Role Of Fiscal Policy Research Articles (Page 1)

This study investigates the impact of monetary policy on inflation in Pakistan, utilizing time series data from 1979 to 2023. The ARDL technique is employed for estimation, with inflation as the dependent variable, while independent variables include bank credit to the private sector, exchange rate, money supply, budget deficit, gross domestic product (GDP), population growth, and the consumer price index (CPI). The research highlights the critical role of fiscal policy in Pakistan's monetary framework, particularly the State Bank of Pakistan's (SBP) responsibility to regulate the money supply. The findings reveal a positive correlation between inflation and several key economic factors. Specifically, inflation is positively associated with the budget deficit, GDP growth rate, population growth, and the consumer price index. The study indicates that increases in the budget deficit and GDP growth rate contribute to rising inflation. Likewise, population growth and the consumer price index also show a direct relationship with inflation. These results suggest that monetary policy in Pakistan, alongside fiscal decisions, plays a significant role in shaping inflationary trends. By analyzing these variables, the study underscores the various economic factors influencing inflation and emphasizes the importance of a balanced approach in managing fiscal and monetary policies. The insights provided aim to inform policymakers on the need for strategic interventions to control inflation and ensure economic stability in Pakistan.

Fiscal policy is one of the fundamental pillars of economic policy, receiving widespread attention from economists and various schools of thought, given its vital role in allocating resources, promoting stability, and achieving national development goals. Under the title "Analyzing the Role of Fiscal Policy in Promoting Innovation in Iraq for the Period (2004–2023)," this research examines the relationship between fiscal policy tools—represented by public expenditures and public revenues—and the level of innovation in Iraq during the specified period. It aims to highlight the most prominent challenges facing fiscal policy tools in supporting innovation, while assessing their effectiveness in creating an environment conducive to growth and technological and cognitive development. The research focuses on analyzing innovation developments in Iraq during the period under study, examining how to finance increases in public spending, and proposing appropriate fiscal policies that would promote innovation, particularly by providing tax incentives, facilitating access to finance, and supporting the private sector. The study found that the absence of a clear and encouraging tax policy and the weak investment environment constitute an obstacle to innovation efforts. Attempts to attract investment have not translated into effective practical measures such as tax exemptions or direct support for productive sectors.

<p>This study investigates the compensation mechanism for green premiums in high-carbon industries within emerging economies, leveraging panel data from Chinese listed companies from 2008 to 2017 and employing a staggered difference-in-differences (DID) approach to evaluate the policy effects of the Energy Conservation and Emissions Reduction Fiscal Comprehensive Demonstration Cities. Key contributions include: (1) Mechanistic insights: Green fiscal policies effectively compensate corporate green premiums through three channels: alleviating urban fiscal pressure, enhancing government governance capacity, and strengthening environmental regulations, thereby facilitating low-carbon transformation in high-carbon industries. (2) Heterogeneity analysis: The compensation effects are more pronounced in firms with high internal control quality, heavily polluting enterprises, and those located in central regions. By contrast, weaker effects are observed in eastern regions, and no significant impact is detected in western regions. These findings suggest that governments should emphasize green fiscal development, provide policy recommendations for policy implementation, and offer new perspectives for achieving climate goals.</p>

Exchange rate near to its equilibrium value is essential for macroeconomic stability. This study measures the exchange rate misalignment in Pakistan and its growth effects from 1996 to 2023. First, ARDL approach is applied to analyze the long run relationship between real exchange rate and its determinants and fundamentals in Pakistan. The results show that the government expenditures and capital accumulation significantly explain real exchange rate. The exchange rate misalignment fluctuates over the time. Sometimes it varies significantly while sometimes it is closed to zero. Second, after measuring the misalignment, its growth effects are calculated. It is observed that the RER misalignment is unfavorable for economic growth in Pakistan. The evidence from this study indicates the latent role of fiscal policy in improving the trade deficit.

