Search results for: fiscal policy

Authors: Walaa W. Diab

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The present paper offers a fundamental critique of the macroeconomic effects of fiscal policy after it surveys the theoretical and empirical literature on the macroeconomic effects of fiscal policy. It emphasizes the importance of the fiscal policy after reviewing the revolution of almost all economic schools and bringing them in one summarized figure; the paper links the developmental role of the fiscal policy with the objectives and measures of the economic transformation. Thus, the importance of this study can be seen from several perspectives: First, it reviews the theoretical harvest of fiscal policy and provides a comparison between the main revolutionary Economic thoughts; the classical school, Keynesian school, and monetarist school. Then it turns to conclude the fiscal policy from the new consensus mainstream economic schools. Finally, the study presents grouped and classified empirical pieces of evidence as it divides those empirical studies into two groups; the first for developed economies and the second for developing ones. So the study is important also for the policymakers as well as scholars as it gives its recommendations upon the last analysis in the form of ‘policy implications’. The paper also presents a deeper look into the evaluation approaches of the macroeconomic effects of fiscal policy at the empirical level. Thus it is useful for both researchers and decision makers.

Keywords: economic transformation, fiscal policy, macroeconomic effects, public spending

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Authors: K. Bokreta, D. Benanaya

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The objective of this study is to examine the relative effectiveness of monetary and fiscal policy in Algeria using the econometric modelling techniques of cointegration and vector error correction modelling to analyse and draw policy inferences. The chosen variables of fiscal policy are government expenditure and net taxes on products, while the effect of monetary policy is presented by the inflation rate and the official exchange rate. From the results, we find that in the long-run, the impact of government expenditures is positive, while the effect of taxes is negative on growth. Additionally, we find that the inflation rate is found to have little effect on GDP per capita but the impact of the exchange rate is insignificant. We conclude that fiscal policy is more powerful then monetary policy in promoting economic growth in Algeria.

Keywords: economic growth, monetary policy, fiscal policy, VECM

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Authors: Yuan-Hong Ho, Chiung-Ju Huang

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This article presents a monitoring indicators system that predicts whether a local government in Taiwan is heading for fiscal distress and identifies a suitable fiscal policy that would allow the local government to achieve fiscal balance in the long run. This system is relevant to stockholders’ interest, simple for national audit bodies to use, and provides an early warning of fiscal distress that allows preventative action to be taken.

Keywords: fiscal health, fiscal distress, monitoring signals, 10-point scale

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Authors: Chiung-Ju Huang, Yuan-Hong Ho

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This study utilizes the International Monetary Fund (IMF) Fiscal Rules Dataset focusing on four specific fiscal rules such as expenditure rule, revenue rule, budget balance rule, and debt rule and five main characteristics of each fiscal rule those are monitoring, enforcement, coverage, legal basis, and escape clause to construct the Fiscal Rule Index for nine countries in the Asia-Pacific region from 1996 to 2015. After constructing the fiscal rule index for each country, we utilize the Panel Generalized Method of Moments (Panel GMM) by using the constructed fiscal rule index to examine the effectiveness of fiscal rules in reducing procyclicality. Empirical results show that national fiscal rules have a significantly negative impact on procyclicality of government expenditure. Additionally, stricter fiscal rules combined with high government effectiveness are effective in reducing procyclicality of government expenditure. Results of this study indicate that for nine Asia-Pacific countries, policymakers’ use of fiscal rules and government effectiveness to reducing procyclicality of fiscal policy are effective.

Keywords: counter-cyclical policy, fiscal rules, government efficiency, procyclical policy

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Authors: Muhammad A. Ishaq, S. U. R. Aliyu

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This paper on an exposition of Islamic fiscal policy attempts to discuss the basic principles of Islamic fiscal policy in an Islamic economy. The paper presents a number of definitions of the subject matter, its nature and its tools of application. Government spending, taxation and public borrowings were identified as the tools of the policy. The paper identifies zakat both as a veritable source of revenue and a major instrument of economic stabilization. Furthermore, the paper presents an algebraic 2-sector and 3-sector models from the basic Keynesian model. The paper posits that in view of uniqueness of its instruments, absence of interest rate in the economy and the policy’s derive towards socioeconomic justice and redistribution, Islamic fiscal policy is capable of stabilizing Islamic economy and ushering it into the path of long term economic growth and prosperity.

