Sustainability Of Fiscal Policy Research Articles

FISCAL EFFICIENCY OF PAYMENT FOR NEGATIVE ENVIRONMENTAL IMPACT

The purpose of this study is to supplement the theoretical justification for the concept of fiscal environmental reform by studying payment for negative environmental impact as a revenue part of the state budget. The article considers the current system of environmental taxes, fees and payments in advanced foreign countries and in the Russian Federation; it analyzes budget revenues from environmental taxes as well. It is noted that in many developed countries the tax burden tends to shift from "labor" taxes to "environmental" ones. The main method of research is structural and dynamic analysis. In order to increase the budget revenues, the possibility of introducing the concept of "environmental tax" into the tax system of Russia is being considered, taking into account the successful experience of foreign countries. An increase in the amount of revenues from environmental taxes, fees and payments in order to achieve a sustainable fiscal policy does not guarantee an improvement in the country's environmental situation. That is why the article raises the problem of compatibility between the fiscal efficiency of environmental fees for negative environmental impact and the mechanism of natural environment restoration, i.e. the designated purpose of spending incoming funds. A compromise between the state's revenue generation and the usefulness of environmental taxes for nature is possible. It should be taken as a postulate that the effectiveness of the payment for the negative environmental impact as a tax will be achieved only if it is linked to the costs of environmental protection. All together – replacement of the payment for negative environmental impact by an environmental tax and "colored" income – will make it possible not only to increase budget revenues, but also to implement the state environmental policy at a high level, one of the goals of which is to finance measures to preserve and restore the environment.

The Impact of the COVID-19 Pandemic on the Cryptocurrency Market

The purpose of our paper is to analyze the main factors which influence fiscal balance’s evolution and thereby identify solutions for configuring a sustainable fiscal policy. We have selected as independent variables some of the main macroeconomic measures, respectively public debt, unemployment rate, economy openness degree, population, consumer goods’ price index, current account balance, direct foreign investments and economic growth rate. Our research method uses two econometric models applied on a sample of 22 countries, respectively 14 developed and 8 emergent. The first model is a multiple regression and studies the connection between the fiscal balance and selected independent variables, whereas the second one uses first order differences and introduces economic freedom as a dummy variable to catch the dynamic influences of selected measures upon fiscal result. The time interval considered was 1999-2013. The results generated using the two models revealed that public debt, current account balance and economic growth significantly influence the fiscal balance. As a consequence, the governments need to plan and implement a fiscal policy which resonates with economy priorities and the phase of the economic cycle, as well as ensure a proper management of the public debt, stimulate sustainable economic growth and employment.

Determinants of Tax Non-compliance Behaviour of Small and Medium Scale Enterprises in Nigeria

The unpredictable nature of crude oil prices in the market requires the government of any economy to develop solid tax bases by generating income from sources especially small and medium enterprises (SMEs) to guarantee revenue that can engender sustainable fiscal policy. This study, therefore, focuses on evaluating and prioritizing the motive toward tax compliance and avoidance among registered SMEs, with at least five years of operational experience, in Lagos, Nigeria. A cross-sectional survey design was adopted with primary data gathered from 382 SME owners/managers derived from the multi-stage sampling technique. Utilizing the Analytical Hierarchy Process (AHP), data gathered were analysed. The results revealed that, out of the six tested, economic criteria and their factors are the most important criteria influencing both tax avoidance and compliance decision. Moreover, to strategically enhance SMEs’ tax compliance, government spending, economy, and fiscal policy need to be logically positioned in favour of SME operators.

Economic growth in the Central East European Union and the Western Balkan countries in the course of Stability and Growth Pact and COVID-19

This research aims to provide an empirical assessment of the relationship between fiscal policy sustainability factors, like fiscal deficit and economic growth in the Western Balkan countries and East European Union Countries, using panel-level data for the yearly time span from 2000-2021. The empirical model provides the impact of fiscal deficit, alongside other control variables like inflation, schooling, total investments, trade openness, and output gap on economic growth in the selected group of countries. For the purpose of research, we employed Static and dynamic panel estimation techniques like Fixed Effects with Driscol and Kraay standard errors and system GMM. The findings confirm that fiscal deficit has significantly affected the growth level in both groups of countries. In addition, when the fiscal deficit has interacted with the COVID-19 dummy, it appears as a growth-enhancing factor. However, when the fiscal deficit interacts with the Eurozone debt crisis period, it becomes a growth-deteriorating factor. Other control variables like inflation, trade openness, total investments, and the output gap are found important factors in explaining the growth performance of the Central East European and Western Balkan countries.

