Stimulus Package Research Articles

The price of implicit guarantee: evidence from municipal bond markets in China

ABSTRACT In China, local government financing vehicles (LGFVs) have grown rapidly since the massive stimulus package in 2008. Due to the significant amount of funds allocated to public welfare infrastructure projects, an ‘implicit guarantee’ of debt repayment by local governments has emerged. This paper examines whether and how investors price this implicit guarantee, using a mixed cross-sectional fixed effects model, a generalized DID model, and placebo tests to investigate the hypotheses and identify the heterogeneity and robustness. The findings indicate that implicit guarantees do exist and are influenced by local fiscal capacity and previous guarantee behavior. Tightened regulations on hidden debt have increased the issuance spread of LGFV bonds, with the impact being more pronounced for regions with weaker fiscal and economic strength. Additionally, LGFVs with relatively lower administrative levels, stronger connections to public welfare-related business, higher explicit guarantees, and longer-term LGFV bonds are more influenced by the regulation.

Small-Scale Pig Farming as a Tool for Unemployment Alleviation in Buffalo City, Eastern Cape of South Africa

The study examines the effect of small-scale pig farming on unemployment alleviation in Buffalo City, Eastern Cape of South Africa. This is against the backdrop of the extreme youth unemployment and increasing poverty rate being witnessed in South Africa (SA) due to the unstable global economic environment that has impacted most economies of the world. On its part, the government made an appreciable number of investments, especially in the agricultural sector, to address the unemployment challenges, which has yielded varied levels of success. The unemployment situation in SA was compounded by the COVID-19 pandemic, which resulted in approximately 33% of the labour resources that were productive before the pandemic to idle. This necessitated a government injection of R100 billion as a stimulus package into the economy to support small businesses and the agricultural sector, especially small-scale farmers. Mixed methods were adopted to gather primary data from 164 pig farmers, which were randomly selected. XLSTAT and SPSS 28 were used to analyse the quantitative data, and NVivo was used for the qualitative data. The results revealed that farming activities provided a source of income for most pig farmers, with several households depending on it for their livelihood. The collective advantage among pig farmers was the availability of space for farming activities, and most of them engaged in pig farming as a necessity. The government plays a crucial role in the sustainability of pig farming activities in the area through the various interventions that create the needed enabling environment for the farmers to thrive.

Navigating the Malaysian dilemma: Constructing a sustainable economy in the post-COVID-19 era

The Malaysian dilemma presents a complex challenge in the wake of the COVID-19 pandemic, requiring a comprehensive statistical analysis for the formulation of a sustainable economic framework. This study delves into the multifaceted aspects of reconstructing Malaysia’s economy post-COVID-19, employing a data-driven approach to navigate the intricacies of the nation’s economic landscape. The research focuses on key statistical indicators, including GDP growth, unemployment rates, and inflation, to assess the immediate and long-term impacts of the pandemic. Additionally, it examines the effectiveness of government interventions and stimulus packages in mitigating economic downturns and fostering recovery. A comparative analysis with pre-pandemic data provides valuable insights into the extent of economic resilience and identifies sectors that require targeted support for sustained growth. Furthermore, the study explores the role of technology and digital transformation in building a resilient economy, considering the accelerated shift towards remote work and digital transactions during the pandemic. The analysis incorporates data on technological adoption rates, digital infrastructure development, and innovation ecosystems to gauge their contributions to economic sustainability. Addressing the Malaysian Dilemma also involves an examination of social and environmental dimensions. The study investigates the impact of economic policies on income distribution, social equity, and environmental sustainability, aiming to achieve sustainable economic growth. The study contributes a nuanced analysis to guide policymakers and stakeholders in constructing a sustainable post-COVID-19 economy in Malaysia.

