Role Of Fiscal Policy Research Articles

This study aims to comprehensively analyze the role of fiscal policy and financial sustainability in enhancing economic stability, particularly in developing nations facing budgetary constraints and economic uncertainty. The research seeks to identify key components of fiscal sustainability and highlight the importance of proactive fiscal planning, institutional reforms, and evidence-based strategies to foster resilience and mitigate economic vulnerabilities. This research adopts a qualitative systematic literature review (SLR) approach to synthesize findings from relevant empirical and theoretical studies published after 2018. The study develops a multidimensional framework for understanding the interaction between fiscal policies and financial sustainability by examining a broad range of scholarly articles, reports, and policy papers. The analysis focuses on key fiscal mechanisms, including countercyclical measures, automatic stabilizers, and governance frameworks. The findings reveal that fiscal discipline, efficient taxation, and responsible debt management are essential to financial sustainability. Proactive budgetary policies, such as automatic stabilizers and counter-cyclical spending, can help stabilize economies during crises. However, the study identifies significant challenges in developing nations, including limited fiscal capacity, weak institutional frameworks, and reliance on external debt. The research emphasizes the need for institutional reforms to strengthen fiscal transparency, enhance public financial management, and foster accountability to build public trust and investor confidence. This study contributes to fiscal policy literature by presenting a holistic framework integrating budgetary sustainability and economic resilience. The practical recommendations highlight the importance of equitable tax policies, strategic public spending, and institutional capacity-building to support sustainable economic growth and long-term financial stability. Future research is recommended to validate these findings further through empirical case studies across different economic contexts.

PurposeThis study aims to investigate the impact of the oil crash during the COVID-19 pandemic on the economy, energy and the environment in MENA countries, with and without fiscal policy, in a global context.Design/methodology/approachThis study applies a Global Vector Autoregressive (GVAR) model for 47 countries from 2006Q1 to 2021Q3. The sign restriction method is used to identify the oil shocks originating from the COVID-19 crisis.FindingsEmpirical evidence shows that without fiscal interventions, MENA countries experienced a decline in output growth, energy consumption and CO2 emissions due to lower oil prices caused by the COVID-19 pandemic. The impact of the oil price shock on inflation varied across the region. Economic growth and inflation rates in MENA countries turn positive when the member states implement expansionary fiscal measures to stimulate economic activities during the pandemic. Hence, fiscal policy played a crucial role in supporting the economy and preventing a severe recession during COVID-19 in the MENA region. However, expansionary fiscal measures increased energy consumption and air pollution.Practical implicationsThe findings help policymakers better cope with the outbreak of deadly pandemics in the coming years. It improves our understanding of the role of fiscal policy in boosting economic efforts and reducing the adverse environmental impact of increased government spending.Originality/valueThis paper enhances the current body of literature by investigating how fiscal policies implemented by the MENA countries help mitigate the adverse economic effects of the COVID-19 crisis. Moreover, it enables us to analyze the impact of fiscal support on energy consumption and the environment during an oil shock influenced by global uncertainty, lockdowns, and supply chain disruptions.

This study aims to analyze the transmission mechanism of fiscal policy in Indonesia using the Structure Vector Autoregression (S-VAR) approach, focusing on macroeconomic variables such as government spending, tax revenue, Gross Domestic Product (GDP), inflation, unemployment, and budget deficit over the period 2010 to 2020. The results of the analysis show that government spending has a significant positive impact on GDP growth, reflecting the effectiveness of expansionary fiscal policy in promoting economic growth and reducing unemployment in the short term. However, the impact on inflation shows complex dynamics, where inflation initially increases in response to government spending, but then stabilizes in the medium term. This finding indicates the need for careful management of fiscal and monetary policies to avoid undesirable inflationary impacts. In addition, Variance Decomposition analysis reveals that variations in GDP are influenced more by government spending than by other variables, emphasizing the important role of fiscal policy in the Indonesian economy. This study provides recommendations to increase spending in productive sectors while still monitoring inflation and budget deficit, which is expected to provide insights for policymakers in formulating economic growth strategies.