Keywords: automatic built-in-stabilizers, government spending, Islamic fiscal policy, taxation, zakat

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Authors: Zohreh Bang Tavakoli, Shuktika Chatterjee

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This study investigates the fiscal policy impact on countries’ economic growth in developing countries with a different external debt level. The fiscal policy effectiveness has been re-emphasized in the global financial crisis of 2008 with the external debt as its new contemporary driver (Ruščáková and Semančíková, 2016). According to Bouakez, (2014 ) different theories have proposed the economic consequence of fiscal policy, specifically for developing countries. However, fiscal policy literature is lacking research regarding the fiscal policy’s effectiveness with the external debt’s contributions through comprehensive study (Canh, 2018). Also, according to scholars, high levels of external debt will influence economic growth. First, through foreign resources and channel of investment in which high level of debt decreases the amount of foreign investment in the developing countries. Second, through the deterioration of foreign investors and fiscal policies related to a high level of debt (Cordella, et.al., 2010). Therefore, this study proposed that only countries with a low external debt level and appropriate fiscal policies and good quality institutions can gain the proper quantity and quality of foreign investors, which will help the economic growth. For this, this research is examining the impact of fiscal policy on developing countries' economic growth in the situation of different external debt levels.

Keywords: fiscal policy, external debt, gross domestic product, developing countries

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Authors: Eiji Okano, Kazuyuki Inagaki

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We revisit Uribe's `Fiscal Theory of Sovereign Risk' advocating that there is a trade-off between stabilizing inflation and suppressing default. We develop a class of dynamic stochastic general equilibrium (DSGE) model with nominal rigidities and compare two de facto inflation stabilization policies, optimal monetary policy and optimal monetary and fiscal policy with the minimizing interest rate spread policy which completely suppress the default. Under the optimal monetary and fiscal policy, not only the nominal interest rate but also the tax rate work to minimize welfare costs through stabilizing inflation. Under the optimal monetary both inflation and output gap are completely stabilized although those are fluctuating under the optimal monetary policy. In addition, volatility in the default rate under the optimal monetary policy is considerably lower than one under the optimal monetary policy. Thus, there is not the SI-SD trade-off. In addition, while the minimizing interest rate spread policy makes inflation rate severely volatile, the optimal monetary and fiscal policy stabilize both the inflation and the default. A trade-off between stabilizing inflation and suppressing default is not so severe what pointed out by Uribe.

Keywords: sovereign risk, optimal monetary policy, fiscal theory of the price level, DSGE

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Authors: Parma Chakravartti

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The impact of government spending and taxation on economic growth has remained a central issue of fiscal policy analysis. There is a wide range of opinions over the strength of fiscal policy’s effect on macroeconomic variables. It can be argued that the impact of fiscal policy depends on the structure and economic condition of the economy. This study makes an attempt to examine the effect of fiscal policy shocks on growth in India using the structural vector autoregressive model (SVAR), considering data from 1950 to 2019. The study finds that government spending is an important instrument of growth in India, where the share of revenue expenditure to capital expenditure plays a key role. The optimum composition of total expenditure is important for growth and it is not necessarily true that capital expenditure multiplier is more than revenue expenditure multiplier. The study also finds that the impact of public economic activities on private economic activities for both consumption expenditure and gross capital formation of government crowds in private consumption expenditure and private gross capital formation, respectively, thus indicating that government expenditure complements private expenditure in India.

Keywords: government spending, fiscal policy, multiplier, growth

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Authors: Abidemi C. Adegboye, Nosakhare Ikponmwosa, Rogers A. Akinsokeji

