Role Of Fiscal Policy Research Articles (Page 3)

Abstract This paper studies the relationship between financial stability and sustainable development from the fiscal and monetary policy perspective in 33 developing countries and 7 developed countries in the period 2005–2020. Bayesian regression results show that financial stability positively affects sustainable development in both groups of countries with a low probability of impact. This probability is above 79.3% in developed countries and above 81.5% in developing ones. When considering the role of monetary policy, the direction of impact and probability is different. Specifically, financial stability in the environment of high inflation and increased money supply (ZscoreInf and ZscoreM2) negatively affects sustainable development in both country groups with high probabilities. In contrast, when considering the monetary policy with the foreign exchange reserves tool (ZscoreER), financial stability positively impacts sustainable development with the probability of 89.6% in developed countries and 92.5% in developing one. When considering the role of fiscal policy, financial stability with government spending (ZscoreGE) positively affects sustainable development with a probability of over 99.7% in the two groups of countries. Meanwhile, tax income in a financially stable environment increases the probability of a positive effect at 100% in developed countries, and a negative effect with a probability of 60.9% in developing countries. From the above results, we propose that central banks in both developed and developing countries should aim to stabilize prices and aim to maintain a low inflation rate to help limit shocks to sudden interest rate changes that cause market volatility. This is a premise to help stabilize finance and promote sustainable development. Furthermore, these countries should maintain an adequate foreign exchange reserve to withstand external shocks and ensure they have enough foreign currency to meet macroeconomic needs, which can boost confidence.

PurposeWe investigate the role of fiscal policy, through several measures of government revenues and expenditures and redistribution, on disposable and market income inequality and economic growth as well as the interaction between inequality and growth for 31 European countries from 1995 to 2019.Design/methodology/approachWe use a simultaneous equations model to assess the linkage between economic growth, inequalities and fiscal policy variables.Findings(1) While disposable income inequality has a negative effect on all fiscal policy variables, market income inequality has a mixed effects; (2) for Eastern European countries, public consumption and direct taxation positively influence economic growth; conversely, for Western European countries, the effects are negative; (3) disposable and market income inequality have a positive effect on growth for Eastern European countries, and a negative influence on growth for Western European countries; (4) growth contributes to the increase of disposable and market income inequality for Eastern European countries; for Western European countries, the effects are opposite; and (5) fiscal policy allows for the attenuation of disposable income inequality.Originality/valueThe different results between the role of market and disposable income inequality levels lead us to suggest tax progressivity as an important feature to consider when analyse the trivariate relationship between inequalities, fiscal policy and growth. Furthermore, there are different dynamics between inequality and growth, and the role of fiscal policy, on both Eastern and Western European countries.

DSGE models based on New Keynesian principles, which have been extended to allow for banking, the zero lower bound on interest rates (ZLB), and varying price duration, can account well for recent macroeconomic behavior across a variety of economies. These models find that active fiscal policy can contribute to macroeconomic stability and welfare by reducing the frequency of hitting the ZLB. Fiscal policy can also share the stabilisation role with monetary policy, whose effectiveness under the ZLB is much reduced.

This paper discusses the role of fiscal policy in overcoming poverty in Indonesia through empowering village funds. Using a literature study approach, the data collection process uses secondary data from the Central Statistics Agency and the Ministry of Finance. This paper examines poverty analysis, factors that influence poverty, and the implementation of fiscal policy in reducing poverty levels. Apart from that, this research also discusses village fund empowerment policies, poverty alleviation strategies and implementation of village fund policies. The research results show that fiscal policy, especially increasing village fund allocation, can be effective in reducing poverty. Programs such as empowering village funds can improve community welfare and reduce poverty levels. Evaluation of the village fund empowerment policy shows a positive impact on poverty alleviation, with increasing village status and reducing poverty levels in rural areas. And by involving the community to participate in managing village funds so that the implementation of village funds can be achieved.

Fiscal policy, a crucial tool in the hands of policymakers, aims to stabilize the economy by manipulating government expenditures and taxation. However, the efficiency of fiscal policy in achieving its objectives has been a subject of ongoing debate among economists. Using a combination of theoretical and empirical approaches, this research assesses the effectiveness of fiscal policy in responding to economic shocks, promoting sustainable growth, and reducing income inequality. The study also explores the role of fiscal policy in stabilizing the business cycle, managing public debt, and influencing inflation. The study concludes that fiscal policy can be an effective tool in stabilizing the economy and promoting growth, but its efficiency is highly dependent on the specific context in which it is implemented. The research contributes to the existing literature by providing insights into the optimal design and implementation of fiscal policy, highlighting the importance of careful consideration of the economic environment and the potential risks associated with fiscal policy interventions. The study's findings have significant implications for policymakers, emphasizing the need for a nuanced and evidence-based approach to fiscal policy decision-making. Conclusions, recommendations and proposal are presented in the article can be used in the implementation effective fiscal policies aimed at creating favorable institutional conditions for the implementation tax reform of the public sector..