This paper explores the transformative role of fiscal policy in driving economic prosperity in Nigeria covering 1985 to 2022. By examining how federal government domestic debt, external debt, capital expenditure, recurrent expenditure, oil revenue and non-oil revenue as a proxy for fiscal policy correlate with gross domestic product per capita as a proxy for economic growth. Data for the study were obtained from Central Bank of Nigeria (CBN) Statistical Bulletin 2022. The Augmented Dickey Fuller (ADF) method was used to conduct a unit root test on the developed model. The variables were found to be of mixed order I(0) and I (1) according to the results of the Augmented Dickey Fuller unit root test. In order to determine whether fiscal policy and economic growth have a long-run connection, the research used the Auto-regressive Distributive Lag (ARDL) model and conducted a bound test. Results from the regression analysis showed that federal government domestic debt had a negative relationship with gross domestic product per capita in the short-run, while federal government external debt reported a negative but significant impact on gross domestic product per capita in the long-run. The Auto-regressive Distributive Lag (ARDL) bound test showed that fiscal policy and economic growth are correlated in the long run. The impact on gross domestic product per capita was positive and statistically significant for federal government recurrent spending and oil and non-oil income, while it was negligible for federal government capital expenditure. Hence, it was concluded that fiscal policy leads to economic prosperity significantly. It was therefore recommended amongst other that the federal ministry of finance should prioritize improving debt management practices to reduce the reliance on domestic debt. This includes developing strategies for refinancing existing high interest debt with lower cost options and integrating debt reduction into fiscal planning.

Financial and technological sovereignty is becoming an important driver of the economic transformation in response to current trends toward regionalization, disruption of value chains, and non-market trade and financial restrictions. Fiscal and financial policies that promote macroeconomic stability and unencumbered operation of economic mechanisms can be considered key components of a country’s financial sovereignty. This article concentrates on analysis of the reforms carried out in Russia over the previous ten years. These reforms have facilitated creation of one of the world’s most effective state budget systems, reduction of dependence on oil price volatility, and enhancement of countercyclicality. Revising budget rules and increasing the efficiency of the fiscal system, including tax administration, were the key decisions that enabled these changes. The importance of the reforms has been confirmed by their success in counteracting the consequences of the COVID-19 pandemic and the pressure from unprecedented sanctions while also ensuring rapid changes in the structure of Russia’s economy. During the crisis period, the principal ways of implementing budget policy adhered to four main principles: maintaining due proportionality of budget support to the scale of shocks, targeting support, holding fast to strategic objectives, and encouraging structural transformations. This article addresses the new challenges ahead by outlining a medium-term development model for the Russian economy. This model envisions establishment of the conditions essential for technological advancement. It also highlights the role of fiscal and financial policy instruments in creating long-term financing sources, offering tax incentives, and providing targeted support measures throughout various stages of the technological cycle. The importance of continuing efforts to develop an independent financial and payment infrastructure aimed at facilitating free foreign economic activity is also emphasized.

Economic inequality is a significant challenge for developing countries, hampering inclusive growth and sustainability. This study aims to analyze the role of fiscal policy in addressing economic inequality, focusing on income redistribution through progressive taxation, public spending, and social transfers. The research method used is a quantitative approach with secondary data from national and global economic reports, as well as regression statistical analysis to evaluate the relationship between fiscal policy and inequality indicators, such as the Gini Index and absolute poverty. The results show that fiscal policies, especially in the form of progressive taxation and targeted social spending, have a positive impact on reducing economic inequality in developing countries. However, the effectiveness of these policies varies among the countries studied, depending on the level of corruption, the efficiency of fiscal administration, and the prioritization of public spending. Some countries with high levels of inequality show that inefficient public spending and budget leakages exacerbate inequality. The discussion highlights the importance of improving fiscal governance and strengthening tax administration capacity to enhance the redistributive impact of fiscal policy. In addition, fiscal policy needs to be tailored to the local context to ensure social justice and equal economic opportunity. In conclusion, effectively designed fiscal policies can play an important role in reducing economic inequality in developing countries. However, the success of these policies depends on good management and political commitment to sustainably improve resource distribution.