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For many resource-rich developing countries, fiscal policy has become a key tool used for short-run fiscal management since it is considered as playing a critical role in injecting part of resource rents into the economies. However, given its instability, reliance on revenue from commodity exports renders fiscal management, budgetary planning and the efficient use of public resources difficult. In this study, the linkage between commodity prices and fiscal operations among a sample of commodity-exporting countries in sub-Saharan Africa (SSA) is investigated. The main question is whether commodity price fluctuations affects the effectiveness of fiscal policy as a macroeconomic stabilization tool in these countries. Fiscal management effectiveness is considered as the ability of fiscal policy to react countercyclically to output gaps in the economy. Fiscal policy is measured as the ratio of fiscal deficit to GDP and the ratio of government spending to GDP, output gap is measured as a Hodrick-Prescott filter of output growth for each country, while commodity prices are associated with each country based on its main export commodity. Given the dynamic nature of fiscal policy effects on the economy overtime, a dynamic framework is devised for the empirical analysis. The panel cointegration and error correction methodology is used to explain the relationships. In particular, the study employs the panel ECM technique to trace short-term effects of commodity prices on fiscal management and also uses the fully modified OLS (FMOLS) technique to determine the long run relationships. These procedures provide sufficient estimation of the dynamic effects of commodity prices on fiscal policy. Data used cover the period 1992 to 2016 for 11 SSA countries. The study finds that the elasticity of the fiscal policy measures with respect to the output gap is significant and positive, suggesting that fiscal policy is actually procyclical among the countries in the sample. This implies that fiscal management for these countries follows the trend of economic performance. Moreover, it is found that fiscal policy has not performed well in delivering macroeconomic stabilization for these countries. The difficulty in applying fiscal stabilization measures is attributable to the unstable revenue inflows due to the highly volatile nature of commodity prices in the international market. For commodity-exporting countries in SSA to improve fiscal management, therefore, fiscal planning should be largely decoupled from commodity revenues, domestic revenue bases must be improved, and longer period perspectives in fiscal policy management are the critical suggestions in this study.

Keywords: commodity prices, ECM, fiscal policy, fiscal procyclicality, fully modified OLS, sub-saharan africa

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Authors: Hrvoje Simovic

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Paper analyses the key problems of fiscal sustainability in Croatia. To point out key challenges of fiscal sustainability, the public debt sustainability is analyzed using standard indicators of fiscal stability, accompanied with the identification of regime changes approach in the public debt trajectory using switching regression approach. The analysis is conducted for the period from 2001 to 2016. Results show huge vulnerability in recession period (2009-14), so key challenges in current fiscal policy and public debt management are recognized in maturity prolongation, interest rates trends, and credit rating expectations.

Keywords: fiscal sustainability, public debt, Croatia, budget deficit

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Authors: S. K. Ashiquer Rahman

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The proper policy handling might not able to attain the target since some of recessions, e.g., pandemic-led crises, the variables shocks of the economics. At the level of this situation, the Central bank implements the monetary policy to choose increase the exogenous expenditure and level of money supply consecutively for booster level economic growth, whether the monetary policy is relatively more effective than fiscal policy in altering real output growth of a country or both stand for relatively effective in the direction of output growth of a country. The dispute with reference to the relationship between the monetary policy and fiscal policy is centered on the inflationary penalty of the shortfall financing by the fiscal authority. The latest variables socks of economics as well as the pandemic-led crises, central banks around the world predicted just about a general dilemma in relation to increase rates to face the or decrease rates to sustain the economic movement. Whether the prices hang about fundamentally unaffected, the aggregate demand has also been hold a significantly negative attitude by the outbreak COVID-19 pandemic. To empirically investigate the effects of economics shocks associated COVID-19 pandemic, the paper considers the effectiveness of the monetary policy and fiscal policy that linked to the adjustment mechanism of different economic variables. To examine the effects of economics shock associated COVID-19 pandemic towards the effectiveness of Monetary Policy and Fiscal Policy in the direction of output growth of a Country, this paper uses the Simultaneous equations model under the estimation of Two-Stage Least Squares (2SLS) and Ordinary Least Squares (OLS) Method.

Keywords: IS-LM framework, pandemic. Economics variables shocks, simultaneous equations model, output growth

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Authors: Walaa Diab, Baher Atlam, Nadia El Nimer