Analyzing public sentiment toward economic stimulus using natural language processing

PurposeThis study aims to investigate public sentiment toward economic stimulus using textual analysis. Specifically, it analyzes Twitter’s public opinion, emotion-based sentiment and topics related to COVID-19 economic stimulus packages.Design/methodology/approachThis study applies natural language processing techniques, such as sentiment analysis, t-distributed stochastic neighbor embedding and semantic network analysis, to a global data set of 88,441 tweets from January 2020 to December 2021 extracted from the Twitter platform, discussing COVID-19 economic stimulus packages.FindingsResults show that in the fourth quarter of 2021, there is a declining trend of positive sentiment (−5%) and an increasing trend of negative sentiment (14%), which may indicate the perceived inadequacy of COVID-19 stimulus measures. Topic modeling identifies seven topics, highlighting the necessity of stimulus in the education sector.Practical implicationsThe big-data findings of this study provide a better understanding of public sentiment about economic stimulus for regulators and policymakers, which can help in formulating more effective fiscal and monetary policies.Originality/valuePublic sentiment is a significant concern for regulators because of its associated ambiguity, such as how to design stimulus packages and evaluate the effectiveness of previous measures. This study applies natural language processing, contributing to the growing literature on designing effective economic stimulus.

The impact of new millennium crises on the power of Islamic banks in deposit markets

AbstractWe investigate the impact of three crises on the power of Islamic banks in deposit markets: the Global Financial Crisis, 2007–2009 (GFC), the Arab Spring political crisis, 2011–2013, and the COVID‐19 health crisis, 2020–2022. Applying difference‐in‐difference (DID) and GMM techniques to panel data for 2004–2022, we find that the power of Islamic banks increased in countries most affected by the GFC, but only for oil‐exporters, as elevated oil prices inflated deposited liquidity. In contrast to the GFC, the market power of countries highly affected by the Arab Spring decreased as depositors withdrew en masse. For these countries, oil export status was irrelevant, and whilst government integrity is significant, it accounts for a small amount of heterogeneity in the country‐level cross‐section due to widely held public attitudes towards institutions during the crisis. For COVID‐19, the market power of Islamic banks initially increased at the outset of the pandemic due to a surge in precautionary deposits, but later decreased due to economic activity constraints. The stringency of lockdowns had little effect on market power in countries that suffered the highest COVID‐19 death rates. These and other findings specific to each crisis provide a rich array of private and public policy implications relevant to crises of different types for bank liquidity crisis management, financial conduct policies, and state‐backed lending stimulus packages.

Effects of supply chain bottlenecks and fiscal stimulus on inflation dynamics in the COVID-19 pandemic era: a case of South Korea*

ABSTRACT We employ an augmented New Keynesian Phillips curve, integrating a global supply chain bottleneck index and comprehensive fiscal stimulus packages, to quantitatively examine the impact of these variables on inflation rates in South Korea using monthly time-series data from 2010 to 2023. The results reveal three key findings. First, the Global Supply Chain Pressure Index (GSCPI), serving as a proxy for global supply chain bottlenecks, has an overall statistically insignificant effect on inflation throughout the observation period. However, during the pandemic, its effect on inflation was statistically significant. Second, the detrended government stimulus packages, proxied by government transfers or government fixed investment, also demonstrated a significant escalating effect on inflation during the pandemic. These findings suggest that both cost-push and demand-pull factors contributed to recent inflation surges. Third, conventional determinants of inflation, such as expected inflation, the domestic output gap, and crude oil prices, consistently influence inflation, aligning with existing literature.

COVID-19 AND GOVERNMENT RESPONSES: HAS THE PANDEMIC AFFECTED THE KUALA LUMPUR COMPOSITE INDEX?

This study aims to determine the impact of the COVID-19 pandemic and government responses on the Malaysian stock market. Usingthe Kuala Lumpur Composite Index (KLCI) from 1st March 2020 to 31st December 2020, the study discovered several findings. First, thenumber of daily new COVID-19 cases affected the index. Nevertheless, the new cases turned out to be positive at a later stage. This finding inferred that investors grew apathetic towards COVID-19 over the long run. Second, daily new COVID-19 deaths negatively impacted the stock index. Third, the Movement Control Order (MCO) harmfully influenced the index. Fourth, the Recovery Movement Control Order RMCO and most government stimulus packages positively impacted the index. In conclusion, the government’s responses to COVID-19 have managed to mitigate several negative impacts of the pandemic on the stock market. The stimulus packages provided the much-needed impetus for market recovery during the pandemic.

