Implications For Fiscal Policy Research Articles

Correlation between taxes and inflation in the Republic of Kazakhstan

A comprehensive study is pivotal for adeptly articulating the intricate interplay between tax policy and inflation within the global economic framework. This exploration elucidates the consequential relationship between taxation adjustments and inflationary trends, providing a bedrock for harmonizing international policy. By deploying econometric methodologies, the analysis meticulously examines data sourced from official channels over a specified timeframe to ascertain the correlation magnitude between these critical economic indicators. The study meticulously considers various determinants that could influence the taxes-inflation nexus, such as the unemployment rate, average wage levels, and the spectrum of tax indicators within a nation. Central to this inquiry is the examination of how alterations in tax policy - specifically tax rate modifications—impact inflationary pressures. This examination is instrumental in furnishing policymakers with the insights required to calibrate tax policies adeptly, thereby mitigating inflation risks while fostering sustainable economic expansion. In delving into these dynamics, the research enriches the corpus of knowledge on the implications of fiscal policy for macroeconomic stability. The analytical outcomes derived from the data not only enhance our comprehension of the complex interplay between taxation and inflation but also serve as a crucial resource for crafting efficacious economic strategies. This contribution is of immense value to the discourse on fiscal policy's role in achieving macroeconomic objectives, underpinning the study's significance in informing policy formulation and international economic cooperation aimed at minimizing adverse global economic impacts.

Experience in conducting tax amnesty in developing countries before the introduction of automatic exchange of tax information

The author provides a detailed overview of an article that examines tax amnesty programs within the framework of international tax initiatives like the BEPS Action Plan and the Common Reporting Standard (CRS). The article argues that the integration of these global initiatives and domestic tax amnesties has complex and far-reaching implications for taxpayer behavior, government revenue, and fiscal policy at large. The key themes of the article focus on global tax initiatives, the effectiveness of tax amnesties, the criteria for a successful amnesty program, and their ethical and social implications. The article underscores the transformative role of global frameworks like CRS and BEPS in tax enforcement, pointing to unprecedented levels of transparency and international cooperation. While the short-term revenue boosts from tax amnesties are acknowledged, the article argues that the long-term impacts of these programs on tax compliance and fiscal integrity are less certain. This makes the article’s detailed set of conditions for an effective tax amnesty program particularly valuable for policymakers. The ethical and social implications of tax amnesties are also explored, emphasizing that public trust is crucial for the success of these programs.
 In terms of methodology, the article combines qualitative analysis with empirical data, such as the OECD survey conducted in 2015, to build its arguments. Its comprehensive approach integrates perspectives from economics, law, and political science, making the findings relevant for a broad audience.
 In conclusion, the article is a significant contribution to the growing body of literature on tax policy and international cooperation. It offers a nuanced understanding of how domestic tax amnesties interact synergistically with global tax initiatives to impact compliance and revenue collection.

The Mundell‑Fleming Model and Macroeconomic Stabilization Policies

This paper analyzes the fiscal policy implications set in the Mundell‑Fleming (M‑F) model and its effectiveness in emerging economies. It also widens the scope of the policy mix with alternative exchange rates. The empirical evidence about the economies of Chile (1991–2003) and Colombia (1994–2004), about institutions, fiscal policy rule, and the eurozone conditions (1999), were considered relevant The paper has three sections a. The budget‑surplus fiscal policy rule and policy effectiveness, b. The role of institutions in setting policy rules, c. The experience of the Chilean and Colombian economies concerning fiscal policy rules within the M‑F framework. The main conclusion is that as long as country risk is lower due to countercyclical fiscal policy rules, governments have an alternative means of getting funds at a lower international interest rate. The fiscal policy effect on GDP (output)becomes positive.

