A fiscally virtuous government?

Productive Public Spending

A third success story of Germany has been the impressive fiscal consolidation. This is no small achievement: the global financial crisis and the subsequent European crisis put many European governments under massive pressure to support their economies in order to avoid an even deeper crisis. The chapter shows that fiscal consolidation and public debt reduction are not always virtues. Cutting spending and raising taxes can, in fact, be disastrous during periods of crisis or recession. Fiscal austerity can be destabilizing and trigger a vicious cycle of low supply and low demand, thereby turning out to be counterproductive by weakening potential growth and long-term investment. Fiscal consolidation may be harmful to the long-term potential of an economy and to welfare if it cuts the most productive public spending on education or infrastructure, for example. Assessing German fiscal policy over the past decade reveals that all these elements apply to Germany.

Fiscal Challenges After the Global Financial Crisis: A Survey of Key Issues

Journal of International Commerce Economics and Policy ◽

10.1142/s1793993314500045 ◽

2014 ◽

Vol 05 (02) ◽

pp. 1450004 ◽

Cited By ~ 1

Author(s):

Augusto Lopez-Claros

Keyword(s):

Financial Crisis ◽

Global Financial Crisis ◽

Planning Horizon ◽

Fiscal Policies ◽

The Past ◽

Fiscal Management ◽

Fiscal Planning ◽

Key Issues ◽

The global financial crisis and the response to it have contributed to a sharp increase in public indebtedness in a large number of countries. While there have been episodes of high debt in the past, there are a number of long-term challenges today that are likely to complicate the implementation of sustainable fiscal policies in the coming years. Population ageing and climate change are factors that are likely to contribute to rising fiscal pressures and the crisis has highlighted the risks and vulnerabilities stemming from reduced fiscal space. This paper argues that heightened fiscal challenges can only be dealt successfully by adopting a long-term fiscal planning horizon. The paper analyzes a range of available policy tools that countries have used in the past to improve fiscal management.

Another look at causes and consequences of pension privatization reform reversals in Eastern Europe

Journal of European Social Policy ◽

10.1177/0958928717735053 ◽

2017 ◽

Vol 28 (3) ◽

pp. 224-241 ◽

Cited By ~ 5

Author(s):

Nikola Altiparmakov

Keyword(s):

Eastern Europe ◽

Global Financial Crisis ◽

Eastern European ◽

Short Term ◽

Rates Of Return ◽

Rational Alternative ◽

Fiscal Austerity ◽

Eastern European Countries ◽

In order for ‘carve-out’ pension privatization to improve long-term sustainability, the transition should not be predominantly debt financed, and private pension funds should deliver (net) rates of return tangibly higher than gross domestic product (GDP) growth. We show that none of the reforming countries in Eastern Europe was successful in fulfilling these two preconditions, even before the emergence of the global financial crisis. While existing literature mostly describes a recent wave of reform reversals as politically driven short-sighted policies that deteriorate long-term sustainability, we argue the contrary: that pension privatization structural deficiencies and disappointing performance allow reversals to improve the short-term stance without necessarily undermining long-term pension sustainability. We conclude that unless political consensus exists to support the multi-decade fiscal austerity required to finance pension privatization, reform adjustments and reversals can be a rational alternative to maintaining economically suboptimal or politically unstable pension systems in some Eastern European countries.

The Global Trade Slowdown: Cyclical or Structural?

The World Bank Economic Review ◽

10.1093/wber/lhx027 ◽

2018 ◽

Vol 34 (1) ◽

pp. 121-142 ◽

Cited By ~ 14

Author(s):

Cristina Constantinescu ◽

Aaditya Mattoo ◽

Michele Ruta

Keyword(s):

Structural Change ◽

Global Financial Crisis ◽

Global Trade ◽

Correction Model ◽

The Past ◽

Key Driver ◽

Trade Elasticity ◽

The Relationship

Abstract This paper focuses on the sluggish growth of world trade relative to income growth in recent years. We use a simple empirical strategy based on an error correction model to assess whether the global trade slowdown is structural or cyclical. An estimate of the relationship between trade and income in the past four decades reveals that the long-term trade elasticity rose sharply in the 1990s, but declined significantly in the 2000s, even before the global financial crisis. These results suggest that trade is growing slowly not only because of slow GDP growth, but also because of a structural change in the trade-GDP relationship in recent years. The available evidence suggests that a key driver of structural change over the 2000s is the slowing pace of international vertical specialization, which accounts for between one-quarter and one-half of the decline in import growth from the 1990s to the 2000s.