Commodity Price and Indonesian Fiscal Policy: An SVAR Analysis with Non-Gaussian Errors

Abstract This study exploits the non-Gaussianity for identification of a Bayesian SVAR model on newly unexplored monthly Indonesian data from 2007M1–2022M12, where we disentangle the commodity-related revenue from the total government revenues. Our main contribution is in labeling the statistically identified structural shocks as economic shocks by conducting a formal assessment of a set of proposed sign constraints. We simultaneously label a commodity price and three fiscal policy shocks, i.e. fiscal income tax, investment-spending, and consumption-spending shocks. Having evaluated their impacts, among the fiscal policy shocks, we find income tax shock the most impactful on output. Moreover, during the Covid crisis 2020–2021, the launched fiscal economic stimulus package (PEN program) positively contributed to the output. The recession of the Covid crisis could have deepened had the fiscal policymaker not responded at all. Albeit so, we should not overlook the contribution of the rising commodity prices to the output recovery. We also evaluate the commodity boom period in 2007–2009, the tax amnesty program in 2016–2017 and 2022, and the infrastructure spending boost in 2015. Our results suggest that output and retail sales would have been lower without the commodity price shock’s contribution during the commodity boom. Then, we find that tax amnesty and infrastructure spending boost policies contribute to higher retail sales.

Fear of COVID-19 and Financial Sector of Tadawul Stock Exchange

The objective of this study is to analyse the effect of the COVID-19 outbreak on the financial sector's equity returns, specifically focusing on Sukuk & Bonds (TSBI), Diversified Financials (TDFI), Banks (TBNI), Insurance (TISII), and the Tadawul All Share (TASI) Index. This will be done through the utilisation of t-test and event study technique. The event will take place from December 2018 to March 2020. The estimation period covers the time frame from December 2018 to December 2019. The pre-announcement phase of the WHO notice spans the month of January 2020, while the post-announcement phase encompasses February 2020 to March 2020. The study suggests that, prior to the alarm given by the WHO, the majority of the financial sector exhibits positive returns, with the exception of Banks. The results validate the substantial and adverse influence of the COVID-19 epidemic on Diversified Financials (TDFI), Banks (TBNI), and Insurance (TISII) following the global alert notice by the World Health Organisation (WHO). The study indicates that the Sukuk & Bonds (TSBI) sector has remained unaffected by the epidemic and has shown a favourable influence on returns. This industry provides a fixed interest rate and does not influence the expectations of investors. Saudi Arabia's government announced a stimulus package of $18.7 billion on March 20, 2020. The adverse consequences suggest that the policymakers failed to foresee this issue and did not take timely action. This study recommends that effective policies must be designed by the policymakers in anticipation of such pandemic outbreak that may help the investors to devise diversification strategies.

Extent of global decarbonization of the power sector through energy policies and governance capacity

During the 2007-2008 global financial crisis, many countries enacted clean energy policies as a part of their economic stimulus packages. These policies are believed to have contributed to a significant reduction in the CO2 intensity of electricity. Here we conduct a retrospective overview and evaluation of energy policies’ effectiveness in reducing the CO2 intensity of electricity. We utilize governance capacity as a measure of policy implementation stringency, and the interaction between governance capacity and the number of categorized policies to adjust policy variables for governance effectiveness. We distinguish between the short- and long-term effects of these policies to investigate the impacts of policy instruments on CO2 mitigation. The results suggest that the increased policy efforts, when executed with effective governance, have led to long-term cumulative effects. Our findings provide insights into the spatiotemporal dynamics of energy policies in CO2 mitigation, serving as a reference for policymakers in the post-COVID-19 era.

A critical analysis of the European Union’s structure and approach to economic recovery during times of crisis

This essay critically analyses the European Union's (EU) approach to economic recovery during times of crisis, focusing on the 2008 financial crisis and the subsequent eurozone debt crisis. The EU's response included various measures such as bailouts, fiscal stimulus packages, and structural reforms. However, shortcomings in these responses are evident, including a lack of long-term planning and the exacerbation of negative effects by bailout announcements. Moreover, the essay examines structural issues within the EU, particularly regarding the European Central Bank's monetary policies and the lack of cohesive fiscal policies among member states. These structural deficiencies contributed to the severity of the crises. Despite lessons learned, including the need for stricter financial regulations and improved coordination among member states, challenges remain. The analysis suggests that while the EU has undergone reforms, its resilience to future crises remains uncertain.