Structural Stability of the Relationship between Indirect Taxes and Government Expenditure in Nepal: Implications for Fiscal Policy

This study uses time series data of Nepal from fiscal years 1974/75 to 2017/18 to examine the dynamics of the relationship between indirect taxes and government spending. The study’s main objective is to examine the effect size of Value Added Tax (VAT), excise, and customs duties in predicting Nepal’s budget deficit. The data for the study purpose were obtained from the Government of Nepal, Ministry of Finance. The study used a retrospective methodology. The data were first checked for stationarity by employing the Augmented Dickey-Fuller Test, and then the link between the variables was determined using a multiple regression analysis based on ordinary least squares. The results showed that customs charges did not affect government spending in Nepal, while value-added and excise taxes had a statistically significant positive impact. The structural stability of the parameter was evaluated utilising the CUSUM and CUSUMSQ procedures. The results showed no evidence of misspecification or instability within the period predicted by the model. The residuals follow a normal distribution with no serial correlation, heteroscedasticity, or multicollinearity issues. The main implication of the study finding is that the government should exercise fiscal restraint and prioritise the collection of indirect taxes. Additionally, it recommends reducing customs taxes for new businesses and expanding the range of products subject to VAT.

The Nature and Implications of Off-Budget Borrowings in India: Centre and States


 
 
 
 India has a long-standing problem with data gaps, which have serious implications for fiscal policy and economic growth. The lack of transparency around off-budget borrowing is a major example of data gaps in India, and has been persistent across the Union and state levels. The paper examines the regulatory framework and institutional gaps surrounding off-budget borrowings in India. It attempts to build a comprehensive understanding on the methods used for such borrowings and ascertains their true extent. The paper relies primarily on data from CAG audits of the Union and state finance accounts. The paper welcomes the Union's recent actions to make transparent and begin to do away with the use of off-budget borrowings. However, more actions are needed to close this form of data gap, at the Union and the states and, meanwhile, the Union should focus on ensuring the full reporting of these borrowings. This calls for an improvement in the coverage, timeliness, quality and integrity of fiscal reporting, in line with international standards. Eventually, that could be best achieved with a comprehensive and consolidated PFM law for the Union and the states.
 
 
 

Effects of Fiscal Policy Uncertainty on Turkish Economy

Uncertainty is one of the most important issues for economic actors. Uncertainty about tax, expenditure and debt policy has an impact on the economy. The central question in this study asks how fiscal policy uncertainty affects the Turkish economy. First, we quantify Turkey's fiscal policy uncertainty index based on volatility measurements between 1998Q1 and 2020Q4. This index represents major fiscal, economic and political incidents in Turkey. Next, we analyse the effects of fiscal policy uncertainty on the Turkish economy using a VAR model. Our study finds that fiscal policy uncertainty shocks have detrimental and long-lasting effects on the Turkish economy. The results indicated that a positive standard deviation shock in fiscal policy uncertainty decreases the confidence, output and consumption. The findings of this study reveal critical fiscal policy implications for decision-makers. These findings imply that reducing Turkey's fiscal policy uncertainty is a critical policy priority for the business cycle fluctuations.

Expectations-Driven Liquidity Traps: Implications for Monetary and Fiscal Policy

We study optimal time-consistent monetary and fiscal policy in a New Keynesian model where occasional declines in agents’ confidence give rise to persistent liquidity trap episodes. Insights from widely studied fundamental-driven liquidity traps are not a useful guide for enhancing welfare in this model. Raising the inflation target, appointing an inflation-conservative central banker, or allowing for the use of government spending as an additional stabilization tool can exacerbate deflationary pressures and demand deficiencies during the liquidity trap episodes. However, appointing a policy-maker who is sufficiently less concerned with government spending stabilization than society eliminates expectations-driven liquidity traps. (JEL E31, E52, E61, E62, E63)

Implications of fiscal policy on household consumption in Kenya: A nonlinear auto-regressive distributed lag approach

Orientation: Fiscal policy can be applied with a stabilisation intention if government finance choices can influence household consumption behaviour. According to Keynes, expansionary fiscal policy is the best economic stabilisation tool.Research purpose: This article examined the crowding in effects of fiscal policy on household consumption whilst investigating the effectiveness of fiscal policy in Kenya.Motivation for the study: Household consumption is a key indicator of economic well-being in any economy. Despite its importance, empirical studies examining the relationship between fiscal policy and household consumption are limited in Kenya. In addition, empirical studies on this subject focused on the linear or the symmetric effects of fiscal policy on household consumption.Objective: The objective of this study was to investigate the asymmetric effects of fiscal policy on household consumption in Kenya.Methodology: This study employed a quantitative research method using time series data which ranged from 1971 to 2018. The nonlinear auto-regressive distributed lag (NARDL) model was used in the empirical analysis.Results: In the short run, fiscal policy was found not to affect household consumption. However, fiscal policy was found to have asymmetric effects on household consumption in the long run.The managerial implications: The study revealed that, in the long run, negative changes in tax revenue crowd in consumption whilst other factors do not have a significant effect on household consumption.Value-added: This study informs the Kenyan government on the best way to follow when fiscal policy tools must be employed to boost household consumption.