On the formation of a New Paradigm of fiscal Policy

Voprosy Ekonomiki ◽

10.32609/0042-8736-2013-6-152-158 ◽

2013 ◽

pp. 152-158 ◽

Cited By ~ 2

Author(s):

V. Senchagov

Keyword(s):

Public Finance ◽

Fiscal Policy ◽

Financial Crisis ◽

Global Financial Crisis ◽

Domestic Demand ◽

Real Economy ◽

New Paradigm ◽

Monetary Aggregate ◽

The Past ◽

Due to Russia’s exit from the global financial crisis, the fiscal policy of withdrawing windfall spending has exhausted its potential. It is important to refocus public finance to the real economy and the expansion of domestic demand. For this goal there is sufficient, but not realized financial potential. The increase in fiscal spending in these areas is unlikely to lead to higher inflation, given its actual trend in the past decade relative to M2 monetary aggregate, but will directly affect the investment component of many underdeveloped sectors, as well as the volume of domestic production and consumer demand.

The Pandemic Exposes an Ailing US Governance Model

Current History ◽

10.1525/curh.2020.119.820.310 ◽

2020 ◽

Vol 119 (820) ◽

pp. 310-316

Author(s):

Alasdair Roberts

Keyword(s):

Financial Crisis ◽

Developing World ◽

Global Financial Crisis ◽

Political Polarization ◽

Washington Consensus ◽

The Past ◽

Governance Model ◽

Governance Challenges ◽

Current Governance

Since the 1990s and Bill Clinton’s embrace of key parts of Ronald Reagan’s legacy, mainstream US governance has been guided by a bipartisan consensus around a formula of shrinking the federal government’s responsibilities and deregulating the economy. Hailed as the ultimate solution to the age-old problem of governing well, the formula was exported to the developing world as the Washington Consensus. Yet growing political polarization weakened the consensus, and in a series of three major crises over the past two decades—9/11, the global financial crisis, and the COVID-19 pandemic—US policymakers opted for pragmatism rather than adherence to the old formula, which appears increasingly inadequate to cope with current governance challenges.

Financial Sustainability and Infrastructure Finance

10.1093/oso/9780198827948.003.0012 ◽

2018 ◽

Author(s):

Felipe Carvalho de Rezende

Keyword(s):

Financial Institutions ◽

Financial Stability ◽

Global Financial Crisis ◽

Financial Sustainability ◽

Infrastructure Finance ◽

Strategic Role ◽

Development Banks ◽

Capital Development

Among the lessons that can be drawn from the global financial crisis is that private financial institutions have failed to promote the capital development of the affected economies, and to dampen financial fragility. This chapter analyses the macroeconomic role that development banks can play in this context, not only providing long-term funding necessary to promote economic development, but also fostering financial stability. The chapter discusses, in particular, the need for public financial institutions to provide support for infrastructure and sustainable development projects. It concludes that development banks play a strategic role by funding infrastructure projects in particular, and outlines the lessons for enhancing their role as catalysts for mitigating risks associated with such projects.

