Government investment fiscal multipliers: evidence from Euro-area countries

2021 ◽  
pp. 1-19
Author(s):  
Matteo Deleidi ◽  
Francesca Iafrate ◽  
Enrico Sergio Levrero
Keyword(s):  
Fiscal Policy ◽  
Euro Area ◽  
Government Expenditure ◽  
Structural Vector Autoregression ◽  
Government Investment ◽  
Fiscal Multipliers ◽  
Discretionary Fiscal Policy ◽  
The Government ◽  
Local Projections ◽  
Structural Vector

Abstract This paper aims to estimate the government investment fiscal multipliers in select European countries for the period 1970–2016. To do this, we combine Structural Vector Autoregression (SVAR) modeling with the Local Projections (LP) approach. We estimate models by also controlling for fiscal foresight, excluding the postcrisis period and distinguishing between Northern and Southern countries. Our findings suggest that an increase in government investment generates a “Keynesian effect” by engendering positive and permanent effects on the GDP level, even when government expenditure expectations are considered. Fiscal multipliers are close to 1 on impact and increase in the years after the implementation of a discretionary fiscal policy.

Discretionary fiscal policy in the Euro area: Past, present and future

2020 ◽  
pp. 55-85
Author(s):  
Francesco Caprioli ◽  
Marzia Romanelli ◽  
Pietro Tommasino
Keyword(s):  
Fiscal Policy ◽  
Euro Area ◽  
Discretionary Fiscal Policy

scholarly journals Educational Level and Tax Compliance: Empirical Evidence From Nigeria

2020 ◽  
Vol 10 (1) ◽  
pp. 160
Author(s):  
Stanley Ogoun ◽  
Godspower Anthony Ekpulu
Keyword(s):  
Educational Level ◽  
Government Expenditure ◽  
Tax Compliance ◽  
Tax Revenue ◽  
Education Expenditure ◽  
Government Investment ◽  
Ex Post ◽  
National Priority ◽  
Ex Post Facto ◽  
The Government

The study interrogates the relationship between educational level and tax compliance in Nigeria. The study employs the ex post facto research design to ascertain how government investment in education enhances tax compliance. The study covers 17 years (2002-2018) for both tax revenue (a surrogate for tax compliance) and education expenditure (a surrogate for educational level). From the empirical results, the study concludes that there is a positive nexus between government expenditure on education and tax revenue. The study, therefore, recommends that as a matter of necessity, the government should invest more in the overall educational demand of her citizens not only from tax revenues but from other oil and non-oil sources. The governments, from the federal and state levels, should act as a matter national priority endeavour to meet up with the international budgetary benchmark allocation for education, as recommended by the United Nations Educational, Scientific and Cultural Organization (UNESCO) in its Education for All (EFA) document 2000-2015. This will give Nigerians more access to quality education that would result in moving up the global ranking in HDI with its resultant benefits.

scholarly journals Economic policy and confidence of economic agents – a causal relationship?

2020 ◽  
Vol 20 (4) ◽  
pp. 471-484
Author(s):  
Silvo Dajčman
Keyword(s):  
Fiscal Policy ◽  
Granger Causality ◽  
Government Spending ◽  
Government Expenditure ◽  
Policy Instruments ◽  
Consumer Confidence ◽  
Causality Analysis ◽  
Economic Agents ◽  
Business Confidence ◽  
The Government

AbstractThe purpose of this paper is to study whether innovations in monetary and fiscal policy are a leading indicator of future business and consumer confidence and reverse applying the panel Granger causality analysis to two periods in the history of the euro area: before and after the start of the Great Recession. The results show that Granger causality interaction between the confidence of economic agents and the stance of monetary policy (measured by the shadow rate) is stronger than between the former and the fiscal policy instruments. The European Central Bank (ECB) shadow rate innovations Granger caused business and consumer confidence in both periods, but also indicators of confidence Granger caused the shadow rate. No such feedback could be established between two fiscal policy instruments (government expenditure and revenue growth) and the indicators of confidence. Government spending and revenues Granger caused business confidence in the first subperiod, but not in the second subperiod when the causality reversed. The government revenues Granger caused consumer confidence in the first subperiod, while government expenditures in the second subperiod. Consumer confidence Granger caused government spending in the first subperiod.

scholarly journals How Does Fiscal Policy Affect Bank Credit? Evidence from China

2021 ◽  
Vol 2021 ◽  
pp. 1-8
Author(s):  
Huan Yan ◽  
Weiguo Xiao ◽  
Qi Deng ◽  
Sisi Xiong
Keyword(s):  
Fiscal Policy ◽  
Government Spending ◽  
Bank Credit ◽  
Tax Revenue ◽  
External Financing ◽  
Structural Vector Autoregression ◽  
Economic Data ◽  
Svar Model ◽  
Collateral Channel ◽  
Structural Vector