Keynote Speech: Sustainability of Fiscal Policy in Malaysia

This keynote speech was delivered at the International Conference on Interdisciplinary and Strategic Studies (ICRIS) on August 12, 2021. It shed light on the sustainability of fiscal policy especially during the COVID-19 pandemic and call for re-structuring fiscal reform to achieve more sustainable fiscal policy. The proposed reform covers enhancing the efficiency of revenue generation, increasing the efficiency and productivity of government spending, improving the enforcement against the black market as well as utilising Islamic financial instruments namely zakat and waqf to finance fiscal policy.

Local Budget Resilience in Times of COVID-19 Crisis: Evidence from Indonesia

The COVID-19 pandemic has put immense pressure on the fiscal situation. Central revenues have decelerated while expenditures had to be increased to facilitate economic recovery. Local governments faced even harder challenges as intergovernmental transfers were reduced and room for mobilizing alternative finances was limited. This paper employs qualitative and secondary data analysis on local budget and fiscal capacities at the subnational level in Indonesia to find insights into the implications and responses of the provincial government in a decentralized economy during the pandemic. Provinces with a high dependence on intergovernmental transfer are struggling to adopt a countercyclical mitigative fiscal policy. However, provinces with high local own-source revenue have suffered the most during the crisis as low economic activity reduced tax revenues and indirectly lead to lower fiscal space. As fiscal policy is critical to containing the pandemic and facilitating recovery, this paper proposes several strategies toward a more sustainable fiscal policy for rebuilding local government capacity in the medium-to-long term in the aftermath of the crisis.

Distribusi Pendapatan dan Kemiskinan di Indonesia: Kasus Kebijakan Sentralisasi, Desentralisasi, dan Pandemi Covid-19

This article reviews the problem of income distribution and poverty in Indonesia based on the case of policies in the era of centralization, decentralization, and the COVID-19 pandemic. This article was compiled using the literature study method. The Centralization period began with good results until the late 1980s and early 1990s there were problems with income distribution and poverty, and then exacerbated by the 1997-1998 economic crisis. The decentralization period began with an upward trend in income inequality after 1998, but empirically, fiscal decentralization has proven to be better at reducing regional income inequality. The existence of the Covid-19 Pandemic has a very large impact on economic growth, reduced community economic activity makes economic growth decline, The decline in economic growth causes an increase in the poverty rate. The Covid-19 pandemic caused high inequality in urban areas, but not too high at the rural level, this indicates that inequality in urban areas is much more serious than rural areas. The policy strategy needed to address the problem of income distribution and poverty should pay attention to aspects of institutional intervention policies, sustainable fiscal policies, special policies for the very poor, and equitable development policies. The Presidential Instruction on Disadvantaged Villages (IDT), Economic Equity Policy (KPE), and National Economic Recovery (PEN) are 3 important policies that have been carried out by the government in overcoming the problem of income distribution and poverty in Indonesia.

Cash Transfers, International Finance and Neoliberal Debt Relations: The Case of Post‐apartheid South Africa

ABSTRACTThis article situates South Africa's cash transfer programme within the country's financialized neoliberal regime. The adoption of economic liberalization by the African National Congress in the aftermath of the democratic transition has raised the profile of international investors in the domestic bond market. It is argued that this development, in the context of rising public debt and stagnating economic growth, has facilitated the financialization of the post‐apartheid state and has linked the sustainability of fiscal policy, and hence state‐led redistributive measures, to deepening debt relations with global asset managers. Additionally, a cluster of orthodox economic measures, such as inflation targeting and reserve accumulation, have served to thwart the potential for industrial upgrading. Moreover, it is posited that financial liberalization has further strengthened the influence of the Treasury over heterodox bureaucratic centres such as the Department of Trade and Industry, thereby serving to lock in the post‐transition neoliberal programme. Finally, the article argues that the integration of cash transfer recipients into the circuits of debt and finance is an outgrowth of the limitations of the social welfare programme and the broader financialization of the state. Overall, the analysis offered here serves as a counter‐argument to the notion that South Africa's cash transfer programme could offer a progressive alternative to market orthodoxy.