The Impact of the Stimulus Packages on the Economy during COVID-19 in Bangladesh: A Mixed-Method Approach

With the unexpected onset of COVID-19, governments across the world responded with a range of preventive measures, including the imposition of lockdowns. To mitigate the adverse effects of lockdowns arising from supply chain shocks and employment loss, governments worldwide chose to implement policies to stimulate their economies and keep them working. This study assesses the impact and effectiveness of four of these packages in Bangladesh, employing a mixed-method approach. These packages include “salary support for workers in export-oriented RMG industries”, “working capital loans for affected industries and service sectors”, “working capital loans for cottage, micro, small, and medium enterprises”, and initiatives for “revitalizing the rural economy and job creation”. Each package was examined individually because of their differences in beneficiary groups, implementation methods, and individual objectives. Quantitative analysis involved propensity score matching (PSM), the difference in difference model (DID), and structural equation modelling (SEM). Stakeholders, including policy implementers, Bangladesh Bank officials, policy analysts, academics, workers, and beneficiaries, contributed to the qualitative analysis through extensive key-informant interviews, providing a comprehensive assessment of intervention outcomes. Ultimately, the results show that the packages achieved their socio-economic relief objectives for beneficiaries. The research examined both positive impacts and challenges in their implementation. It suggests that all four packages successfully achieved their goals, such as providing social and economic support, sustaining livelihoods, addressing marginalized groups’ needs, ensuring survival for large industries and small businesses, and promoting employment. In order to better address future shocks, establishing a beneficiary database integrated with the national system is recommended for smoother policy rollout. Despite acknowledged limitations, including challenges in beneficiary identification, data availability, and time constraints, the study’s unbiased estimations provide valuable insights to guide future policy directions in similar situations.

INCREASING FISCAL AND ECONOMIC RESILIENCE POST PANDEMIC: EVIDENCE FROM SOUTH ASIAN COUNTRIES

The South Asia region faced extremely difficult economic challenges from the Coronavirus (COVID-19) pandemic. Almost two billion people living in South Asia were affected by the pandemic. The unprecedented shock in South Asia disturbed the pace and pattern of development and increased the vulnerabilities of the region. The region faced the problems of inequality, high inflation, rising fiscal deficit, disrupted growth, and environmental challenges further increasing the region’s vulnerabilities. Traditional macroeconomic policies are not enough to cope with this problem. In the face of these shocks, South Asian countries need to build robust fiscal and monetary policies and efficient use of remaining resources to build a more resilient economy for the protection of the population. Economic resilience might be effective to overcome such external shocks and support the recovery of all countries especially South Asian countries. Post-pandemic action in South Asian countries thus has become moreimportant, especially with restrained scope of fiscal and monetary stimulus. This examines the impact of COVID-19 on South Asian countries. The paper addresses the economic challenges faced by South Asian Countries in the pre- and post-pandemic period. It also briefly discusses the fiscal stimulus packages released by the South Asian countries to build stronger economies.

Impact of Stimulus Packages on Business Recovery During the COVID-19 Pandemic in Bangladesh

The COVID-19 pandemic significantly impacted Bangladesh’s economy, leading to disruptions in supply chains and a decline in business activities. To counter these effects, the government introduced stimulus packages aiming to aid business recovery. This article evaluates the impact of these measures using a unique dataset from the Business Confidence Index survey conducted by the South Asian Network on Economic Modeling in April 2021. This survey covered 503 firms across eight divisions in Bangladesh. Using the Propensity Score Matching technique for causal estimation, findings suggest that firms that availed the stimulus packages demonstrated around 9 percentage points higher recovery than those that did not. Such insights are instrumental for future policy design and strengthening evidence-based policymaking.

A creative gift economy: pre-pandemic creative systems examined through a study of regional creative industries in Australia

Australia’s creative industries and the impact COVID-19 had on cultural, employment and economic outputs is examined through the themes creative systems, creative migration, cultural volunteering and cultural tourism. Using a Creative System/Ecosystem theoretical framework, this research takes a retrospective view through data collected during the ‘old normal’ that was pre-pandemic Australia and presents findings on creative and cultural activities occurring in seven statistically determined creative hotspots. These findings are reviewed against the COVID-19 economic stimulus packages created by Australian Federal and State Governments. The research takes a deep dive into the precarious nature of creative employment and migration, cultural volunteering and tourism, through an investigation of Australia’s regional creative economies and points to the existence of a gift economy that sustains many activities that are essential to the Creative Industries.