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Egypt faces many obvious economic challenges, and it is so clear that a real economic transformation is needed to address those problems, especially after the recent decisions of floating the Egyptian pound and the gradual subsidy cuts that are trying to meet the needed conditions to get the IMF support of (a £12bn loan) for its economic reform program. Following the post-2008 revival of the interest in the fiscal policy and its vital role in speeding up or slowing down the economic growth. Here comes the value of this paper as it seeks to analyze the macroeconomic effects of fiscal policy in Egypt by applying A Bayesian SVAR Approach. The study uses the Bayesian method because it includes the prior information and no relevant information is omitted and so it is well suited for rational, evidence-based decision-making. Since the study aims to define the effects of fiscal policy shocks in Egypt to help the decision-makers in determining the proper means to correct the structural problems in the Egyptian economy, it has to study the period of 1990s economic reform, but unfortunately; the available data is on an annual frequency. Thus, it uses annual time series to study the period 1991: 2005 And quarterly data over the period 2006–2016. It uses a set of six main variables includes government expenditure and net tax revenues as fiscal policy arms affecting real GDP, unemployment, inflation and the interest rate. The study also tries to assess the 'crowding out' effects by considering the effects of government spending and government revenue shocks on the composition of GDP, namely, on private consumption and private investment. Last but not least the study provides its policy implications regarding the needed role of fiscal policy in Egypt in the upcoming economic reform building on the results it concludes from the previous reform program.

Keywords: fiscal policy, government spending, structural vector autoregression, taxation

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Authors: Nora Yusma Bte Mohamed Yusoff, Hussain Ali Bekhet

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The rationalization of a gradual subsidies reforms plan has been set out by the Malaysian government to achieve the high-income nation target. This paper attempts to analyze the impacts of energy subsidy reform policy on fiscal deficit and macroeconomics variables in Malaysia. The Computable General Equilibrium (CGE) Model is employed. Three simulations based on different groups of scenarios have been developed. Importantly, the overall results indicate that removal of fuel subsidy has significantly improved the real GDP and reduced the government fiscal deficit. On the other hand, the removal of the fuel subsidy has increased most of the local commodity prices, especially energy commodities. The findings of the study could provide some imperative inputs for policy makers, especially to identify the right policy mechanism. This is especially ensures the subsidy savings from subsidy removal could be transferred back into the domestic economy in the form of infrastructure development, compensation and increases in others sector output contributions towards a sustainable economic growth.

Keywords: CGE, deficit, energy, reform, subsidy

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Authors: Siphat Lim

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This study used Autoregressive Distributed Lag (ARDL) approach to cointegration. In the long-run the general price level and exchange rate have a positively significant effect on domestic output. The estimated result further revealed that fiscal stimulus help stimulate domestic output in the long-run, but not in the short-run, while monetary expansion help to stimulate output in both short-run and long-run. The result is complied with the theory which is the macroeconomic policies, fiscal and monetary policy; help to stimulate domestic output in the long-run. The estimated result of the Vector Error Correction Model (VECM) has indicated more clearly that the consumer price index has a positive effect on output with highly statistically significant. Increasing in the general price level would increase the competitiveness among producers than increase in the output. However, the exchange rate also has a positive effect and highly significant on the gross domestic product. The exchange rate depreciation might increase export since the purchasing power of foreigners has increased. More importantly, fiscal stimulus would help stimulate the domestic output in the long-run since the coefficient of government expenditure is positive. In addition, monetary expansion would also help stimulate the output and the result is highly significant. Thus, fiscal stimulus and monetary expansionary would help stimulate the domestic output in the long-run in Cambodia.

Keywords: fiscal policy, monetary policy, ARDL, VECM

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Authors: Yunita Anwar, Maya Safira Dewi

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With the increasing importance on digital TV industry, there must be several incentives given to support the growth of the industry. Prior research have found mixed findings of economic and fiscal incentives to economic growth, which means these incentives do not necessarily boost the economic growth while providing support to a particular industry. Focusing on a setting of digital TV transition in Indonesia, this research will conduct document analysis to analyze incentives have been given in other country and incentives currently available in Indonesia. Our results recommend that VAT exemption and local tax incentives could be considered to be added to the incentives list available for digital TV industry.

Keywords: Digital TV transition, Economic Incentives, Fiscal Incentives, Policy.

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Authors: Pascal Horni, Sandro Fuchs

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In presence of increasing deficits and public debt among OECD countries, the debate on fiscal disciple and mechanisms to constrain public spending policy heated up and gave rise to the institutionalization of fiscal rules. Considering the notions from political economy literature and the therein advocated axiom of maximization of votes, introduction of institutional mechanisms and rules to govern public spending is likely to be coined by electoral motives. While there exists a series of research concerned with the rise of creative accounting in the presence fiscal rules, implementation of accrual government accounting and its impact on the biting of fiscal rules has to authors’ best knowledge never been explored. This paper serves the illumination of the connection between debt break mechanisms and the adoption of accrual public sector accounting standards such as the IPSAS in the interface of political economy in the Swiss context. By explicitly considering the technical accounting dimension, this paper develops an integrated conceptual view on well-established Public Financial Management (PFM) institutions and elaborates how their interdependencies can co-create value with regard to the contemporary challenge of fiscal sustainability. Derivation of this integrated view follows an explorative approach, taking into account expert interviews with director level staff from cantonal finance administrations and policy documents, as well as literature from both research areas – public sector accounting and political economy.