Tax-Spend or Spend-Tax? The Case of Southern Africa

Whether to increase taxes or cut spending is an important question with profound policy implications, especially as countries attempt to deal with the consequences of the COVID-19 pandemic. This study, therefore, investigated the relationship between revenues and spending in the Southern African Development Community (SADC), where concerns about rising debt and deficits were raised prior to the pandemic. A panel bootstrap Granger-causality technique was used to analyze annual frequency data covering the 1980–2018 period. To our best knowledge, this was the first study in Africa to simultaneously account for cross-country differences and cross-section dependence. The findings of the study have in-depth implications for fiscal policy and adjustments towards budgetary equilibria. The study found no evidence of causality between revenues and spending in eleven SADC member states, suggesting that to balance their respective budgets, governments in these countries can alter either spending or revenues, or both. However, in Botswana, we found evidence of the tax-spend hypothesis, implying that governments should consider altering revenues to eliminate budget imbalances. Finally, evidence of the spend-tax hypothesis was found in Mauritius and Mozambique, suggesting that past and current expenditures drive revenues in these countries. Accordingly, cutting spending would be an ideal policy recourse to deal with budgetary disequilibrium.

What Determine the Corporate Tax Rates During the COVID-19? Evidence From 113 Countries.

Fiscal policy implications become an important tool to soften the negative consequences of the COVID-19 pandemic. Given this backdrop, this paper analyses the drivers of corporate tax rates during the COVID-19 pandemic (i.e., in 2020 and 2021). The results from 113 advanced and developing economies show that a higher level of the COVID-19-related uncertainty is positively associated with the corporate tax rates. Similarly, the country size (measured by total population) increases the corporate tax rates. Per capita income is negatively related to the corporate tax rates, but this evidence is insufficient to consider different estimation techniques. The paper also discusses potential fiscal policy implications for the driving mechanism of corporate tax rates for the post-COVID-19 era.

Prosečna efektivnost poreza na dobit na primeru kompanija na listingu Beogradske berze

The fiscal policy of a country is a crucial source of successful and normal functioning of that country's economy. The implications of fiscal policy can be reflected in both the private and the functioning of the public sector of a country's economy. Public finance is an area of economics dealing with the analysis of tax policy and government spending policy. One of the important areas of public finance research is corporate income tax. Corporate income tax is a direct tax imposed at the national level for the purpose of taxing the profits of certain companies, whether state-owned or privately owned. The aim of this paper is to look at the actual amount of profit tax paid, i.e. by observing the profit before taxation of companies listed on the Belgrade Stock Exchange. The paper considers the effective tax rate of companies and points out the deviation of the same from the legally prescribed corporate income tax rate in the Republic of Serbia and the implications of corporate income tax on the company's business results. The paper presents graphical and tabular representations of the effective tax rates of each company as well as the average effective tax rate of companies listed on the Belgrade Stock Exchange in relation to the law in the period from 2013 to 2020 in the Republic of Serbia. Finally, a statistical analysis of the presented results is given in order to understand more precisely the deviation of the effectiveness of corporate income tax of companies listed on the Belgrade Stock Exchange as well as the analysis of the correlation between the growth of the average pre-tax profit and the growth of the average effective corporate income tax rate.