This study examines the relationship between financial management and public policy on economic performance in Bengkulu, Indonesia, using a time series approach over four years. The research incorporates eight key variables, including government spending, tax revenue, inflation rate, interest rate, public debt, economic growth, financial inclusion, and investment level. Employing the EViews software for data analysis, the study applies econometric techniques such as unit root tests, cointegration analysis, and vector error correction models (VECM) to assess short-term and long-term interactions among the variables. The findings highlight the significant role of fiscal policies and financial management in shaping economic stability and growth. Furthermore, the results provide policy implications for improving financial strategies to enhance economic performance in Bengkulu. This study contributes to the existing literature by offering empirical evidence on the interplay between financial management and public policy within a localized economic context.

Motivation: This paper addresses the ongoing debate surrounding Bitcoin’s potential to function as an alternative to state-issued fiat currencies. With the advent of Bitcoin and its increasing global prominence, it is essential to explore its viability, particularly in light of its formal adoption in El Salvador as legal tender. The limited supply and decentralized nature of Bitcoin present a significant departure from traditional monetary systems, which raises questions regarding its capacity to fulfill the roles of money under Modern Monetary Theory (MMT).Aim: The primary goal of this paper is to critically examine whether Bitcoin can serve as a functional replacement for fiat money. Using a post-Keynesian analytical framework, this study investigates Bitcoin’s ability to meet the requirements of sovereign money, particularly within the theoretical framework of MMT. The analysis focuses on Bitcoin’s decentralized issuance, limited supply, and its role in fiscal policy and credit creation.Materials and methods: This research employs a critical literature review and a case study analysis, using the framework of MMT and post-Keynesian endogenous money theory to assess Bitcoin’s economic implications and its real-world application in El Salvador’s Bitcoin Law. The study analyzes Bitcoin’s economic implications based on the endogenous money supply model and evaluates its impact on government fiscal policy, credit markets, and economic stability in both theoretical and practical contexts, with a special focus on El Salvador’s Bitcoin Law.Results: The analysis reveals significant limitations in Bitcoin’s ability to function as a fiat currency. Its rigid supply and speculative nature hinder its capacity to serve as a medium of exchange, store of value, and unit of account, as envisaged by MMT. The study concludes that Bitcoin’s decentralized nature and deflationary design pose challenges for its broader adoption as state money, particularly in managing aggregate demand and economic crises.

Active or passive? Revisiting the role of fiscal policy during high inflation

During the times of crisis, the role of fiscal policy when ensuring macroeconomic stability and fostering economic growth within integration associations increases. Tax policy is a pivotal parameter in the formation of state budgets and significantly impacts population income, while the convergence of tax systems has gained prominence as a means of bringing integrating states closer together. Therefore, it is imperative to evaluate the convergence processes of tax systems within integration associations. In the study, we explore the convergence hypothesis in relation to the tax systems of a group of post-Soviet countries: Armenia, Belarus, Kazakhstan, Kyrgyzstan, and Russia. Methodologically, the research relies on the convergence theory in economics, process and systems approaches. The method is based on the concept of sigma-convergence, and calculation of Frank indices. The dataset utilized for analysis spans a decade, from 2012 to 2022, and comes from the Eurasian Development Bank (EDB). The findings reveal that the sigma-convergence of tax policy within the group of countries belonging to the Eurasian Economic Union (EAEU) was present before the onset of the coronavirus pandemic. However, with the pandemic’s spread, an uncoordinated tax policy to support the national economies emerged, which has led to the tax systems’ divergence. The study underscores the necessity of establishing automatic crisis management mechanisms for fiscal interventions at the supranational level within the EAEU. Such mechanisms would enable a coordinated response to future humanitarian and financial shocks, enhancing the resilience of EAEU member states.