On the Sustainability of Fiscal Policy in Sierra Leone

The aim of this paper is to empirically investigates whether Sierra Leone fiscal policy is sustainability. In this regard, I employ different econometric methodologies used in the empirical literature to investigates the sustainability of fiscal policy. The empirical findings that emerged from this study are useful on one hand to creditors, serving as a guide for lending to the government, and, on the other hand to the government, cautioning policymakers to avoid public debt from exploding that could possibly lead to fiscal insolvency and/or debt distress. I start by testing for the stationarity properties of the primary balance, the necessary condition for a sustainable fiscal policy. The findings indicated that Sierra Leone fiscal policy is sustainable under the review period. Next, I test for cointegration relationship between government revenue and government expenditure, the alternative approach to test for a sustainable fiscal policy. On this note, I employ both the Dynamic Ordinary Least Square (DOLS) and the Johansen cointegration techniques. Both approaches confirmed the existence of a cointegration relationship between government revenue and government expenditure. The estimated cointegration coefficients show that fiscal policy during the review period is weakly sustainable and the cointegration between government spending and revenue is positive (but less than one) and statistically significant. This implies that for each percentage point of GDP increase in government expenditure, government revenues increase by less than one percentage point of GDP. Additionally, I proceeded to endogenously account for structural breaks in the cointegration relationship, which is relevant for Sierra Leone, a country that has witnessed significant changes over the years, including the Structural Adjustments Programme (SAP) in the 1980s, tax reforms in the 1990s and 2000s, etc. I found evidence of a significant structural break occurring in 1984. There also exists uni-directional causality running from government revenue to government expenditure. This causality result is in line with the tax-and-spend hypothesis as proposed by Friedman (1978).Finally, I estimate an error correction model and the error correction term shows that the speed of adjustment from the expenditure side works faster than that of the revenue side to correct the fiscal disequilibrium.

FACTORS AFFECTING THE EFFECTIVENESS OF GOVERNMENT EXPENDITURE BUDGET MANAGEMENT IN THE CASE OF ETHIOPIA'S MINISTRY OF FINANCE

Budget is an important component in county government planning and decision making. A budget system that functions well is important to develop sustainable fiscal policies and economic growth. In developing countries, budgetary institutions are in their infancy and are mainly used as tools for legalistic controls and micromanagement. The general objective of the study was to evaluate factors that affect the effectiveness of budget management in the ministry of finance of Ethiopia. To conduct the study both primary and secondary data were used. Primary data were collected from MOF staffs using questionnaire and interviews. SPSS 23 versions were used to analyze the collected data. The findings show that budget experts’ staff competency has strong impact on the budget management, there is a problem with MOF salary scale to attracts and retains qualified and experienced experts. Government budget laws and regulations have significant effect on the government budget management; MOF has weaknesses in updating and revising the budget laws and regulations. Regarding the applications of IFMIS the Ministry prepares and executes the budget using IFMIS; however, it has still a room for the improvement of personnel knowledge & expertise for the effective implementation, operation, & maintenance of IFMIS. MOF should provide trainings on the government budget management, public financial management and government accounting system to the public accounts standing committees of the legislative organs. Key words: Government budget, laws and regulations, IFMIS, staff competency and SPSS

FACTORS AFFECTING THE EFFECTIVENESS OF BUDGET MANAGEMENT IN A CASE OF THE MINISTRY OF FINANCE AND ECONOMIC COOPERATION OF ETHIOPIA

Budget is an important component in county government planning and decision making. A budget is the quantitative expression of a proposed plan of action by management for a specified period and aid to coordinating what needs to be done to implement the plan. A budget system that functions well is important to develop sustainable fiscal policies and economic growth. In many countries economic problems are worsen by weak budget systems and faulty budget choices. In developing countries, budgetary institutions are in their infancy and are mainly used as tools for legalistic controls and micromanagement. The general objective of the study was to evaluate factors affecting the effectiveness of budget management in the ministry of finance and economic cooperation of Ethiopia. To conduct the study both primary and secondary data were used. The primary data were collected from the ministry of finance and economic cooperation using questionnaire and interviews. SPSS 23 versions were used to analyze the collected data. The findings show that budget experts’ staff competency has strong impact on the budget management, to this end the ministry has put in place a training and development policy and arranged trainings programs to enhance budget experts’ skills; however, there is still a problem with ministry salary scale to attracts and retains qualified and experienced experts. Government budget laws and regulations have significant effect on the government budget management; the ministry has weaknesses in updating and revising the budget laws and regulations. Regarding the applications of IFMIS the Ministry prepares and executes the budget using IFMIS; however, it has still a room for the improvement of personnel with requisite knowledge & expertise for the effective implementation, operation, & maintenance of IFMIS. The ministry should strictly hold accountable the heads of line ministries for the breach of budget laws and regulations, it should provide trainings on the government budget management, public financial management and government accounting system to the public accounts standing committees of the legislative organs.