Changes in the Composition of Tax Revenues: Implications for Monetary and Fiscal Policy

Changes in the Composition of Tax Revenues: Implications for Monetary and Fiscal Policy

Fiscal Policy, Institutional Quality, and Public Debt: Evidence from Transition Countries

This research makes a significant contribution to the literature on the economic implications of fiscal policy and institutional quality by modeling empirically the impact of these factors on public debt in 27 transition countries over the period 2000–2018. Applying Ordinary Least Squares (OLS), Random effects, and two-step GMM methods, the research gives evidence to confirm the background theory that deducing public expenditure and improving government revenue could push government debt lower. The main findings especially demonstrate that institutional quality contributes to making an impact on public debt. Particularly, weak governance in controlling corruption leads to higher accumulation of public debt while financing to improve the institutional quality in relation to government effectiveness, regulatory quality, and rule of law after changes in the regime in those countries increases the size of public debt. The results of this paper convince policymakers of crucial implications of both fiscal policy and institutional quality in managing public debt.

Fiscal policy and environment: a long-run multivariate empirical analysis of ecological footprint in Pakistan.

The ecological footprint attempts to quantify human impact on nature and its resources necessary to satisfy human needs. This research study explores the long-run implications of fiscal policy on the ecological footprint in Pakistan empirically, keeping different socio-economic factors into consideration. Per annum, time series data have been collected between 1976 and 2018, and the ARDL model is applied to investigate this long-run and short-run association. The conclusion of ARDL model shows that a 1% increase in public development expenditures, total population, GDP, and energy consumption increase 0.19, 2.17, 1.16, and 2.17% ecological footprint, respectively, in Pakistan between 1976 and 2018 vice versa. However, it is also derived that a 1% increase in public tax and non-tax revenue and current public expenditures (in health, education, and other social sectors) shrink 0.36 and 0.013% ecological footprint in the long run in Pakistan. For policy implications, these results focus on practical fiscal policy significance to achieve environmental targets in Pakistan, suggesting an increase in public current expenditures in public and social sectors and increasing public revenue by expanding the tax base, which will ultimately reduce ecological footprint in the long run in Pakistan.

Reverse Causality between Fiscal and Current Account Deficits in ASEAN: Evidence from Panel Econometric Analysis

This study aims to explore the causal relationship between fiscal deficit (FD) and current account deficit (CAD) along with policy recommendations based on long-run and short-run dynamics and sensitivities. A panel data span from 1990 to 2019 is analyzed based on panel unit root tests, panel co-integration with auto-regressive distributed lag (ARDL), panel co-integration regression with fully modified ordinary least squares (FMOLS) and dynamic ordinary least squares (DOLS), and causal analysis with the Dumitrescu and Hurlin (DH) technique. The results disclosed that all tested variables are stationary at the first difference I(1) except the real interest rate (IR), which is stationary at level I(0). The ARDL estimates suggested that there is a long-run relationship between tested variables and 92% annual convergence is possible for long-run equilibrium. The FMOLS and DOLS estimates indicated that the CAD is sensitive towards the FD and the exchange rate. The DH causality test showed that the CAD is significantly affecting the FD, supporting the current account targeting hypothesis. Furthermore, it is observed that the interest rate is acting as a moderating factor between the FD and the CAD because it causes both the deficits. Thus, reverse causality is concluded from the CAD to the FD. These results have macroeconomic implications for fiscal policy in the Association of South-East Asian Nations (ASEAN-10).

GAUSSIAN PROCESS REGRESSION FOR FORECASTING GASOLINE PRICES IN JORDAN

The purpose of this paper is to forecast monthly gasoline prices in Jordan by applying Gaussian process regression on monthly prices of two types of gasoline (octane-90 and octane-95) during the period January 2008 to December 2019. Accurately predicting gasoline prices have several fiscal policy implications concerning fuel subsidies and taxes. Also, they affect the consumption and the production of decisions. Moreover, they are crucial for designing and analyzing environmental policies. The Gaussian process model was able to treat a geometric Brownian motion with a deterministic unknown drift function. The performance of prediction was measured using the Root Mean Square Error (RMSE) and the Mean Average Percentage Error (MAPE). Where the numerical results show that the model predictions of gasoline prices were accurate. Keywords: Geometric Brownian motion; Gaussian process regression; Gasoline prices; Maximum likelihood method; Covariance function JEL Classifications: C11, C15, Q47, Q48 DOI: https://doi.org/10.32479/ijeep.11032

