Increase In Government Expenditure Research Articles

Credit spread and the transmission of government purchases shocks

I estimate government purchases multipliers using structural VAR analysis, featuring credit spreads and real-time forecast data to purge spending innovations of their anticipated components. The cumulative output multiplier of a temporary rise in government purchases is about 2.0 after year 5. I propose an explanation for these observed effects based on a dynamic stochastic general equilibrium model with financial intermediation. The key to this framework is the differential efficacy of fiscal policy dependent on the tightness of financing constraints. The cumulative multipliers are about or higher than one in regimes when financing constraints on banks bind tightly. In contrast, in times when financing constraints are loose the multipliers are smaller than one. The result can be explained by the crowding-in of private investment following an increase in government consumption in regimes of tighter financing constraints.

Global economic stagnation due to a worse coronavirus pandemic and massive lockdown, and humanitarian disaster!

The novel Coronavirus was first commenced from an outbreak in Wuhan, China, in December 2019. Then the virus failed to control and quickly spread worldwide. On the one hand, the doctors and nurses provide day and night services to the patients. On the other hand, Scientists have been working day and night to prevent this epidemic and invent the vaccine. But in the meantime, the outbreak has caused the global economy to collapse, and the situation is evolving daily. Indeed, the calculation of actual losses depends on a few factors. Such as the dimension of coronavirus infections, how long they will last, and policymakers will take measures to minimise health risks and economic harm. The UN 1 estimates that the global currency will reduce by USD 2 trillion. Many people will lose jobs due to the coronavirus pandemic. During this catastrophic pandemic, people’s purchasing power will decrease, which will slow down the economy. Therefore, investment in the economy has to be reinforced to create employment. However, these investments need to be managed efficiently and bring transparency. It will have to increase government expenditure and protect the poor. Secretary-General of UN Mr António Guterres has launched a USD 2 billion2 global humanitarian response plan for the most vulnerable. According to the United Nations Conference on Trade and Development report, developing countries could lose at least USD 220 billion in income, and development has called for USD 2.5 trillion to support them. Also, World Bank has declared USD 14 billion3 for fast track package to strengthen the coronavirus pandemic response in developing countries, protect the poor andvulnerable, support businesses, and recover the economy. And, according to World Bank Group’s broader economic program revealed, provide up to USD 160 billion4 in support to client countries over the next 15 months. This article aims to present the deadly negative impact of Covid-19 on globalisation, global health, trade, travel and tourism, food-agriculture production, education system, social activities, supply-chain, workforce, and industrial development. So far, the pandemic has caused more than 502 million cases and 6.19 million deaths worldwide with a CFR5 of 1.2%, and in Bangladesh, 1.95 million total confirmed cases and 29,124 deaths, thus a mortality rate of 1.5%. This paper has discussed the social communities in the transmission of COVID19, the resulting economic catastrophe, and the struggle for life and livelihood. This paper may help raise awareness about the virus.

GOVERNMENT EXPENDITURES WITHOUT GROWTH: THE CASE OF TURKEY

Share of government expenditures in the GDPs are increasing virtually everywhere. Available data for developed countries indicate that the beginnings of this upward trend date back to the mid-19th century. Interestingly, economic growth rates did not increase significantly over time despite the increases in government expenditures. Low income countries today spend more than the double of what today’s developed economies were spending on average in 1900. However, this is not helping them to converge to richer economies. Why are government expenditures increasing then? This question might have global pertinence but due to the variety of country-specific factors, it can be best studied on a single country level. In this article, the country of focal interest is Turkey. Five important variables that might affect government expenditures from different angles are evaluated regarding their contributions to the out-of-sample predictions of government expenditures using random forest methodology. Military expenditures are estimated as primarily important for determining the government expenditures in Turkey in the last fifty years, while tax collections happened to be the second most important factor affecting the ups and downs of government expenditures around a time-varying average line. Per capita income, urbanization and inflation also affect government expenditures in various ways.

Asymmetric effect of FDI and public expenditure on population health: new evidence from Pakistan based on non-linear ARDL.

