and Kalimantan. Third, impacts of further fiscal transfers on labour income vary considerably depending on the region and type of labour. Keywords: regional economy, fiscal decentralisation, Social Accounting Matrix