Population ageing and sustainable fiscal policy in Czechia

Population ageing and sustainable fiscal policy in Czechia

Worth its weight in gold: is the extractive industries transparency initiative a credible signalling mechanism to investors?

AbstractThis paper seeks to understand the link between resource governance and investor expectations in resource-rich countries. We test whether voluntary membership in the Extractive Industries Transparency Initiative (EITI), a public-private partnership that promotes transparency and accountability in the extractives sector, behaves as a credible signalling mechanism to investors that governments in resource-rich countries can manage resource revenue and adhere to sustainable fiscal policies in the medium and long run. Using an interrupted time series analysis coupled with a fixed effects model, we examine whether investor expectations on the price of sovereign debt behave as a credible signalling mechanism in the presence of certain conditions. Results indicate that in some cases there is a significant change in spread on the default price of sovereign debt as a result of announcement of either EITI candidacy or EITI compliance. However, it is clear that EITI membership alone is not a sufficient signal to investors that a country can effectively manage its resource revenues in the long run because the result of EITI implementation is heavily influenced by country-specific conditions.

Effects of Double Taxation Agreements between Tanzania and India on the Foreign Direct Investments

Abstract The paper analyzed policy effects of Double Taxation Agreements (DTA) between Tanzania and India. The study employed desk study and mini-field research survey purposely to obtain primary data and qualitative information from the Tanzania Revenue Authority (TRA), High Commission of India and Indian companies. The paper found that Tanzania has no comprehensive national taxation policy which incorporates DTAs. The current treaties do not protect the government revenue losses. The loopholes include the denial of taxing the gains made by investors selling assets. However, the contribution of Tanzania-India DTAs in Foreign Direct Investment, (FDIs) flow in Tanzania has been significant positive. Indian FDIs have positive effects on Tanzanian employment. Moreover, the investments from India have brought massive capital flows and new technologies into the country. Tanzania-India DTA is more potential for sustainable national development. The study recommends the need to review and formulate New National Investment Policy 2019 that effectively integrate into sustainable fiscal and sector policies. Tanzania has to review all DTAs with aim of minimizing government revenue losses and to renegotiate all existing DTAs adopting UN Model Tanzania. It has to rationalize favoured bilateral treaties to signal their commitments to stable, correct, and often favourable treatment of foreign investors. Tanzania has to implement the Goal #17 of Sustainable Development Goal as that of “Partnering for Development” as a strategy to strengthen the means of implementation and revitalize the global partnership for sustainable development.

The sustainability of fiscal policy in southern African countries–a comparative empirical perspective

PurposeThe purpose of the paper is to assess the fiscal sustainability of nine southern African countries that belong to the Southern African Development Community.Design/methodology/approachIn this paper, the author performs a novel time-varying analysis of fiscal sustainability in southern African countries.FindingsThe authors found that in Zimbabwe and Namibia, the formal condition of solvency was not fulfilled, resulting in the explosive growth of debt during the recent slowdown. In contrast, Angola, Botswana and Malawi prove to run sustainable fiscal policies, and they were also fiscally invulnerable to the recent unfavourable economic developments in Africa. For the rest of the countries in the sample (Eswatini, Lesotho, South Africa and Zambia), the results are mixed.Originality/valueIn the existing literature, there is abundance of empirical evidence concerning fiscal sustainability in European and American countries. In contrast, there is strikingly little knowledge concerning this phenomenon in African countries. The authors tried to fill this gap using a novel, time-varying approach.