This study investigates the empirical interaction between changing socioeconomic challenges and the construction sector in Cambodia. The empirical analysis applied uses data from the Statistical Yearbook of Cambodia (2021) to analyze the statistical relationship between socioeconomic , economic, demographic variables and construction. To do this, the study conducts a combination of regression analyses, Ordinary Least Squares in conjunction with Methods-of-Moments, while applying rigor to guarantee compliance with the CLR function assumptions. We find that the link between economic development and activity in construction is more complex than previously believed, with the role of the construction industry changing during economic development. Results show that the number of private dwelling construction projects can be explained by the ratio of primary education (-3.4), number of people employed in the educational sector (13.6), road construction (0.8), and net exports (-0.5). Future research should focus on i) potential endogeneity issues. This might emerge because activity might be conditional on the state of construction which, on the other hand, drives overall activity. ii) disentangling the effects of developments within domestic financial markets and their role in efficiently allocating financial capital to the real economy. Lastly, the significant impact of the Covid-19 crisis on the Cambodian economy, particularly the role of FP (fiscal policy) and MP (monetary policy) and efficient resource allocation within the construction industry. This aspect is crucial, as different industries responded variably to the shock and lock-down caused by Covid-19.

This study examines the effectiveness of fiscal policy in reducing income inequality across five Southeast Asian countries: Indonesia, Malaysia, the Philippines, Thailand, and Vietnam. Using a comparative approach, the research analyzes the trends in Gini coefficients alongside fiscal indicators such as tax-to-GDP ratios, social spending as a percentage of GDP, and the progressivity of transfer programs from 2010 to 2022. The findings indicate substantial variation in fiscal performance and redistributive outcomes. Vietnam and Thailand have demonstrated notable success in reducing inequality, supported by progressive tax systems and sustained investments in health and education. In contrast, Malaysia, despite relatively high social spending, showed limited redistribution due to a less progressive tax structure. Indonesia and the Philippines have implemented targeted transfer programs, yet structural weaknesses in tax collection and program implementation have limited their effectiveness. The analysis highlights that fiscal policy effectiveness depends not only on the amount of resources mobilized but also on how equitably and efficiently those resources are allocated. The study concludes that adequate fiscal capacity, political commitment, and institutional efficiency are essential to enhancing the redistributive impact of fiscal policy. The findings provide valuable insights for policymakers seeking to design inclusive and equitable fiscal strategies in emerging economies.

This article examines the impact of green bonds on renewable energy generation and economic growth in Peru through an empirical analysis that incorporates robust econometric models, including OLS, GMM, and VAR, along with Johansen cointegration tests. Through these approaches, we assess the influence of green bonds on the energy sector, identifying how these financial instruments have boosted renewable energy projects and contributed to sustainable economic growth. The findings reveal a positive and significant relationship between green bonds and the expansion of renewable generation, further highlighting the crucial role of fiscal policies and regulatory frameworks in fostering these instruments. This analysis also identifies challenges, such as the need to strengthen institutional capacity and infrastructure to optimize the use of green bonds. This study provides a comprehensive perspective on the relevance of green bonds in the transition to a low-carbon economy in Peru, serving as a basis for future sustainable energy policies.

PurposeThis paper evaluates the sustainability of subnational government debts in Brazil, with a focus on how borrowing costs compared to revenue growth and how fiscal policy contributed to debt dynamics from 2007 to 2022.Design/methodology/approachThe study applies two tests derived from the intertemporal budget constraint using dynamic panel data models estimated via system GMM. The first test examines the stability of the debt-to-net current revenue ratio, while the second assesses the role of fiscal policy in ensuring sustainability, isolating the effects of primary balances and borrowing costs.FindingsThe results indicate that Brazilian states’ debt dynamics were slightly on the side of stability during the period analyzed. Fiscal policy, on aggregate, contributed positively to debt sustainability. However, sustainability increasingly relied on favorable conditions in the relationship between debt costs and revenue growth, rather than persistent primary surpluses.Originality/valueThis study advances the literature by offering a novel empirical approach that separates the effects of debt dynamics from fiscal behavior. It highlights the evolution of fiscal sustainability across different subperiods and provides a deeper understanding of the institutional and economic factors shaping state debt management in Brazil.

