Relative Effectiveness Of Fiscal Policies Research Articles

The Dynamics of Inflation Rates in a Consumer Driven Economy

The research was motivated by the conviction that inflation entails sizeable economic and social cost, and that for achieving a sustainable economic growth, management of inflation is a prerequisites. Co-integration and autoregressive error correction model approach was used to investigate the effect of money supply, fiscal deficits and export on the relative effectiveness of fiscal policy in Nigerian consumer driven economy. The study reveals there is a significant causal relationship between gross domestic product (GDP) and the variables considered in the research. The Granger causality outcomes demonstrate that t here is no causality between money supply and inflation in Nigeria within the study period, meaning that there are different economic conditions that are key determinant of inflation in Nigeria. We conclude that fiscal policies have a significant influence on the output growth of the economy, and recommend that the Central Bank of Nigeria should guarantee an exchange rate stability and sound monetary surveillance, look inward for ways to regulate the interest rates that will encourage private and foreign investors to transform our consumer driven economy.

Monetarism or Keynesian Discourse in Indonesia

This paper examines the relative effectiveness of fiscal policy and monetary policy in Indonesia during 1970–2015, using the autoregressive distributed lag (ARDL) bounds testing approach to cointegration and Toda–Yamamoto causality. The ARDL results suggest that there is a long-run equilibrium relationship between monetary policy and economic growth in Indonesia. In the short run, money supply is found to positively affect growth while interest rates negatively affect growth. We conclude that monetary policy is more effective than fiscal policy in both the long and the short run. The causality test reveals bidirectional causality between interest rates and growth. Overall, we find that monetary policy has a more profound impact on growth than fiscal policy. Evidence from the causality test in this study supports the Wagner hypothesis and the fiscal synchronisation hypothesis, and shows that there is coordination between the government and the central bank in Indonesia.

The New View on Fiscal Policy and Its Implications for the European Monetary Union

The New View on fiscal policy (as coined by Furman 2016) represents a rethinking of the mainstream consensus on the optimal macroeconomic policy mix. It focuses on a reassessment of the relative effectiveness of fiscal policy and its ability to stabilize the economy when monetary policy reaches its limit. This paper aims to present in detail the main principles of The New View as proposed by Furman (2016), to extend them, bring additional theoretical and empirical evidence, as well as concrete policy implications for the architecture of the European Monetary Union. The New View builds upon five core principles. Firstly, fiscal policy is a significant and efficient complement to monetary policy at the zero lower bound on theoretical grounds. Secondly, we take a closer look at the empirical evidence on government spending multipliers in a recession, both in the DSGE and in the VAR literature, and show it points to much higher multipliers than in normal times. Thirdly, we provide evidence to why fiscal space is actually higher than normally perceived in a recession, because fiscal stimuli can pay for themselves by enhancing current growth and potential output. We shortly discuss whether it is not better to have a sustained stimulus rather than a short one and whether enhanced global spillover effects in an environment of insufficient aggregate demand further enhance fiscal policy effectiveness. All of the above arguments point to the welfare enhancing effects of fiscal stimulus during a zero lower bound episode and that an approach, led by the New View, would have delivered better macroeconomic outcomes during the Eurozone crisis. We then discuss what such an approach could mean for a more resilient EMU architecture and for stabilization mechanisms in the Euro Area.

Cyclical Properties of Macroeconomic Policy in Oil-Reach Country (Draft)

The study, I investigate the cyclicality properties and relative effectiveness of monetary and fiscal policy for 13 oil exporting country during 1993-2011 by pool model. The paper presents evidence that supports the link between an Index of Institutitunal Quality (law and order, government stability, investment profile, etc.), the cyclicality of macroeconomic policy, and the volatilities of output and the iii) relative effectiveness of fiscal policies in oil-exporting countries. The main finding is that macroeconomic policy is significantly pro-cyclical in countries where institutions exhibit low quality. Empirical result show that during 1993-2011 period resource-rich countries that exhibited institutional quality index averages above the threshold range in Iran, Kazakhstan, Kuwait, Norway, Saud Arabia, UEA and Russia. Finally, we find that the effect of fiscal policy on economic cycle first than monetary policy, because of monetary policy obeys the fiscal goals so money supplies to be high in booming and has positively correlation with the cycle. But monetary policy has greater influence than fiscal policy. The paper shows that focused countercyclical macroeconomic policies are feasible in oil-dependent countries.