The core purpose of the study is to examine the asymmetric effect of foreign direct investment (FDI) and population health (measured by life expectancy index). The study takes time series data for 1980-2020. The non-linear autoregressive distributed lag (NARDL) bound testing to cointegration approach is applied to scrutinize an asymmetric association among foreign direct investment, government expenditures, trade openness, public debt, and population health. The study also used an asymmetric causality test to investigate the causal association between the measured variables. The findings affirm that cointegration exists between the variables in the occurrence of asymmetries. The asymmetric causality outcomes confirm that only positive changes in FDI have bidirectional causality to life expectancy while negative shocks have unidirectional that runs from FDI to life expectancy. The government expenditure and foreign direct investment also provided evidence of social sector health welfare in Pakistan. The output shows that increasing government expenditure can cause an increase in life expectancy while decreasing government expenditure can cause a decrease in life expectancy. The study found that investment in health care medical services is paramount to better results as far as government assistance (welfare) gains. The outcomes of the study have given numerous policy suggestions to boost life expectancy in the general public of Pakistan.

Effects of COVID-19 early release of pension funds: The case of Chile.

Amid the extraordinary economic effects of COVID‐19, some policymakers have turned to retirement accounts to support individuals in financial hardship. Given the haste, the long‐term impacts and their heterogeneity have scarcely been analyzed. Using Monte Carlo simulations on the Chilean Social Protection Survey linked with administrative data, this study quantifies the effects of a 10% early release of pension funds. Each withdrawn dollar brings losses of 1.59 dollars in future retirement savings, reducing monthly pension benefits by 7.26%. This policy raises income inadequacy and inequality in retirement, increasing government expenditure by 4.33% to counteract these effects for 65‐year‐old retirees. We propose four policies to mitigate these effects and address the current challenges of most defined contribution pension schemes. Increasing contributions combined with an intragenerational solidarity component shows the biggest impacts. Contribution enforcement, reducing tax evasion, and delaying retirement by at least 1 year via incentives have lower but significant effects.

Redistributive effects of health care out-of-pocket payments in Cameroon

BackgroundThe bulk of health care financing in Cameroon is derived from out-of-pocket payments. Given that poverty is pervasive, with a third of the population living below the poverty line, health care financing from out-of-pocket payments is likely to have redistributive and equity effects. In addition, out-of-pocket payments on health care can limit the ability of households to afford non-healthcare goods and services.MethodThe study estimates the Kakwani index for analyzing tax progressivity and applies the model developed by Aronson, Johnson, and Lambert (1994) to measure the redistributive effects of health care financing using data from the 2014 Cameroon Household Survey. The estimated indexes measure the extent of the progressivity of health care payments and the reranking that results from the payments.ResultsThe results indicate that out-of-pocket payments for health care in Cameroon in 2014 represented a significant share of household prepayment income. The results also show some evidence of inequity as few people change ranks after payment despite the slight progressivity of health care out-of-pocket payments.ConclusionThe existence of some disparities among income groups implies that the burdens of ill-health and out-of-pocket payments are unequal. The detected disparities within income groups can be reduced by targeting low-income groups through increases in government expenditures on health care and pro-poor prioritization of the expenditures.

Assessment of The Social Economic Effects of Covid 19 and The Policy Response in Tanzania

The study intended to assess the social economic effects of COVID 19 and the policy response in Tanzania. The study was important due to the tremendous effects of the pandemic to the social and economic wellbeing of citizens. The study adopted a conceptual modeling to present a description framework which can unite the significant social economic factors of COVID 19 and policy response in Tanzania. To build the conceptual model, the study reviewed several research papers in detail. The literature review of more than 55 papers was conducted through searches in different data bases with different search words in different combinations. Special emphasis was given to studies conducted in the context of social economic factors of COVID 19 and policy response in Tanzania. The study found out that the country has experienced three waves of the epidemic, with an increased impact of subsequent waves. It found out further that economic growth has slowed significantly due to COVID 19, increase in the number of cases and death, effect on the individual income, effects on tourism and hospitality industry, transport and storage sector, whole sale and retail trade, impacts on agriculture, impact on the poor and vulnerable groups and effects on public financing and government budgeting. However, Tanzania has relatively fared well in this pandemic as the country graduated from low-income country (LIC) to lower-middle-income country (LMIC) status. In controlling the pandemic, the country implemented movement restrictions, including bans on large gatherings (except religious services), school closures, and the cancellation of international flights and mandated the wearing of face masks. On fiscal policies, there were increase in government expenditure and amendments in the tax systems. Also, the monetary measures were implemented by BOT. Similar study can be done but with a different methodology especially using questionnaire or time series.