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

The aim of this research is to determine the level of importance of fiscal policy in supporting sustainable development and maintaining the stability of the Indonesian economy. The definition of fiscal policy is a series of actions taken by the government to maintain the stability of state expenditure and income with the aim of encouraging healthy economic growth. where in carrying out these actions the instruments used include: taxes, spending, public bonds and budget allocations. The research method used is a literature study of articles, journals and documents relevant to fiscal policy starting from taxation, APBN public bonds and budget allocations.. The data used is data from two previous researchers and financial projection data originating from credible government publications. The results obtained show that the important role of fiscal policy in supporting sustainable development is the government's right to regulate state revenues and expenditures in order to maintain the stability of the country's economy.

The Iraqi economy has faced different internal economic issues and imbalances, which have led to a decline in economic performance and development attempts. Thus, the government utilized a new mechanism after 2003 to achieve economic balance amid fluctuations in crude oil prices. However, internal imbalances persist due to economically unjustified increases in public spending distributed through channels influenced by the market mechanism. Therefore, the government's economic Role has been updated from developmental to corrective, with fiscal and monetary policies playing an important role in eliminating government assistance and foreign trade restrictions. This method has influenced resource distribution across sectors and regions and made the Iraqi economy more flexible.

There are many proposals to diagnose the weakness of the Iraqi economy that has reached the point of crisis, but the problem that the Iraqi economy suffers from is the lack of diversity in sources of public revenues and reliance on a single source to finance revenues, in addition to the increase in public expenditures and not directing them in the correct manner that serves the Iraqi economy, as most public expenditures are operating expenditures while the rates of investment expenditures are very low, in addition to inflation rates that rise from year to year. The research aims to study the impact of public expenditures and revenues on the annual inflation rate for the period (1990-2022), and the research problem was related to the nature of the political and economic conditions and the problems that the Iraqi economy went through, which resulted in a huge increase in public revenues and high inflation rates due to the increase in public expenditures.

We develop an endogenous growth model with North–South interactions, monetary policy, and a multi-dimensional role for fiscal policy. To boost economic performance, the government of the less developed country subsidizes R&D and intermediate goods production. Besides, to account for the effects of excessive public debt, we introduce a negative externality on productivity and a risk premium effect. Our findings reveal that the steady-state growth rate of both economies depends positively on the subsidies in the South and negatively on the public debt’s externality on productivity and the risk premium affecting the indebted economy. Additionally, public debt externalities increase the equilibrium wage inequality, making it more significant in the South. To minimize these effects, both countries can agree to mutualize their debts to overcome the risk premium. Then, the economy’s steady-state growth rate would increase in both countries. Finally, several policy implications were retrieved.

The study examines the relationship between fiscal policy, the level of poverty, and the frontier technology readiness index (skill) in the Southern African Customs Union over the period of 2012 to 2022. The technique of pooled ordinary least squares was used to ascertain the empirical findings, while the LLC and IPS established the stationarity of the variables. The empirical findings show that government expenditure on education, indirect taxes, and the skills index directly affect household consumption expenditure significantly and, by implication, reduce poverty. However, the interaction of government expenditure on education and skills significantly reduces household final consumption expenditure. The essence of the study is that the respective government in the Southern African Customs Union should harness efforts towards integrating relevant skills into the educational system in light of the 21st-century technology revolution. It is admitted that previous studies have largely concentrated on issues such as income inequality, financial inclusion, government expenditure program in addressing the problem of poverty in developing economies, this study, while observing the crucial role of fiscal policy, evaluates the effect of a frontier technology readiness index, skills, in abating the severity of poverty in the region.