Micro, Small, and Medium Enterprises (MSMEs) play an important role in the Indonesian economy as labor absorbers and drivers of the local economy. However, this sector often faces various challenges such as limited access to financing, infrastructure, and policy support. This study aims to analyze the role of fiscal policy in encouraging the growth of MSMEs in Indonesia. The methods used are literature studies and secondary data analysis from various official sources, including government reports and national statistical data. The results of the study indicate that fiscal policy instruments such as tax incentives, subsidies, and state spending for MSME empowerment programs have a positive impact on increasing MSME productivity and competitiveness. However, the effectiveness of these policies is highly dependent on targeted implementation and synergy between related institutions. Therefore, a more inclusive, transparent, and adaptive fiscal policy formulation is needed to encourage sustainable economic growth

The purpose of this study is to determine how fiscal policy influences carbon emissions (CO2) in different income groups. The study looks at how government revenue, expenditure, and debt affect carbon emissions or pollution, as well as the Environmental Kuznets Curve (EKC) and renewable energy. It does this using the Driscoll and Kraay (1998) method and covers 150 countries with a range of incomes from 2000 to 2020. The results indicate that high-income countries have more effective fiscal policies against pollution than low- and middle-income countries. This conclusion explains why high-income countries are better equipped to implement effective climate policies. Moreover, the results indicate the presence of an inverted U-shaped Environmental Kuznets Curve (EKC) in all countries and highlight the importance of promoting renewable energy sources. These findings are consistent with policy recommendations emerging from COP28 (Conference of the Parties), which underlined the critical need for international cooperation to reduce global pollution inequalities. The study highlights that without joint global efforts, the fiscal and environmental gap between high- and low-income countries will continue to widen, threatening global sustainability goals. Consequently, by concentrating on low- and middle-income countries, the gap with high-income countries should be mitigated by green fiscal policies.

This study examines the determinants of inflation in Tunisia from 1998 to 2023, with a particular focus on the role of fiscal policy. The study analyzes the long-run and short-run relationships between inflation and key macroeconomic variables, including government expenditure, government revenue, money supply, balance of trade, and budget deficits using ARDL model. The empirical findings reveal that budget deficits have a significant and positive impact on inflation, underscoring the critical role of fiscal imbalances in driving price instability. In contrast, government expenditure, government revenue, money supply, and balance of trade do not exhibit statistically significant long-term effects on inflation. The results highlight the importance of fiscal discipline and effective coordination between fiscal and monetary policies to achieve price stability. These findings provide valuable insights for policymakers in Tunisia and other developing economies facing similar inflationary pressures, emphasizing the need for prudent fiscal management and structural reforms to mitigate inflation volatility and ensure macroeconomic stability.

ABSTRACTThe growing imperative to attain equitable income distribution has compelled international organizations and the academic community to make a collaborative commitment towards alleviating the escalating income inequality experienced worldwide. While there has been a notable development of interest among scholars regarding the nexus between fiscal policy and income inequality, the empirical scrutiny on the contributing role of fiscal policy and institutional quality remains scant in the literature. The present study complements the existing literature by investigating the tripartite nexus between fiscal policy, institutional quality, and income inequality in SSA, which has received no empirical attention in the literature. This study utilizes an advanced econometric technique, the cross‐sectional autoregressive distributed lag (CS‐ARDL) approach, which addresses cross‐sectional dependency and heterogeneity issues for the panel dataset during 1990–2015. The empirical results demonstrate that economic growth, population growth, and government tax exacerbate income inequality, whereas education, government expenditure, and institutional quality metrics mitigate income inequality in SSA countries in the short and long run. The findings also indicate that the performance of institutional quality settings in SSA is significant for fostering efficient fiscal policy, thus improving equitable income distribution. These findings offer substantial, valuable insights and policy implications for policymakers in SSA, which may inform the design and formulation of sustainable development strategies to achieve equitable income distribution.

Domestic sovereign bonds have become a growing source of government financing in Emerging Market and Developing Economies (EMDEs). This paper investigates the role of fiscal policies in determining domestic bond yields, and how this relationship varies depending on the debt structure. Specifically, the analysis highlights the interaction of fiscal policy with banking sector leverage and foreign investor holdings for government debt. A 1 percentage point increase in expected primary deficits results in a persistent increase in 10-year domestic bond yield by around 36 basis points over 2.5 years, with larger effects observed during the COVID-19 pandemic. This contrasts with external bond spreads which are more sensitive to external and global risk factors. The greater the reliance on domestic banks for deficit financing, the stronger the impact of loose fiscal policy on domestic bond yields. The shift in domestic debt financing towards domestic banks after the pandemic implies that sovereign yields have been increasingly interlinked with domestic banks’ investment behavior implying potential financial sector risks in major EMDEs.