Development of the global pharmaceutical market under the conditions of the COVID-19 pandemic

The paper examines the peculiarities of development of the global pharmaceutical market under the conditions of the COVID-19 pandemic. It has been proved that pharmaceutics is currently one of the most dynamic and science-intensive sectors of economy in Ukraine and across the world with its development stipulated by a growing demand for pharmaceutical products and the increase in government expenditures for healthcare. The purpose of the presented work is the analysis of development of the global pharmaceutical market under the conditions of the COVID-19 pandemic. It is established that the growth of the global pharmaceutical market is preconditioned primarily by the following trends: growth in the segment of biologically active additives (BAA) and the generic drug segment; epidemiological and economic changes; growth in demand for medication which is effective in the treatment of diseases previously typical only for the developed countries. An analysis has been conducted with regard to the dynamics of health-care costs over the period of 1995–2020 among three groups of countries: with high / medium / low per capita income. According to the results of the statistic analysis of the foreign trade balance of Ukraine in the period of 2016–2020 it was asserted that within the structure of foreign trade operations the importation of pharmaceutical products significantly exceeds its exportation. Contrary to the global market with its upward trend of growing consumption of medicines, Ukraine manifests fairly modest consumption, mainly stipulated by low purchasing power of the population. A ranking of the leading companies in the Ukrainian market of pharmaceutical products has been established with regard to three indicators: the growth of sales, the Evolution Index, the market share. The paper scrutinizes possible risks in the global pharmaceutical market in consequence of the COVID-19 pandemic: disruption of the global supply chain; deficit of medications for intensive care units and emergent of bottlenecks in their production distribution; decline in demand for prescription medicines. Among the local short-term risks for the pharmaceutical market of Ukraine are as follows: a relatively slow recovery of basic macroeconomic indicators; structure of household expenditures; increased fiscal pressure on manufacturers; unstable political and economic situation within the country.

Human Resource Development and Economic Growth in Nigeria

This study examined the impact of human resources development on economic growth in Nigeria from 1980 to 2019. To achieve this objective, data were collected on the real gross domestic product, government expenditure on education, government expenditure on health and human development index from Central Bank of Nigeria Statistical bulletin, World Bank -World Development Indicator and UNDP. The study adopted the Augmented Dickey-Fuller unit root test, Johansen Co-integration test and Error Correction Mechanism (ECM) methods of econometric to analyse the collected data. Evidence from the findings revealed that all the variables were individually integrated of Order One and have a long-run relationship. The parsimonious ECM result revealed that an increase in government expenditure on education, government expenditure on health, as well as human development index, do not significantly increase economic growth in Nigeria during the period of study. The study concluded that human resources development via public spending in the education sector, health sector, as well as an increase in human development index remains crucial in the process of achieving sustainable economic growth in Nigeria. Based on these findings, the study recommended among others that crucial effort should be made by the government in channelling more funds to the health sector in order to improve health standards and reduce the mortality rate of the citizens since a healthy population and workforce is a major ingredient for rapid and sustainable productivity and growth. Enough funds should be allocated to education for proper utilization of potential productive and social benefits that will help to boost the real sector of the economy.