Scarring effects of major economic downturns: The role of fiscal policy and government investment

Purpose This research aims to determine the role of fiscal policy in reducing gender income inequality in Indonesia. Design/methodology/approach This research used the microsimulation INDOMOD model, which is a static tax-benefit microsimulation model that has been underpinned by BPS Susenas 2019 data. Findings The estimation results show that the most appropriate fiscal policy to reduce gender income inequality are through PKH and BPNT. Meanwhile, income taxes for upper income levels have almost no effect, and for lower income levels, although it can reduce gender income inequality, it will increase income inequality. Research limitations/implications This research has several limitations which can be explored for further research. First, due to the limitations of the data, the gender term used refers to the gender of the head of household, so it does not describe the actual gender condition of the individual. Second, the income tax is calculated based on the income data available in the income block in the Susenas, so that the value does not reflect the actual condition of the income and income tax paid by taxpayers. Third, the microsimulation method is static, so it cannot be used to analyze the dynamic changes that occur at the individual level. Originality/value There are many studies on the relationship between fiscal policy and gender equality, but similar studies are still very limited in Indonesia. Moreover, the INDOMOD microsimulation model is rarely used in Indonesia, even though this method has been widely used in many countries.

The authors have employed several techniques to account for model uncertainty in the inequality-growth model. However, the BMA technique is the most prominent approach that solves model uncertainty in the inequality-growth literature. This study applied a recent BMA analysis using panel data to examine the role of fiscal policy on income inequality in 37 OECD countries from 2000 to 2015. Fiscal policy (in terms of tax revenue increase) serves as a redistributive tool or instrument to transfer income from higher income earners to lower earners and is considered a mechanism for income equality. To the best of the author’s knowledge, only a few empirical growth studies have considered fiscal policy impact in their income inequality model setup. Our work contributes to very little research on the fiscal policy–income nexus using a novel BMA and MCMC regression as a robust methodology. Our empirical evidence on the role of fiscal policy on income inequality has found three variables, namely, economic growth, fiscal policy, and urban population, to impact income inequality significantly. We also found that the countries are conditionally neither converging nor diverging because of the probability of their coefficient being high at 100%. As expected, the coefficient of fiscal policy has a significant negative relationship with income inequality, indicating that fiscal policy reduces income inequality significantly by an average of 22% (with 100% certainty) for both BMA and Bayes models in OECD countries.

PurposeThis paper seeks to explore the sensitivity of these parameters and their impact on fiscal policy outcomes. We use the existing literature to establish possible ranges for each parameter, and we examine how changes within these ranges can alter the outcomes of fiscal policy. In this way, we aim to highlight the importance of these parameters in the formulation and evaluation of fiscal policy.Design/methodology/approachThe role of fiscal policy, its effects and multipliers continues to be a subject of intense debate in macroeconomics. Despite adopting a New Keynesian approach within a macroeconomic model, the reactions of macroeconomic variables to fiscal shocks can vary across different contexts and theoretical frameworks. This paper aims to investigate these diverse reactions by conducting a sensitivity analysis of parameters. Specifically, the study examines how key variables respond to fiscal shocks under different parameter settings. By analyzing the behavioral dynamics of these variables, this research contributes to the ongoing discussion on fiscal policy. The findings offer valuable insights to enrich the understanding of the complex relationship between fiscal shocks and macroeconomic outcomes, thus facilitating informed policy debates.FindingsThis paper aims to investigate key elements of New Keynesian Dynamic Stochastic General Equilibrium (DSGE) models. The focus is on the calibration of parameters and their impact on macroeconomic variables, such as output and inflation. The study also examines how different parameter settings affect the response of monetary policy to fiscal measures. In conclusion, this study has relied on theoretical exploration and a comprehensive review of existing literature. The parameters and their relationships have been analyzed within a robust theoretical framework, offering valuable insights for further research on how these factors influence model forecasts and inform policy recommendations derived from New Keynesian DSGE models. Moving forward, it is recommended that future work includes empirical analyses to test the reliability and effectiveness of parameter calibrations in real-world conditions. This will contribute to enhancing the accuracy and relevance of DSGE models for economic policy decision-making.Originality/valueThis study is motivated by the aim to provide a deeper understanding of the roles macroeconomic model parameters play concerning responses to expansionary fiscal policies and the subsequent reactions of monetary authorities. Comprehensive reviews that encompass this breadth of relationships within a single text are rare in the literature, making this work a valuable contribution to stimulating discussions on macroeconomic policies.