Fiscal instruments are pivotal in the green transition, shaping economic incentives for sustainable development. This paper examines carbon taxes, environmental levies, green investment tax credits, renewable energy incentives, and energy subsidies, assessing their effectiveness in reducing emissions, enhancing energy efficiency, and driving ecological innovation. Well-designed tax policies, supported by a stable regulatory framework and equitable revenue redistribution, can align environmental goals with economic competitiveness. However, challenges such as carbon leakage, compliance costs for industries, and public resistance continue to hinder their implementation. Strengthening tax enforcement, improving the collection of environmental levies, and integrating green investment tax credits into broader macroeconomic strategies are essential for ensuring stable funding for environmental programs. This study evaluates the role of fiscal instruments in the green transition, identifying key challenges and opportunities for optimizing tax policies to reduce emissions, stimulate ecological innovation, and maintain economic stability through coordinated tax reforms and international cooperation.

This paper explored the role of fiscal policy in driving national economic growth and development in Nigeria through the lens of the Structuralist theory of fiscal policy. The paper identified the strengths and weaknesses of fiscal policies within the context of Nigeria's unique economic structure, marked by its dependence on oil revenues, and highlighted the challenges posed by external factors like global market volatility and internal issues such as lack of public accountability and corruption. The paper found that despite the lessons we ought to have learnt from previous overreliance on oil during the post-independence period, successive democratic administrations in Nigeria continued to depend heavily on oil revenues. It concluded by offering policy recommendations that align with the structuralist perspective to foster inclusive growth, reduce economic disparities and to enhance sustainable development in Nigeria. The study recommended amongst others that Nigeria government should discontinue the use ofexternal debt to finance budget deficit in the economy, but look inward through sustainable internal revenue generation, as well as embrace economic diversification policies, coupled with a drastic cut down on cost of governance in Nigeria.

Faced with unprecedented changes, the emergent energy sector has evolved the new high ground of international competition, among which the development of the new energy vehicle industry is particularly crucial and of great significance to the global energy transformation. To strengthen the role of fiscal policy in promoting innovation in new energy technologies, this article has introduced a sequence of fiscal policies to promote the development of high-tech, while using tax incentives and subsidies to guide new energy enterprises to increase their research and development efforts and achieve technological innovation. This article takes the strategic emerging industry represented by the new energy vehicle industry as an example, analyzes the role and constraint mechanism of fiscal policy on enterprise innovation, explores how fiscal policy affects the technological innovation capability of new energy enterprises, and analyzes the differentiated impact of fiscal policy on different new energy enterprises. Finally, this article proposes strategic recommendations for coordinating fiscal policies to promote innovation in strategic emerging industry enterprises, which has practical significance for the development of China's strategic emerging industries

Abstract This article examines the interplay between fiscal policy and investments in climate change mitigation and adaptation. Adaptation is funded by public revenues from taxation and public bonds, whereas households can invest in mitigation and receive subsidies. We show that adaptation and mitigation are substitutes or complements, depending on the level of economic development and fiscal policy decisions. If the capital stock is initially low, adaptation and mitigation are complements (resp. substitutes) if the mitigation subsidy is low (resp. high). When the government is in debt, we show that increasing public spending to finance adaptation and/or mitigation could be beneficial if the capital stock is high enough but could be detrimental for countries with low capital stock. Thus, we add a new argument to the debate on the optimal mix between adaptation and mitigation, namely fiscal policy and the funding schemes of these investments. Finally, we propose extensions that consider a level of adaptation proportional to pollution flow, debt financing of public investment, and public mitigation investment alongside private adaptation investment.