Keywords: accounting, fiscal rules, International Public Sector Accounting Standards (IPSAS), public financial management

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Authors: Marcos Centurion-Vicencio

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This study discusses the idea of ‘dominance’ in economic policy and its practical influence over monetary decisions. The discretionary use of repurchase agreements in Brazil over the period 2006-2016 and its effects on the overall price level are the specific issues we will be focusing on. The set of in-depth interviews carried out with public servants at the Brazilian central bank and national treasury, alongside data collected from the National Institution of Statistics (IBGE), suggest that monetary and fiscal dominance do not differ in nature once the assumption of depoliticized central bankers is relaxed. In both regimes, the pursuit of private gains via public institutions affects price stability. While short-sighted politicians in the latter are at the origin of poor monetary decisions, the action of short-sighted financial interest groups is likely to generate a similar outcome in the former. This study then contributes to rethinking monetary policy theory as well as the nature of public borrowing.

Keywords: fiscal and monetary interactions, interest groups, monetary capture, public borrowing

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Authors: Dan Li, Hao Tang

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The idea of “public bonds” was foreign to Qing China because it went against the traditional political ideology that supported that the emperor had absolute ownership over the nation. When a new fiscal crisis emerged out of the First Sino-Japanese War in 1894, the Qing rulers had no better option than to issue domestic bonds. This article documents the processes of issuance, distribution, and reimbursement for a total of three bonds issued by the Qing. These processes reveal how a well-established Western fiscal instrument could be extremely awkward and difficult to implant in China—a culturally, politically, and institutionally different society. Our paper sheds light on why Qing China failed to rise as a modern fiscal state.

Keywords: public bond, Qing China, fiscal crisis, fiscal state, the first Sino-Japanese war

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Authors: Ephraim Ugwu, Christopher Ehinomen

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Despite efforts by the Nigerian government to harmonize the macroeconomic policy implementations by establishing various committees to resolve disputes between the fiscal and monetary authorities, it is still evident that the federal government had continued its expansionary policy by increasing spending, thus creating huge budget deficit. This study evaluates the effect of macroeconomic policy coordination on economic growth uncertainty in Nigeria from 1980 to 2020. Employing the Auto regressive distributed lag (ARDL) bound testing procedures, the empirical results shows that the error correction term, ECM(-1), indicates a negative sign and is significant statistically with the t-statistic value of (-5.612882 ). Therefore, the gap between long run equilibrium value and the actual value of the dependent variable is corrected with speed of adjustment equal to 77% yearly. The long run coefficient results showed that the estimated coefficients of the intercept term indicates that other things remains the same (ceteris paribus), the economics growth uncertainty will continue reduce by 7.32%. The coefficient of the fiscal policy variable, PUBEXP, indicates a positive sign and significant statistically. This implies that as the government expenditure increases by 1%, economic growth uncertainty will increase by 1.67%. The coefficient of monetary policy variable MS also indicates a positive sign and insignificant statistically. The coefficients of merchandise trade variable, TRADE and exchange rate EXR show negative signs and significant statistically. This indicate that as the country’s merchandise trade and the rate of exchange increases by 1%, the economic growth uncertainty reduces by 0.38% and 0.06%, respectively. This study, therefore, advocate for proper coordination of monetary, fiscal and exchange rate policies in order to actualize the goal of achieving a stable economic growth.