Effects of government assistance programs on the well-being of urban low-income households during COVID-19 pandemic in Malaysia

This study aims to investigate the effects of government assistance programs on the well-being of urban low-income households during the COVID-19 pandemic in Malaysia. The COVID-19 pandemic has had a significant impact on Malaysians’ well-being, affecting a variety of factors such as income, health, and standard of living. To address the repercussions of the pandemic, the government has implemented diverse economic stimulus packages. Household well-being is assessed using four indicators: income, health, cost of living, and social relations. A cross-sectional survey was conducted in six regions of Malaysia. Data from 706 respondents was analysed using the Structural Equation Modelling (SEM). The main findings reveal that government assistance programs enhance household well-being by reducing the cost of living, increasing income, improving health, and fostering social interactions. Specifically, among the four focused aspects, the programs have the most significant impact on improving the health of low-income households. These programs have the least effect on enhancing well-being through the reduction of the cost of living. Consequently, these findings provide valuable information to policymakers in understanding the effectiveness of government assistance programs during the crisis period. This nationwide evidence-based analysis will contribute additional insights to the formulation of future assistance programs aimed at improving the well-being of low-income households.

Beyond the Crisis: Tracking SME Non-Performing Loan in Indonesia Before and After the COVID-19 Stimulus

This study evaluates the impact of two Indonesian government economic stimulus packages on the performance of Non-Performing Loans (NPLs) in the Small and Medium Enterprises (SME) financing sector. It compares the NPLs in conventional and rural banks with Non-Performing Financing (NPF) in Islamic commercial and rural banks, before and after the stimulus, during the COVID-19 crisis period. The two policies are in the form of interest/margin subsidies and credit/financing restructuring for debtors in the SMEs sector. The approach used is a quantitative approach with three analytical methods consisting of ANOVA, MANOVA and DiD (Difference in Difference). The secondary data in this study were sourced from official publications of government institutions such as the Financial Services Authority and the Ministry of Finance. The results showed that there were significant differences in the performance of NPL/F of Conventional banks, Islamic Commercial Banks, Conventional Rural banks, and Islamic Rural banks before and after the government's economic stimulus policy was determined.

Political connections and zombie firms: The role of the 2008 stimulus plan in China

This paper explores the impact of political connections on zombie business in the presence of massive economic stimulus. Although a stimulus plan may substantially ease financial constraints for a politically connected firm, it distorts the firm’s decision regarding market exit. Exploiting China’s 2008 stimulus package as a semi natural experiment, we show that a firm with political connections is more likely to become a zombie following such stimulus measures. Further analysis indicates that the zombification impact of the stimulus plan is more pronounced for the firms operating in the key industries targeted by the stimulus package.

The Impact of the Iraqi Government's Financial Policy on Reduction of Unemployment Rates During the COVID-19 Pandemic

This research paper aimed at analyzing the role of the financial policy taken up by the Iraqi government in confronting the outbreak of the COVID-19 pandemic and mitigating the repercussions of the pandemic on unemployment. It relied on quantitative and qualitative methods to analyze and evaluate the effects of financial policy on unemployment rates. Several international indicators were used, such as the Oxford University Government Response Tracker (OXCGRT) to know the strength of the stimulus package adopted by Iraq. The Principal Component Analysis (P) methodology was also used to analyze the composition of the stimulus financial policy taken. The results of the analysis generally came up with the fact that the the role of financial policy adopted by Iraq in promoting economic growth and accelerating recovery from the repercussions of the pandemic was significant on unemployment rates, depending on the size of that fiscal policy in Iraq.

How Urban-Level Credit Expansion Affects the Quality of Green Innovation: Evidence from China

We take the economic stimulus package in China as a quasi-natural experiment to investigate the effect of urban credit expansion on the quality of green innovation at the city level. The analysis takes urban-level and firm-level data from 2004 to 2015 and adopts the PSM-DID approach. Our empirical results suggest that the implementation of credit expansion makes a significant contribution to the improvement of green patent quality. In addition, the mechanism suggests that urban credit expansion policies promote corporate green innovation through channels such as providing credit expansion and a lower cost of financing enterprise transformation and upgrading. This research also suggest that credit expansion promotes economic growth while also incentivising first-tier cities to engage in more green transformations and upgrade to improve the quality of green patents. Our findings also provide an important insight for the implementation of credit expansion policies and the achievement of sustainable development in countries around the world, particularly in developing countries. Finally, this paper argues that China’s credit expansion policy in 2009 has played a role in improving the quality of green innovation and improving green transformation.