This study aims to analyze the role of fiscal policy and monetary policy in overcoming poverty in Indonesia as one of the government's efforts to address economic problems. The type of research method used is a qualitative descriptive research method by preparing, collecting, and analyzing data. The collected data is then processed through three stages, namely data reduction, data presentation, and conclusion withdrawal. The results of this study show that poverty is a problem faced by all countries, especially in developing and lagging countries. The problem of poverty is multidimensional caused by many factors that are not only the domain of economics but also political, social, cultural, and other social systems. Fiscal policy and monetary policy greatly helped to lower the poverty rate in Indonesia. With fiscal policy and monetary policy, it can help the government solve one of the problems of the Indonesian economy. Although it did not completely resolve, it was able to reduce the poverty rate in Indonesia to remain on the normal line so that it did not affect economic growth and development in Indonesia.

Under the conditions of a modern market economy, the employment issue is a difficult problem that governments around the world must face directly. As one of the most important means for governments to implement macroeconomic regulation and control, it is of greater theoretical and practical significance to give full play to the positive role of fiscal policy in promoting employment. This paper introduces the concept of a flow model of unemployment to study the impact of fiscal policy on the labour market and explores the government's role in easing the contradiction between labour supply and demand and unifying the labour market through fiscal expenditure, taxation, social security and other means. This paper consists of four parts. The first part describes a flow model of unemployment in detail and studies how to reduce the unemployment rate theoretically. The second and third parts tell the different effects of expansionary fiscal policy and tight fiscal policy on the unemployment rate respectively, and how the government chooses the appropriate fiscal policy. The fourth part of the article selects the example of Japan in an economic down cycle to illustrate that the government needs to take into account both short-term and long-term factors, as well as the overall and local economic situation, and choose an appropriate direction or combination of fiscal policies in order to reduce the unemployment rate.

In the light of growing economic challenges and in the time of the war, the role of fiscal policy in macro-financial stability becomes extremely important for ensuring economic stability and development in Ukraine. Fiscal policy as an important mechanism for managing the state's financial flows, determines not only the amount of tax revenues and expenditures, but also affects inflation, employment, and other macroeconomic indicators. Consideration of its role in the context of macro-financial stability is of strategic importance for the development of effective strategies for managing economic resources and ensuring the sustainability of the country's economy. The purpose of the article is to determine the role of fiscal policy in the macro-financial stability of Ukraine. The study used general scientific methods of cognition, in particular, a critical analysis of the available scientific literature on the implementation of the state fiscal policy and its impact on macro-financial stability and economic growth, data compilation related to the systematization of tasks and principles, as well as methods of induction and deduction. It reveals how effective fiscal policy can act as an effective tool for maintaining stability, avoiding the growth of public debt, and directing resources to strategically important sectors of the economy, contributing to the sustainable economic development of the country in conditions of uncertainty and conflict. Effective implementa- tion of fiscal policy enables the government to manage economic cycles, smooth out imbalances, and respond to fiscal shocks. This contributes to the formation of the country's financial security, increasing its competitiveness and limiting the shadow economy. It is concluded that fiscal policy plays a significant role in the formation of financial and economic security of the country, and significantly affects the competitiveness of the national economy even for the development of the shadow economy. The publication analyzes important elements of interaction between fiscal policy and the macro-financial stability of the State. It is concluded that a decrease in tax pressure or an increase in expenditures in certain sectors of the economy will affect macro-financial stability, ensuring a balance between financial resources and public needs.

The article is devoted to the study of the impact of taxes on the development of the regional economy. The theoretical foundations of taxation, various types of taxes and their impact on economic activity, investment attractiveness and the standard of living of the population are considered. The role of fiscal policy and tax competition between regions is analyzed, as well as the impact of tax regulation on the investment climate. The social aspects of taxation and the main problems of tax policy are discussed. Examples of successful tax policy in various regions and recommendations for its improvement to stimulate economic growth and improve the standard of living of the population are given.

This paper examines the role of fiscal policy in driving macroeconomic dynamics in a resource-rich emerging economy like Nigeria. Specifically, the paper investigates the macroeconomic implications of fiscal policy using a small open economy dynamic stochastic general equilibrium model that features oil in the fiscal rule. The model is estimated via Bayesian methods using data covering the period 2010Q1- 2021Q1. The results show that the feedback coefficient of output in the fiscal rules is mainly negative, indicating a counter-cyclical fiscal stance. Also, increased oil revenue leads to a rise in government consumption, investment and transfer payments. Further evidence indicates that government spending and transfer payments rose in response to increased debt. We also show that fiscal shocks are highly persistent and that government spending on consumption and investment, tax instruments and transfer are expansionary.