Keywords: macroeconomic, policy coordination, growth uncertainty, ARDL, Nigeria

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Authors: Patricia Sanz-Cordoba, Bernd Theilen

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This article analyzes the conditions where decentralization and partial tax harmonization in a coalition of asymmetric jurisdictions plays a role in the fight of fiscal competition (i.e. the race to bottom). Starting from a centralized economies, we use the ZM-W model to analyze the fiscal competition and coordination among three countries. We find that the asymmetry of jurisdictions facilitates partial tax harmonization between jurisdictions when these asymmetries are not too large. Furthermore, when the asymmetries are large enough, the level of labor tax plays an important role in the decision of decentralize capital tax. Accordingly, decentralization is achievable when labor tax is low. This result indicates that decentralization and partial tax harmonization between jurisdictions can be possible results in order to fight the negative externalities from fiscal competition, and more in the European Union countries where the asymmetries are substantial.

Keywords: centralization, decentralization, fiscal competition, partial tax harmonization

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Authors: Anocha Kimkong, Natnichar Kleebbuabarn

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This research work has the objective to analyze the financial status and operational performance of Suan Sunandha Rajabhat University (SSRU) in 3 fiscal years (2011-2013). The tool used is a form to record financial statements and balances of the university. The analysis is based on the calculation that regards the figures in the fiscal year of 2011 as the 100% bases to be compared with the same figures in the fiscal years of 2012 and 2013, which are multiplied by 100 and divided by the base figures. The outcomes are the percentages of each year, which can reflect the rising, stable, and falling trends. The results from the analysis reveal that SSRU’s financial status is getting better because the gross assets, debts and accumulated cash are increasing in the fiscal years of 2012 and 2013. Concerning the operational performance, the university’s incomes and expenses are rising from the fiscal year of 2011. This makes the university’s incomes grow higher than expenses.

Keywords: financial status, operational performance, Suan Sunandha Rajabhat University, balances

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Authors: Abdulkarim Yusuf

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Motivation: The Nigerian economy has seen significant macroeconomic instability, fuelled mostly by an overreliance on fluctuating oil revenues. The rising disparity between tax receipts and government spending in Nigeria necessitates government borrowing to fund the anticipated pace of economic growth. Rising public debt and fiscal sustainability are limiting the government's ability to invest in key infrastructure that promotes private investment and growth in Nigeria. Objective: This paper fills an empirical research vacuum by examining the impact of public debt on fiscal sustainability in Nigeria, given the significance of fiscal stability in decreasing poverty and the constraints that an unsustainable debt burden imposes on it. Data and method: Annual time series data covering the period 1980 to 2022 exposed to conventional and structural breaks stationarity tests and the Autoregressive Distributed Lag estimation approach were adopted for this study. Results: The results reveal that domestic debt stock, debt service payment, foreign reserve stock, exchange rate, and private investment all had a major adverse effect on fiscal stability in the long and short run, corroborating the debt overhang and crowding-out hypothesis. External debt stock, prime lending rate, and degree of trade openness, which boosted fiscal stability in the long run, had a major detrimental effect on fiscal stability in the short run, whereas foreign direct investment inflows had an important beneficial impact on fiscal stability in both the long and short run. Implications: The results indicate that fiscal measures that inspire domestic resource mobilization, sustainable debt management techniques, and dependence on external debt to boost deficit financing will improve fiscal stability and drive growth.

Keywords: ARDL co-integration, debt overhang, debt servicing, fiscal stability, public debt

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Authors: Djehich Mohamed Yousri

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This research tries to highlight the different stages and developments of financial policy which has evolved significantly in its means and mechanism, goals as well, according to the successful developments of the society, in addition to that, the role of the country has been developed from custody to intervening country, that evolution does not impact only on financial science but it was reflected on financial system concepts, that helped fr transport it from neutral financial policy to intervening policy, since each stage was characterized by a set of characteristics, financial policy considers like reflective mirror to the role of state in all times, when the state has been absent as an organized authority to society, the role of financial policy was weakened and has been limited under the impact of ideology which exists at all time, financial role has was limited until the state intervened in all aspects of life, the state role is also influential in economic, social, and political life, this study highlighting the most important developments of financial policy under successful economic systems.