Using a set of Chinese economic data and a structural vector autoregression (SVAR) model, this paper investigates the transmission channels of fiscal policy to bank credit in China. We find that increases in tax revenue can increase bank credit through external financing premium channel, collateral channel, and bank liquidity channel. We also find that increases in government spending can reduce bank credit through bank liquidity channel and increase bank credit through external financing premium channel and collateral channel.

scholarly journals Pakistan: making a “COVID budget” in a struggling economy

2020 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Marium Ashfaq ◽  
Mohsin Bashir
Keyword(s):  
Fiscal Policy ◽  
Government Expenditure ◽  
Fiscal Year ◽  
Religious Groups ◽  
Political Factors ◽  
Content Type ◽  
Policy Responses ◽  
Policy Measures ◽  
The Government ◽  
The Military

PurposeThe purpose of this study is to examine the fiscal measures undertaken by the Pakistani government to counter the recessionary pressures of the coronavirus pandemic. The authors analyse the economic, social and political factors that have shaped the government's fiscal policy response to this economic shock.Design/methodology/approachThe authors analyse the federal and provincial budget documents for the fiscal year 2020–21 to study the fiscal response of the government. The authors review recent research articles and news pieces to examine the determinants of these budgetary measures.FindingsThe government adopted expansionary fiscal policy measures such as reduced taxation and increased government expenditure to counter the recessionary pressures of the pandemic. These measures, however, were largely constrained by macroeconomic issues of high fiscal debt, slow economic growth and low fiscal space and political influences from the military and religious groups.Research limitations/implicationsThe coronavirus pandemic is an ongoing issue which may pose more threats and elicit more policy responses as it evolves. This research may be extended as the pandemic progresses, to include further policy responses.Originality/valueThis research provides insight into the unique problems faced by the Pakistani government during the pandemic, and how it steers the economy despite these limitations.

Public investment and inclusive growth in Africa

2020 ◽  
Vol 47 (12) ◽  
pp. 1669-1691
Author(s):  
Opeoluwa Adeniyi Adeosun ◽  
Philip Akanni Olomola ◽  
Adebayo Adedokun ◽  
Olumide Steven Ayodele
Keyword(s):  
Fiscal Policy ◽  
Public Investment ◽  
Inclusive Growth ◽  
Government Investment ◽  
Automatic Stabilization ◽  
Content Type ◽  
Long Run ◽  
Short Run ◽  
The Government ◽  
Productive Employment

PurposeThe increasing debate on the viability of broad-based productive employment in stimulating the participatory tendencies of growth makes it instructive to inquire how the African “Big Five” have fared in their quests to ensure growth inclusiveness through public investment-led fiscal policy.Design/methodology/approachTime varying structures and nonlinearities in the government investment series are captured through the non-linear autoregressive distributed lag, asymmetric impulse responses and variance decomposition estimation techniques.FindingsStudy findings show that positive investment shocks stimulate growth inclusiveness by enabling access to opportunities through job creation and productive employment for the populace; this result is evident for Morocco and Algeria. However, there is a non-negligible evidence that shocks due to decline in the government investment manifest in insufficient capital stocks and limited investment opportunities, impede access to opportunities by the populace, hinder labour employability and make growth less inclusive. Furthermore, all short-run findings corroborate long-run results regarding the reaction of inclusive growth to positive investment shocks with the exclusion of South Africa; which, unlike its long-run finding, shows that shocks due to increases in investment can foster growth inclusiveness. Also, in respect to short-run negative investment shocks, Nigeria is the only country that does not align its long-run findings.Practical implicationsThat public investment shocks make or mar inclusive growth effectiveness shows the need for appropriate fiscal policy consolidation and automatic stabilization guidelines to ensure buffers against shocks and to enhance government investment generation efficiency for a sustainable inclusive growth process that is more participatory in Africa.Originality/valueThis study is the first to accommodate possibilities of shocks in the inclusivity of growth analysis for the five biggest African economies which jointly account for over half of the recorded growth in the continent. As such, there is quantitative evidence that government investment is a potent determinant of growth inclusiveness and it is susceptible to structural changes and time variation of shocks.

Fiscal Policy and Public Debt

2020 ◽  
pp. 417-488
Author(s):  
Christopher Tsoukis
Keyword(s):  
Fiscal Policy ◽  
Empirical Evidence ◽  
Public Debt ◽  
Economic Activity ◽  
Budget Constraint ◽  
Policy Rules ◽  
Fiscal Multipliers ◽  
Fiscal Solvency ◽  
The Government