Indonesian government’s primary balance and debt

This study aims to determine the Indonesian fiscal sustainability condition by analyzing the impact of government debt on primary balance for the 1980-2018 period. Accordingly, we analyze the research data by using the Autoregressive Distributed Lag (ARDL) method. The results show that government debt has a significant and positive effect on primary balance, likely because the government intends to stimulate the economy and boost tax revenues by keeping debt interest rates low. Therefore, based on Bohn’s condition, Indonesia exhibits sustainable fiscal policies. However, in the short run, government debt negatively affects primary balance due to several factors, such as suboptimal tax efforts and revenue growth, unproductive use of debts, and relatively low capital expenditures. In sum, our research results recommend that the Indonesian government considers various policies that likely offset increased debts, such as intensifying and extending tax efforts to increase tax revenues and increase government spending in various productive sectors.

Sustainability of Fiscal Policy in Economic and Monetary Community of Central Africa: An Analysis Based on Panel Data

The objective of this paper is to study the long-term sustainability of fiscal policies in CEMAC, following the pioneering approach of Hamilton and Flavin [10]. Over the period from 1992 to 2012, first and second generation panel stationarity tests suggest that total public expenditures, total revenues, the primary budget balance and public debt are stationary. As a result, fiscal policies are sustainable in the long run within the area. There is a unidirectional causality between government revenues and expenditures. Decisions to increase expenditures are made on the basis of the availability of revenues.

INVESTIGATING THE GOVERNMENT REVENUE–EXPENDITURE NEXUS: EMPIRICAL EVIDENCE FOR THE FREE STATE PROVINCE IN A MULTIVARIATE MODEL

This paper examines the government revenue–expenditure nexus for the Free State Province in a multivariate vector error correction model (VECM) using real GDP and inflation as control variables over the period 2004Q2–2018Q1.Cointegration and intertemporal (causal) links among variables were established employing Johansen (1995) and Toda-Yamamoto (1995) non-Granger causality tests. The results of the cointegration analysis confirm the existence of a long-run relationship between variables. The results of the causal analyses show a bidirectional causality between government revenues and expenditures in both the long-run and short-run supporting the fiscal synchronization hypothesis. Real GDP and inflation individually Granger-causes government revenue, in both the long-run and short-run, stressing their importance on generating revenue. Based on these findings, an isolated fiscal measure to raise tax-revenues or cut expenditure will exacerbate fiscal imbalance. On the policy front, the Free State government should adhere to a planned budget process, devise innovative revenue-generating strategies to circumvent the burden of producing inflation revenue, as well as utilize its autonomy on fiscal instruments to maintain a sustainable fiscal policy path, and stimulate economic growth.

Greening the Financial System in USA, Canada and Brazil: A Panel Data Analysis

Each country designs its own scheme to achieve green financing and, in general, credit is considered to be a fundamental source of greening financial systems. The novelty of this study resides in that we examined green financing initiatives in USA, Canada and Brazil by focusing on major components of the financial systems before, during and after the 2008 world financial crisis. By means of panel data analysis conducted on observations ranging across the period 1970–2018, we investigated variables such as domestic credit from banks, domestic credit from the financial sector, GDP, N2O emissions, CO2 emissions and the value added from agriculture, forest and fishing activities. According to our findings, domestic credit from banks was insufficient to achieve green financing. Namely, in order to increase economic growth while reducing global warming and climate change, the financial sector should assume a bigger role in funding green investments. Moreover, our results showed that domestic credit from the financial sector contributed to green financing, while CO2 emissions remained a challenge in capping global warming at the 1.5 °C level. Our empirical study supports the idea that economic growth together with policies targeting climate change and global warming can contribute to green financing. Over and above that, governments should strive to design sustainable fiscal and monetary policies that promote green financing.

A Convenient Truth: The Convenience Yield, Low Interest Rates and Implications for Fiscal Policy

Some countries currently face historically low interest rates on government debt due to a positive ‘convenience yield’ arising from an excess demand for safe and liquid assets. This low interest rate environment has raised interest in the role of fiscal stabilization policy. We study the convenience yield and its implications for fiscal policy in a New Keynesian model where households derive utility from government bonds. We find that the convenience yield expands the set of sustainable fiscal policies and renders countercyclical fiscal policy successful in stabilizing business cycle fluctuations. Conveniently, fiscal policies that stabilize output rather than debt are feasible, welfare enhancing and can even reduce the risk of exploding debt dynamics if the convenience yield is positive.