Redistribution, Growth and Productivity Relationship in Fiscal Policy in Core and Peripheral Countries

The main purpose of this study is to analyze the impact of fiscal policies on growth and productivity by dynamic panel data analysis in core and periphery countries. The results of the analysis differed for the core and periphery countries, it was observed that the effect of public expenditures and revenues had a different impact on growth and productivity. Study found that public expenditure and revenues had negative relations on growth performance for both groups. It is considered that government budget policies should be improved on the basis of a more responsive and inclusive way. Regarding to the labor productivity, increasing government expenditures promotes labor productivity in core countries, while it does not in the periphery countries. The impact of inequality on growth and productivity is not found statistically significant in two country groups. Main conclusion is that fiscal policy plays a more active role in the growth and productivity.

Simulating the macroeconomic impact of expansion in total government expenditure on the economy of Nigeria

AbstractThis study examines the impact of further expansion in government spending in Nigeria for the period of 1970–2016. Using a simulation analysis, the model divides the economy into five blocks which corresponds with five key sectors: government, price, supply, external, and monetary/financial sectors of the economy. The simulation scenario involves the average annual increase in total government expenditure, based on the projections of the Economic Recovery and Growth Plan (ERGP) of the Federal Government of Nigeria. The results reveal positive and negative shocks across the sectors. Specifically, the results indicate that the policy fuels the growth of non‐oil output/export and real gross domestic product, suggesting the sensitivity of output to government expenditure. It further reveals a generally positive reaction from the monetary/financial sector variables, worsens inflationary pressure and exchange rate volatility crisis, while the manufacturing sector output also witnesses a significant fall. This study concludes that fiscal expansion in the form of public expenditure would yield a positive impact on the various sectors of the Nigerian economy, and that it would particularly serve as a veritable tool for achieving the diversification drive of the government. Overall, the study confirms the relative efficacy of fiscal policy in Nigeria. The study recommends sustained increase in government expenditure vis‐a‐vis fiscal discipline via the institutionalised regulatory framework. The economy should also be consciously diversified from oil to a non‐oil‐based economy.

Dynamic Impact of Government Expenditure and Debt Policy Instruments on Agricultural Growth in Nigeria

This research examined the impact of government expenditure and debt policy instruments on agricultural growth in Nigeria for the period 1980-2018. Findings revealed that, for every billion rise in aggregate government expenditure, agricultural growth significantly increased by 1.66%. Additionally, per capital income and inflation were significant determinants of agricultural growth. However, the response of agricultural growth to increased debt was inelastic with a coefficient of -0.3152. Thus, macroeconomic policy instruments dynamics impacted agricultural growth. It recommended increased government expenditure to agricultural sector, education, investing in human capital development through budgetary allocations and intervention funds for increased growth while policy makers should desist from increasing the debt profile as it gave less than proportionate effect on agricultural growth with negative consequences on the Nigerian economy.

Quantifying multipliers in Italy: does fiscal policy composition matter?

Abstract This article aims to estimate fiscal multipliers in Italy by assessing the effect of an increase in government expenditure and taxes on the Gross Domestic Product (GDP). By applying structural vector autoregressive modelling to Italian quarterly data for the 1995–2019 period, I show that expansionary fiscal policies produce positive effects on the GDP level. Estimated spending multipliers are higher than 1, and when government investment and consumption are compared, findings show that government investment has a larger effect on GDP than government consumption. Estimated tax multipliers are lower than 1, and tax-based policies are less effective in stimulating GDP than expenditure-based fiscal plans. My findings strongly support the Keynesian perspective and indicate that Italy should increase public investments considerably in order to foster economic growth.

The effects of fiscal policy shocks in Bangladesh: An agnostic identification procedure

This paper analyzes the macroeconomic effects of fiscal shocks in Bangladesh using the sign restriction approach in a Bayesian structural vector autoregression (SVAR) framework. We identify a generic business cycle shock to deal with the endogenous movement of fiscal variables along with a monetary policy shock to absorb the variations due to those shocks. Both unanticipated and anticipated fiscal shocks, that is, government expenditure and revenue shocks, are also identified by minimal sign restrictions. In identifying those shocks, we do not impose any restrictions on the sign of the key variable of interest. We find that private investment and consumption significantly increase due to expansionary government expenditure shock. Such an increase in private consumption is consistent with neo-Keynesian prediction. The fall in output due to the tax increase shock is highly robust. Private consumption also decreases due to a tax increase, although investment does not. The results suggest that fiscal policy, especially tax policy, is more effective than monetary policy in stabilizing output. Moreover, the fiscal authority could increase government expenditure without hurting private investment.