The effect of government expenditure and free maternal health care policy (FMHC) on household consumption in Ghana

PurposeIn Covid-19 pandemic era when most households' members have lost their jobs and incomes, the government assistance and programs in ensuring household consumption smoothing is very significant. The main objectives of this study are to analyze the impact of government expenditure and free maternal healthcare (FMHC) policy on household consumption expenditure in Ghana in both long run and short run.Design/methodology/approachThey used the ARDL to estimate the impact of government expenditure on household consumption and Segmented Linear Regression to examine impact of FMHC policy household consumption using longitudinal data from 1967 to 2018.FindingsThe results revealed that government expenditure had a negative and statistically significant effect on household consumption expenditure suggesting that government expenditure crowed-out private consumption in Ghana. Also, it was observed that before the implementation of the FMHC policy, there was an increase household consumption expenditure, but after the introduction of the FMHC policy, the study household consumption expenditure decreases significantly suggesting that FMHC policy has strong association with household consumption in Ghana.Research limitations/implicationsDue to limited data availability, this study did not assess the impact of the FMHC policy at the household or district level. Also, Ghana has introduced a free senior high school education policy in 2017 so further research could analyze the implications of these policies for household consumption in Ghana at the micro-level using different estimation technique such as the difference in difference.Practical implicationsThe study suggests the need to increase public spending on basic social amenities and also extend the free maternal healthcare policy to all pregnant women especially those in the rural areas of Ghana as these have a greater impact on household consumption in Ghana. The findings from this study have important implications for household savings and interest rate in Ghana. The findings from this study also have important implications for both fiscal policy and healthcare policy in Ghana and other developing countries.Originality/valueTo the best of my knowledge this is the first empirical study to examine the effect of government expenditure and free maternal healthcare policy on household consumption in Ghana.

The Term Structure of Expectations

Economic theory predicts that intertemporal decisions depend critically on expectations about future outcomes. Using the universe of professional survey forecasts for the United States, we document the behavior of the entire term structure of expectations for output growth, inflation, and the policy rate. We show that a simple unobserved components model of the trend and cycle explains the joint behavior of both consensus measures of expectations and the observed disagreement among individual forecasters. Importantly, univariate models of each variable are outperformed by a multivariate model of the joint dynamics of these three variables, particularly for nominal interest rates. Consistent with the data, the model predicts a link between revisions in long-run expectations to short-term forecast errors. In structural models, learning about the long run has important empirical and theoretical implications for monetary and fiscal policy.

A Convenient Truth: The Convenience Yield, Low Interest Rates and Implications for Fiscal Policy

Some countries currently face historically low interest rates on government debt due to a positive ‘convenience yield’ arising from an excess demand for safe and liquid assets. This low interest rate environment has raised interest in the role of fiscal stabilization policy. We study the convenience yield and its implications for fiscal policy in a New Keynesian model where households derive utility from government bonds. We find that the convenience yield expands the set of sustainable fiscal policies and renders countercyclical fiscal policy successful in stabilizing business cycle fluctuations. Conveniently, fiscal policies that stabilize output rather than debt are feasible, welfare enhancing and can even reduce the risk of exploding debt dynamics if the convenience yield is positive.

Risks of Global Financial Markets and the Importance of Credibility: Implications for Hungarian Fiscal Policy

The central issue in the controversy about the adoption of the euro in Hungary is the difficulties associated with the fulfillment of the fiscal criterion and the possible growth sacrifice it requires. In this paper the author examines the question whether the strategy of delaying entry into the euro-zone implies that fiscal consolidation can be delayed as well. In approaching the problem the paper considers the origins and history of the present-day global financial markets and argues that given the high degree of systemic risks individual countries face responsible macroeconomic policies are crucial in minimizing vulnerability tocrises. Consequently in order to avoid excessive interest rates and speculative inflows (or currency crisis in the worst case scenario) fiscal deficits in Hungary would have to be cut and credibility of fiscal policy reestablished even without EMU accession. The overall conclusion from this overview is that delaying entry in order to delay fiscal adjustment is likely to increase the trade off between real and nominal convergence instead of mitigating it.
 JEL classification: F33, F41, H62