Keywords: public expenditure, government spending, taxes, revenues public, economics

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Authors: Yulia Kasperskaya, Ramon Xifré

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Budgetary procedures are considered to be important for countries’ fiscal performance. The objective of this paper is to analyze this relationship for the OECD countries in the wake of global economic crisis taking into consideration countries’ fiscal conditions and institutional arrangements. We test whether groups of countries that are fiscally different after the crisis differ in their use of budgetary procedures including performance budgeting, transparency mechanisms and medium-term expenditure framework. For this purpose, we classify OECD countries in two groups according to the variations, in debt to GDP ratio between 2008 and 2014. We then analyze the intensity of use of budget procedures taking into account countries’ economic conditions during the crisis. Our first finding is that there is no monotonic relationship between the intensity of use of these three budgetary procedures and enhanced fiscal performance. Countries showing similar fiscal performance scored differently in terms of on budgetary procedures. We, therefore, review the budgetary frameworks and trajectories of several countries that are fiscally sound. From this qualitative analysis, we derive a set of factors that may enhance the efficiency of budgetary procedures. This suggests that a given budgetary procedure may have different effects in different countries depending on their economic and administrative settings. Our results are thus in line with those studies that reject one-size-fits-all approaches.

Keywords: budget procedures, fiscal performance, OECD, performance budgeting

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Authors: Nazira Kakulia

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The analysis of transformation of institutional changes outlines two important characteristics. These are: the speed of the changes and their sequence. Successful transformation must be carried out in three different stages; On the first stage, macroeconomic stabilization must be achieved with the help of fiscal and monetary tools. Two-tier banking system should be established and the active functions of central bank should be replaced by the passive ones (reserve requirements and refinancing rate), together with the involvement growth of private sector. Fiscal policy by itself here means the creation of tax system which must replace previously existing direct state revenues; the share of subsidies in the state expenses must be reduced also. The second stage begins after reaching the macroeconomic stabilization at a time of change of formal institutes which must stimulate the private business. Corporate legislation creates a competitive environment at the market and the privatization of state companies takes place. Bankruptcy and contract law is created. he third stage is the most extended one, which means the formation of all state structures that is necessary for the further proper functioning of a market economy. These three stages about the cycle period of political and social transformation and the hierarchy of changes can also be grouped by the different methodology: on the first and the most short-term stage the transfer of power takes place. On the second stage institutions corresponding to new goal are created. The last phase of transformation is extended in time and it includes the infrastructural, socio-cultural and socio-structural changes. The main goal of this research is to explore and identify the features of such kind of models.

Keywords: competitive environment, fiscal policy, macroeconomic stabilization, tax system

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Authors: Tasawar Nawaz

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Migration has once again become a lively topic in Europe and UK, in particular. A burgeoning concern in the public debate, however, is driven by the fear that migrants are fiscal burden because they drain public resources by drawing on the generous social transfers introduced in Europe to prevent social exclusion. This study challenges these beliefs by gathering empirical evidence through a qualitative research approach on the subject matter. The analysis suggests that UK provides a rich social and economic environment for intellectual profiles especially, human intellectual capital of migrants to flourish and add value to the exchequer. Contrary to the beliefs held by politicians and general public, the empirical evidence suggests that migrants add higher fiscal contribution by working longer hours, paying consistent taxes, and bringing skills which UK may lack thus, are not fiscal burdens on the UK exchequer.

Keywords: austerity, European union, human intellectual capital, migrants, social welfare, United Kingdom

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Authors: Umang Prajapati

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Elected prime minister of India Narendra Modi has very largely focused on improving ties with the neighbors since day one of his regime. This was the most significant initiative to focus on major Asian powers also emphasizing on the two decades old look east policy. The “neighborhood first policy” as termed by the media has been a corner stone in improving ties with the immediate neighbors of the country through several bilateral talks with the nations individually. However, the announcement of demonetisation policy in India, ceasing the usage of 500 and 1000 rupee notes has rattled countries like Nepal, Bangladesh, Bhutan, Sri Lanka and Myanmar who encourage Indian currency parallel to theirs. According to the ministry of commerce and industry (MCI), India’s total trade with neighboring countries stood at US$21.6 in the fiscal year 2015-16, India has good surplus trade surplus with its neighbors and has a strong interest in ensuring smooth trade flows. India might have this benefit, but yet this policy can create issues between India and neighboring countries. The demonetisation policy might benefit in the long run, but in the short run, this might create border issues. While there would be more countries affected by this policy, this paper will emphasize on the problems faced by the countries and the impact of demonetisation on all other neighboring countries.