Determinants of Household Expenditure on Primary Education

Government expenditures and household expenditures appear to act as complements rather than substitutes for each other: an increase in government expenditure tends to increase household expenditures and vice-versa. Public investment can provide educational facilities, quality, and other institutional measures, but only household investment will enable its utilization.

TOTAL QUALITY MANAGEMENT PRACTICES AND PERFORMANCE OF HIV/AIDS PROJECTS IN RWANDA - A CASE OF AIDS HEALTH CARE FOUNDATION

Rwanda’s Vision 2030 puts healthcare as one of its integral pillars. HIV/AIDS is one of the biggest challenges in the health sector and Rwanda’s economy at large since the disease led to reduction of labour supply and productivity as well as increased government expenditure on importation of expensive healthcare goods. Total quality management is one of the key factors that affect the success of projects and has gained popularity among project managers overtime. This study sought to investigate total quality management practices and performance of HIV/AIDS projects in Rwanda. Specifically, the study analyzed the effects of top management commitment, employee involvement and staff training on the performance of HIV/AIDS control projects. The study is helpful to project managers in policy formulation and rational decision making. It is also helpful to the Rwandan government in making informed decisions towards achieving health care provision objectives. The donors’ confidence in funding health projects may also be boosted by the findings of this research. The study adopted descriptive and correlational research designs. A sample of 98 respondents was drawn from a population of 130 consisting of the staff and project managers of Aids Healthcare Foundation (AHF) Rwanda. Simple random sampling technique was used to select the sample size in this study. Data used was of primary nature collected using questionnaires. Quantitative and qualitative data collected were analyzed using IBM SPSS version 22 and the findings presented in tables and figures. Regression and correlation analysis were used to establish an interaction between the dependent and independent variables. Descriptive findings indicated that over 75%, 85% and 90% of respondents did agree that at top management commitment, employee involvement and training practices respectively are practiced at AHF Rwanda. Correlation findings did indicate a Pearson correlation coefficient of 0.780, 0.630 and 0.690 for top management commitment, employee involvement and training practices respectively with significance values of 0.01 for all. Lastly the betta coefficients for top management training, employee involvement and training practices were 0.163, 0.235 and 0.126 respectively with corresponding probability values of 0.011, 0.002 and 0.036 and R squared value was found to be 71.5%. The study concluded that TQM including top management commitment, employee involvement and training are practiced largely at Aids Healthcare Foundation. Hence, a strong positive significant relationship between TQM practices and performance of HIV/AIDS projects in Rwanda. The study recommends AHF project managers to focus more on TQM practices, particularly management commitment on project activities, involvement of other employees in decision making and creating an enabling working environment and lastly, they should consider enhancing human resource training as a way to enhance project performance. Additionally, the government and the donors should ensure that TQM practices are implemented in the healthcare projects in order to realize positive results from such projects. 
 
 JEL: I10; I18; J21
 
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Energy market dynamics and the role of fiscal policy in oil‐exporting countries: a TVAR approach

AbstractWhile realising the macroeconomic significance of oil price fluctuations, this research examines the role of fiscal policy under changing dynamics of energy market for selected oil‐exporting countries. We specify a non‐linear threshold structural vector autoregression model which constitutes policy variables such as general government expenditures and primary fiscal balance and macroeconomic indicators such as real GDP growth and the inflation rate. To capture the energy market dynamics, this research selects Brent crude oil price as threshold variable and segregates the sample period 1991‐2019 as ‘high’ and ‘low’ oil price regimes. While using non‐linear generalised impulse response functions, we find that under higher oil price regime, an increase in government expenditures and reduction in fiscal deficit have larger multiplier effect to enhance output growth in most of the sampled countries. In addition, this research identifies larger inflationary effects of an increase in government expenditures and fiscal deficit under higher oil price regime for all countries except Canada. However, under a higher oil price regime, a fiscal deficit induced output growth, and under a lower oil price regime, a reduction in government expenditure brings inflation in Saudi Arabia. Furthermore, this research provides an alternative measure of threshold crude oil price for the sampled countries to their accounting‐based concept of fiscal break‐even price.