Contemporary crisis phenomena, including financial, structural, political, and social aspects, underscore the need for effective fiscal policy to ensure the resilience and development of the country. Additionally, there are currently complex challenges related to the war, such as infrastructure destruction, business shutdowns, and mass migration, which have significantly impacted the country’s economy and require additional financial resources for recovery. This situation necessitates the search for new sources of income and the optimisation of existing resources, highlighting the importance of effective tax regulation to overcome economic challenges during conflict. This scientific article aims to determine the role of fiscal policy in ensuring effective economic development, as well as the importance of tax instruments and their efficiency in promoting economic growth and optimising financial resources. In the research process, literary sources were analysed, and statistical data was scrutinised to evaluate the dynamics of state revenues and expenditures and the impact of tax receipts on the state budget. The study emphasises the importance of tax instruments for economic development and meeting the country’s financial needs. The efficient use of tax instruments facilitates the collection of sufficient revenues to fund social and economic needs. The study highlights the importance of employing the necessary tax instruments to ensure the country’s effective economic development. In martial law conditions, mobilising fiscal reserves and activating tax instruments become critical strategies for ensuring financial stability and supporting the economy. However, the successful implementation of these measures requires the improvement of the organisational structure and administration. A balanced approach to tax burden, a conducive environment for business, and the development of new revenue sources are critical in ensuring financial stability and supporting economic growth during conflict.

This paper provides a comprehensive empirical analysis of the role of discretionary fiscal policy for inflation differentials across the 19 euro area countries over the period 1999–2019. The results confirm existing (older) literature that it is difficult to find robust evidence of the fiscal policy stance or impulse impacting directly on inflation differentials. We do find, however, support for an indirect effect of discretionary fiscal policy on inflation differentials working through the output gap channel. There is also some evidence that fiscal policy may be especially potent in influencing inflation differentials—with fiscal tightening cooling (and fiscal expansion increasing) inflation pressures—when the economy is above its potential. Finally, going from the overall fiscal stance or impulse to individual fiscal instruments, we find that value added tax rate changes and public wage growth are statistically significant determinants of inflation differentials in our sample.

Abstract For decades, macroeconomists have analyzed the role of fiscal policy in stabilizing economic trends in theory and practice. However, there is no general consensus on the efficiency of fiscal policy in stabilizing economic flows. Historically, fiscal policy has generally been considered stabilizing, but its flexibility in modern conditions can also have a developmental effect on the specific national economy. Macroeconomic instability can be caused by various shocks. First of all, this paper will discuss the basic postulates of stabilization fiscal policy in modern conditions and the macroeconomic signals of when and how to initiate stabilization through fiscal policy. It will also address the perennial dilemma of the effectiveness of automatic stabilizers versus discretionary fiscal policy measures for stabilization purposes. The essence of the paper is the analysis of the efficiency of fiscal policy stabilization measures in European Union countries, specifically the effects of public revenues and public expenditures on the output gap of the EU countries.

Based on an extensive survey of the members of the American Economic Association, the authors of this article compare consensus among economists on several economic propositions over four decades. The main result is an increased consensus on many economic propositions, specifically the appropriate role of fiscal policy in macroeconomics and income distribution issues. Economists now embrace the role of fiscal policy in a way not apparent in previous surveys and largely support government policies that mitigate income inequality. Another area of consensus is the concern with climate change and the use of appropriate policy tools to address it.

Carbon blessing or carbon curse? The role of fiscal policy

This paper aims to investigate the role of fiscal policy and some fundamental macroeconomic factors on the economy's growth in Pakistan from 1976 to 2023 by using the ARDL model to analyze both the short and long-term relationship. The study establishes employment and capital accumulation as pivotal growth enablers, inviting more investment in human capital and infrastructure. On the other hand, government expenditure and trade openness have ambiguous results, which once again cement the need for context-specific fiscal and trade strategies. The analysis also highlights Inflation as another challenge and calls for strong measures to enhance price stability. Although foreign direct investment has not brought in a strong positive image for the destination country, the overall stability in the model reinforces the reliability of these understandings. The last section of the study presents policy implications that should be helpful for policymakers seeking to promote sustained economic growth and add substantively to the emerging literature about mechanisms of economic development in emerging economies.