Keywords: bilateral trades, demonetization, neighborhood policy, value of rupee

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Authors: Risikat Oladoyin S. Dauda, Onyebuchi Iwegbu

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This study investigates the response of human development outcomes to selected macroeconomic indicators in Nigeria. Human development outcomes is measured by human development index while the selected macroeconomic variables are inflation rate, real interest rate, government capital expenditure, real exchange rate, current account balance, and savings. Structural Vector Autoregression (SVAR) technique is employed in examining the response of human development index to the macroeconomic shocks. The result from the forecast error variance decomposition and Impulse-Response analysis reveals that fiscal policy (government capital expenditure) shock is the greatest determinant of human development outcomes. This result reiterates the role which the government plays in improving the welfare of the citizenry. The fiscal policy tool is pivotal in human development which comes in the form of investment in education, health, housing, and infrastructure. Further conclusion drawn from this study is that human development outcome positively and significantly responds to shocks from real interest rate, a monetary policy transmission variable and is felt greatly in the short run period. The policy implication of this study is that if capital budget implementation falls below expectations, human development will be engendered. Hence, efforts should be made to ensure that full implementation and appraisal of government capital expenditure is taken sacrosanct as any shock from such plan, engenders human development outcome.

Keywords: human development outcome, macroeconomic outcomes, structural vector autoregression, SVAR

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Authors: Ragini Trehan, D.K. Srivastava

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In the post-planning era, India’s fiscal transfers from the central to state governments are solely determined by the Finance Commissions (FCs). While in some of the well-established federations such as Australia, Canada, and Germany, equalization serves as the guiding principle of fiscal transfers and is constitutionally mandated, in India, it is not explicitly mandated, and FCs attempt to implement it indirectly by a combination of a formula-based share in the divisible pool of central taxes supplemented by a set of grants. In this context, it is important to measure the extent of equalization that is achieved through FC transfers with a view to improving the design of such transfers. This study uses an index-based methodology for measuring the degree of equalization achieved through FC-transfers covering the period from FC12 to the first year of FC15 spanning from 2005-06 to 2020-21. The ‘Index of Equalization’ shows that the extent of equalization has remained low in the range of 30% to 37% for the four Commission periods under review. The highest degree of equalization at 36.7% was witnessed in the FC12 period and the lowest equalization at 29.5% was achieved during the FC15(1) period. The equalizing efficiency of recommended transfers also shows a consistent fall from 11.4% in the FC12 period to 7.5% by the FC15 (1) period. Further, considering progressivity in fiscal transfers as a special case of equalizing transfers, this study shows that the scheme of per capita total transfers when determined using the equalization approach is more progressive and is characterized by minimal deviations as compared to the profile of transfers recommended by recent FCs.

Keywords: fiscal transfers, index of equalization, equalizing efficiency, fiscal capacity, expenditure needs, finance Commission, tax effort

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Authors: Rogerio Vieira Dos Reis

Abstract:

Countries like Brazil that despite fighting hard against corruption are not improving their corruption perception, especially due to systemic political corruption, should review their corruption prevention strategies. This thesis brings a case study based on an alternative way of preventing corruption: addressing the corruption drivers in public policies that lead to poor economic performance. After discussing the Brazilian industrial policies adopted recently, especially the measures towards the automotive sector, two corruption issues in this sector are analyzed: facilitating payment for fiscal benefits and buying the extension of fiscal benefits. In-depth interviews conducted with a policymaker and an executive of the automobile sector provide insights for identifying three main corruption drivers: excessive and unnecessary bureaucracy, a complex tax system and the existence of a closed market without setting performance requirements to be achieved by the benefited firms. Both the identification of the drivers of successful industrial policies and the proposal of anti-corruption strategies to ensure developmental outcomes are based on the economic perspective of industrial policy advocated by developmental authors and on the successful South Korean economic development experience. Structural anti-corruption measures include tax reform, the regulation of lobbying and legislation to allow corporate political contribution. Besides improving policymakers’ technical capabilities, measures at the ministry level include redesigning the automotive regimes as long-term policies focused on national investment with simple and clear rules and making fiscal benefits conditional upon performance targets focused on suppliers. This case study is of broader interest because it recommends the importance of adapting performance audits conducted by anti-corruption agencies, to focus not only on the delivery of public services, but also on the identification of potentially highly damaging corruption drivers in public policies that grant fiscal benefits to achieve developmental outcomes.

Keywords: Brazilian automotive sector, corruption, economic development, industrial policy, Inovar-Auto

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