This objective is to provide a comparative research study that explores the role that fiscal policy plays in economic growth, with a special focus on both industrialized nations and developing countries. The study will explore the effect that fiscal policy has on economic development. Another area that is examined in this study is the connection that exists between fiscal policy and economic development. Another way of putting it is that it is a convoluted link that, depending on the economic climate in which it is being evaluated, might take on a somewhat different aspect. Given the nature of the relationship that exists between fiscal policies and expanding economies, it may be difficult to comprehend the link. The role that fiscal policy plays in the process of economic growth is influenced by a variety of factors, each of which has its own unique effect. Factors such as the organization of the government and the economy, as well as the specific channels through which fiscal policies are implemented, are included in this category. There is a significant gap between the industrialized nations and the developing countries in terms of the significance that fiscal policy plays in the process of economic growth. This gap is particularly pronounced in the development countries. In order to accomplish the aim of shining light on these discrepancies, which will be accomplished via the evaluation of empirical data and theoretical frameworks, the purpose of this comparative research is to achieve the purpose of illuminating light. Over a variety of different routes, fiscal policy has the potential to impact economic development. When it comes to industrialized nations, fiscal management that is solid often results in lower interest rates, which in turn supports private investment and consumer activity. In contrast, successful fiscal policies may boost human capital development in poor countries by directing public expenditure on education and infrastructure in a targeted manner, which can result in long-term economic gains.

Introduction. Fiscal policy aims to promote economic growth and ensure inclusive growth in reaching low-income populations and benefit from economic activity. Therefore, fiscal policy instruments should be appropriately chosen to achieve inclusive growth. Maintaining the financial system's stability determines the critical role of fiscal policy, especially given its impact on economic growth and the reduction of income inequality. Therefore, it is crucial to identify targeted fiscal measures to promote economic development and reduce income inequality simultaneously. Aim and tasks. This study investigates the effects of fiscal policy instruments on inclusive growth in several selected countries, including EU members and EU candidate countries. The analysis covers the period from 1996 to 2022, using a Bayesian VAR model to examine data on direct and indirect taxation and current and capital spending, with GDP per capita (or GDP growth) and the GINI index serving as the impact variables. Results. The results indicate that capital spending positively affects GDP growth while reducing the GINI index, which causes inclusive growth but does not have an immediate impact. Current spending is a fiscal policy instrument that does not positively affect inclusive growth, as it does not promote economic growth but only increases income equality. Direct taxes increase GDP but do not always reduce the GINI index. As for indirect taxes, this policy instrument is frequently used for inclusive growth. It promotes economic growth, reduces the GINI index, and creates more equally distributed income among the population. Therefore, achieving inclusive economic growth is more feasible for the selected EU members and candidate countries through increased capital spending or indirect taxes. Conclusions. The study found that indirect taxes can reduce income inequality with inclusive growth. Capital expenditures play a crucial role in the medium and long term in helping to achieve inclusive economic growth in a country. For developing countries, direct taxes and capital expenditures can effectively achieve inclusive growth. In contrast, developed countries can achieve similar results using a combination of tax measures and expenditures.

Papua Province, known for its abundant natural resources and cultural diversity, faces significant challenges in achieving inclusive economic development. Persistent disparities in income, infrastructure, and access to essential services have hindered equitable growth and social welfare improvement. This study examines the inclusiveness of economic development in Papua and explores its driving factors. Utilizing secondary data from the Ministry of National Development Planning/National Development Planning Agency (Badan Perencanaan Pembangunan Nasional, Bappenas), BPS - Statistics Indonesia (Badan Pusat Statistik, BPS), and the Directorate General of Fiscal Balance (Direktorat Jenderal Perimbangan Keuangan, DJPK) for 2017–2021, the research employs descriptive analysis and panel data regression methods. The panel regression results highlight the critical role of fiscal policies in promoting inclusivity. Economic expenditures demonstrate a positive and significant impact on inclusive development, fostering equitable economic participation and productivity. In contrast, basic infrastructure spending shows a significant negative effect, possibly due to uneven allocation or misalignment with local community needs. While education expenditures are not statistically significant, they exhibit potential for enhancing inclusivity through long-term human capital development. These findings underscore the importance of targeted and well-distributed fiscal policies to address Papua’s unique socio-economic challenges. By prioritizing human capital, aligning infrastructure investments with local needs, and fostering balanced economic growth, policymakers can pave the way for more inclusive development across the province. This research provides valuable insights for designing effective policy interventions to reduce inequality and foster sustainable economic growth in Papua.