Contemporary crisis phenomena, including financial, structural, political, and social aspects, underscore the need for effective fiscal policy to ensure the resilience and development of the country. Additionally, there are currently complex challenges related to the war, such as infrastructure destruction, business shutdowns, and mass migration, which have significantly impacted the country's economy and require additional financial resources for recovery. This situation necessitates the search for new sources of income and the optimisation of existing resources, highlighting the importance of effective tax regulation to overcome economic challenges during conflict. This scientific article aims to determine the role of fiscal policy in ensuring effective economic development, as well as the importance of tax instruments and their efficiency in promoting economic growth and optimising financial resources. In the research process, literary sources were analysed, and statistical data was scrutinised to evaluate the dynamics of state revenues and expenditures and the impact of tax receipts on the state budget. The study emphasises the importance of tax instruments for economic development and meeting the country's financial needs. The efficient use of tax instruments facilitates the collection of sufficient revenues to fund social and economic needs. The study highlights the importance of employing the necessary tax instruments to ensure the country's effective economic development. In martial law conditions, mobilising fiscal reserves and activating tax instruments become critical strategies for ensuring financial stability and supporting the economy. However, the successful implementation of these measures requires the improvement of the organisational structure and administration. A balanced approach to tax burden, a conducive environment for business, and the development of new revenue sources are critical in ensuring financial stability and supporting economic growth during conflict.

Collaborative effect of the energy conservation and emission reduction fiscal policy in China

Abstract The Indonesian economy at the time after Covid-19 occurred declined, therefore in this journal the author will discuss the role of fiscal policy to stabilize the Indonesian economy which is experiencing a global economic crisis caused by Covid-19. In this study using a qualitative research method with a secondary data approach in which the author searches, reads, understands and summarizes the results of research sourced from books, journals, scientific articles or other data using literature studies. This study discusses the role and steps of fiscal policy to stabilize the Indonesian economy after Covid-19 which caused a global economic crisis, these steps also go hand in hand with close coordination with monetary policy that has been implemented by Bank Indonesia. Planning and setting a well-directed and targeted fiscal policy will have a positive impact on economic recovery. Keywords: Covid-19, Fiscal Policy, and the Economy Abstrak Perekonomian Indonesia pada saat setelah Covid-19 terjadi menjadi menurun oleh sebab itu dalam jurnal ini penulis akan membahas tentang peran kebijakan fiskal untuk menstabilkan perekonomian Indonesia yang mengalami krisis ekonomi global yang disebabkan oleh Covid-19. Dalam penelitian ini menggunakan metode penelitian kualitatif dengan pendekatan data sekunder yang mana penulis mencari, membaca, memahami dan merangkum dari hasil penelitian yang bersumber dari buku, jurnal, artikel ilmiah atau data lainnya yang menggunakan studi kepustakaan. Penelitian ini membahas tentang peran dan juga langkah-langkah kebijakan fiskal untuk menstabilkan perekonomian Indonesia pasca setelah Covid-19 yang menyebabkan krisis perekonomian global, langkah-langkah ini juga beriringan bersama dengan koordinasi yang erat dengan kebijakan moneter yang telah diterapkan oleh Bank Indonesia. Merencanakan dan menetapkan kebijakan fiskal yang terarah dan tepat sasaran akan berdampak positif terhadap pemulihan perekonomian. Kata Kunci: Covid-19, Kebijakan Fiskal, dan Perekonomian

This research paper intends to look at the significance of the government expenditures in various sectors, investment by the private sector, and current account conditions on the well-being of the citizens in Pakistan over the duration of 1972-2021, making use of the Autoregressive Distributed Lag (ARDL) structure. This study additionally checks out disaggregated levels of government spending, with a particular concentration on the social sector (health and health as well as additional education), economic services, subsidies, as well as the maintenance of law and order. The research concern settled in this study is: Do the public sector’s economic actions improve the financial condition of the society through the increase in per capita income and employment opportunities, or do they trigger misallocation of public sources as well as injury to eco wellbeing of the society? The study also analyzes the impact of changes in the structure of the federal government's investment in time in addition to determining quick- and durable outcomes for crucial macroeconomic variables. The empirical results reveal that all parts of federal government expenses have considerable long-run organizations with per capita income, a certain welfare variable, besides spending on law and order, which has an unfavorable, nonetheless statistically insignificant impact. In terms of job opportunities, the federal government's expenses on education and learning have a considerable long-term favorable impact on employment. Nonetheless, expenditures on health have a significant unfavorable impact on employment. Different various other parts of federal government expenses did not substantially support employment. This study supplies valuable insights into the relationship between federal government costs and well-being in Pakistan. The browsing may give some requirements for focusing on the allowance of development in addition to the non-development budget to improve the welfare of Pakistani people.