This chapter looks at fiscal policy, broadly interpreted to include its implications on deficits, debt, and fiscal solvency. It is informally divided in two parts, starting from the latter set of issues. After introducing the budget deficit, debt and the government budget constraint, and related issues, it proceeds to analyse fiscal solvency, deriving formal conditions and discussing extensively indicators and required policy rules. The role of growth in ensuring fiscal solvency is put in sharp relief. Additionally, the ‘dilemma of austerity’ is critically discussed, i.e. whether ‘fiscal consolidations’ can in fact damage public finances by being recessionary. We then turn to the effects of fiscal policy on economic activity: A ‘toolkit’ of static fiscal multipliers is discussed, as is the intertemporal approach to fiscal policy (including Ricardian Equivalence), complemented by empirical evidence.

scholarly journals Post-2008 Brazilian fiscal policy: an interpretation through the analysis of fiscal multipliers

2017 ◽  
Vol 47 (1) ◽  
pp. 93-124
Author(s):  
Celso José Costa Junior ◽  
Alejandro C. García Cintado ◽  
Armando Vaz Sampaio
Keyword(s):  
Fiscal Policy ◽  
Open Economy ◽  
Public Investment ◽  
Aggregate Demand ◽  
Small Open Economy ◽  
New Keynesian ◽  
Fiscal Policies ◽  
Fiscal Multipliers ◽  
Brazilian Government ◽  
The Government

Abstract The global crisis that erupted in 2007 led many countries to embark on countercyclical fiscal policies as a way to cushion the blow of a depressed aggregate demand. Advocates of discretionary measures emphasize that fiscal policy can indeed stimulate the economy. The main goal of this work is to assess whether the fiscal policies pursued by the Brazilian government in the aftermath of the 2008 crisis, succeeded in bringing the economy back on track in a sustainable fashion. To this end, the fiscal multipliers of five different shocks are studied in a small open-economy New Keynesian framework. Our results point to the government spending and public investment as the most effective fiscal tools for combating the crisis. However, the highest fiscal multiplier turned out to be the one associated with excise tax reductions.

scholarly journals CAN THE CREDIBLE FISCAL POLICY MITIGATE THE TERMS OF TRADE FLUCTUATION?

2017 ◽  
Vol 1 (3) ◽  
pp. 242-257
Author(s):  
Haryo Kuncoro
Keyword(s):  
Fiscal Policy ◽  
Positive Impact ◽  
International Market ◽  
Terms Of Trade ◽  
Government Size ◽  
Fiscal Policies ◽  
Quarterly Data ◽  
Discretionary Fiscal Policy ◽  
Policy Credibility ◽  
The Government

This paper examines the links between fiscal policy and terms-of-trade movement in the case of Indonesia over the period 2001-13. Unlike other researchers, this paper explores both the rules-based and discretionary fiscal policies. The earlier factor covers deficit rule and debt rule which are intended to measure the fiscal policy credibility. The later follows Fatás and Mihov (2003; 2006). The OLS estimation of quarterly data reveals that the less credible deficit rule policy and discretionary fiscal policy have a positive impact on the terms of trade. In contrast, the more credible debt rule policy and government size tend to depreciate the terms of trade. Those findings suggest that fiscal policy credibility does not matter in the context of international market. Furthermore, to mitigate the external risks, the government intervention to the international market debt should be limited.

scholarly journals The Effect of Government Consumption and Government Investment as Intervening Variables to Growth in Indonesia

2020 ◽  
Vol 20 (2) ◽  
pp. 193-207
Author(s):  
Suparjito Suparjito ◽  
Julianus Johnny Sarungu ◽  
Albertus Magnus Soesilo ◽  
Bhimo Rizky Samudro ◽  
Erni Ummi Hasanah
Keyword(s):  
Economic Growth ◽  
Fiscal Policy ◽  
Budget Deficit ◽  
Partial Least Square ◽  
Analysis Tool ◽  
Government Investment ◽  
Government Consumption ◽  
The Government ◽  
Investment Spending ◽  
The Impact

Fiscal policy and monetary policy are the two macroeconomic policies used by the government and monetary authorities in order to create a stable economy. The budget deficit policy is one form of fiscal policy implemented by the government in order to realize a high level of economic growth, a controlled inflation rate and open up new job opportunities to reduce unemployment. The impact of the implementation of the budget deficit policy on the level of economic growth is a long debate. Neoclassical groups argue that the implementation of budget deficit policies is detrimental to the economy, as it lowers the rate of economic growth. Keynesian groups argue that the implementation of the budget deficit policy is very good for the economy, because it triggers the rate of economic growth by increasing the number of demand for goods and services through increased government spending. While the Richardian people argue that the implementation of budget deficit policy has no effect on the economy. The data used in this study is data from 1981-2014 which consists of budget deficit, government consumption, government investment and economic growth rate. The method of analysis in this research is using Partial Least Square-Path Modeling (PLS-PM) approach with SMART-PLS analysis tool which aims to analyze the direct and indirect influence of the implementation of budget deficit policy toward the level of economic growth through government consumption and government investment. The results show that the implementation of the budget deficit policy can increase economic growth through increased government investment spending. Keywords: budget deficits, government investment, government consumption, growth.

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