Demographic Transition and its Impacts on Fiscal Sustainability in East and Southeast Asia

Many economies in East and Southeast Asia are progressing toward becoming aging or aged societies. The impacts of this demographic transition are multifaceted and far-reaching and include declining tax revenues, leading to fiscal imbalances, and possible increases in government expenditures for coping with care expenses and pension schemes. We provide insights into ways to balance fiscal revenue against costly pension and social security systems and increasing healthcare expenditures.Using panel data for 178 countries across 18 years to capture the state of fiscal balance and data on demographic transition, we estimate three models to analyze the relationships between (i) demographic transition and government balance, (ii) demographic transition and government health expenditure, and (iii) demographic transition and government debt. The results first establish that health expenditure is negatively associated with the government balance. Then, for the relationship between demographic transition and health expenditure, old-age dependency and the share of the population aged over 64 shows a significant positive relationship with health expenditure. We find that demographic transition does not have a direct effect on the government balance, but instead has an indirect effect through higher government expenditure. This can be explained by the high costs of treating health conditions related to old age, including chronic illnesses.Our findings provide important implications for fiscal sustainability and necessitate comprehensive reviews of public health spending; healthcare reforms that prioritize accessibility for all and efficiency in healthcare services; and cost-sharing measures to mitigate the age-related fiscal burden. These measures will be particularly important in dealing with the impacts of the coronavirus disease (COVID-19) pandemic, to which the elderly are particularly vulnerable.

Impact of government expenditure on agriculture in Nigeria: A subsector analysis

This paper examines the effect of government expenditure on agricultural sector in Nigeria using the Johansen cointegration and Vector error correction model approaches. Specifically, the paper examines the relationships between government expenditure on agriculture subsector outputs for crop, livestock, fishing and forestry over the period 1980 to 2019. The results of the short run and long run analyses indicate the significant influence of government expenditure in agriculture on agricultural outputs except in forestry subsector. The granger causality test result indicates the absence of causality relationship between agricultural expenditure and agriculture outputs except in crop and livestock subsectors. However, there is a strong unidirectional causality from agricultural credit to both aggregated and disaggregated agricultural outputs. The paper recommends the need to increase government expenditure on agriculture in order to boost productivity. Government should also assist farmers to access credit facilities which can help increase production in the agricultural sector.

Drivers of Deposit Mobilization in Private Commercial Banks of Ethiopia

Deposit mobilization is a deep-seated part of banking activity. Banks have a decisive implication in enlightening economic efficiency by creating channel between lender and borrower via transferring funds from resource surplus unit to deficit resource unit that have better productive investment opportunities. Therefore, it is indispensable to examine the drivers of Commercial banks deposit mobilization in Ethiopia. To conduct the study, the panel data type from 2010-2019 has been used. Also, for this study the fixed effect model with the application of some diagnostic tests like langragian test, hausman test, unit root test heteroskedasticity test and autocorrelation tests have been used. The data has been analyzed by the descriptive and econometrics analysis. The descriptive analysis of the study shown that the average rate of commercial banks deposit mobilization in Ethiopia in the last nine subsequent years was growing by 9.7 percent and the rate of growth of branch expansion growing by 1.413 percent. In general, inflation rate rate of risk, the rate of return to asset, and Liquidity ratio altered by 137, 0.39, 0.31&0.003 percent, respectively. The result of fixed effect model indicates that, among seven explanatory variables four variables such as government expenditure, interest rate, and return on asset positively and significantly affect at 5% and 10% deposit mobilization but inflation rate is statistically and negatively affected deposit mobilization at 5% level of significance. Given the result of the study, the following recommendations have been forwarded: the responsible agent shall be increase government expenditure of infrastructure, increase interest rate and decrease inflation rate to raise deposit mobilization in Ethiopia.