Financialization

The Oxford Handbook of Global Studies ◽

10.1093/oxfordhb/9780190630577.013.5 ◽

2018 ◽

pp. 276-290

Author(s):

Ravi Roy ◽

Thomas D. Willett

Keyword(s):

Financial Markets ◽

Financial Services ◽

Capital Mobility ◽

Global Financial Crisis ◽

Economic Globalization ◽

The Past ◽

The World ◽

National Economies ◽

Global Financial System

The size and scope of financial sectors throughout the world have grown exponentially in tandem with the rise of globalization and increased capital mobility. The terms “economic globalization” and “financialization” are often discussed as inextricably related phenomena. Although the rapid increase in the number and variety of financial services and products during the past four decades has helped spur economic growth and create wealth on an unprecedented scale, the devastating fallout from the global financial crisis of 2008–2009, and the economic turbulence that followed, demonstrates how poorly managed financial sectors can simultaneously cause enormous pain. This chapter argues that if the opportunities created by economic globalization and financialization are to be maximized, while at the same tempering volatile financial markets, then the global financial system (and the national economies connected with it) must be fundamentally restructured. A number of ways that should be taken under consideration are discussed.

Effect of economic indicators, biomass energy on human development in China

Energy & Environment ◽

10.1177/0958305x211022040 ◽

2021 ◽

pp. 0958305X2110220

Author(s):

Ngo Thai Hung

Keyword(s):

Human Development ◽

Global Financial Crisis ◽

Trade Openness ◽

Biomass Energy ◽

Wavelet Coherence ◽

Causality Test ◽

Frequency Domains ◽

Bidirectional Relationship ◽

Previous studies ignored the distinction between short, medium, and long term by decomposing macroeconomic variables and human development index at different time scales. We re-visit the causal association between biomass energy (BIO), economic growth (GDP), trade openness (TRO), industrialization (IND), foreign direct investment (FDI), and human development (HDI) in China on a quarterly scale by scale basis for the period 1990 to 2019 using the tools of wavelet, i.e., wavelet correlation, wavelet coherence and scale by scale Granger causality test. The main findings uncover that IND, TRO, GDP, and BIO positively drive the HDI at low and medium frequencies, while FDI negatively impacts HDI during the sample period. Additionally, there is a bidirectional relationship between GDP and HDI at different time and frequency domains. Specifically, we discover that the positive co-movement is more robust in the aftermath of the global financial crisis, particularly for HDI, BIO, GDP, and TRO at medium frequencies throughout the period under research. Our empirical insights have significant implications for achieving human development sustainability in China.

Financial cycle − A critical analysis of the methodology for its identification

Journal of Central Banking Theory and Practice ◽

10.2478/jcbtp-2021-0026 ◽

2021 ◽

Vol 10 (3) ◽

pp. 99-116

Author(s):

Łukasz Kurowski

Keyword(s):

Economic Policy ◽

Critical Analysis ◽

Global Financial Crisis ◽

Critical Perspective ◽

Financial Cycle ◽

Economic Justification ◽

The Business Cycle ◽

Abstract While the legitimacy of the concept of the financial cycle (as distinct from the business cycle) in research and economic policy after the experience of the global financial crisis raises no concerns, the methodology for its application has become a subject of discussion. The purpose of this article is to indicate which research methods dominate in identifying a financial cycle and which methodological traps accompany them. The low level of critical perspective on the methods used to identify cycles often results in conclusions that have no economic justification and may result in erroneous decisions in economic policy and central bank practice. The case study carried out in the article confirms that the key elements in identifying a financial cycle are part of a long-term series covering at least two lengths of the financial cycle. In addition, because the results may be sensitive to the type of filter used, it is important not to rely on a single variable but rather to build indexes that take into account a number of them (including those obtained using filtration methods).

ADJUSTMENT SPEED OF DEBT MATURITY: EVIDENCE FROM FINANCIAL CRISES IN EAST ASIA

Buletin Ekonomi Moneter dan Perbankan ◽

10.21098/bemp.v24i1.1287 ◽

2021 ◽

Vol 24 (1) ◽

pp. 71-92

Author(s):

Hasan Tekin ◽

Ali Yavuz Polat

Keyword(s):

Financial Crisis ◽

Global Financial Crisis ◽

East Asian ◽

Debt Maturity ◽

Least Square ◽

Exogenous Shocks ◽

Adjustment Speed ◽

Debt Holders

We investigate the change in adjustment speed of debt maturity for East Asian firms between 1990 and 2017 by including two exogenous shocks: the Asian Financial Crisis 1997-1998 (AFC) and the Global Financial Crisis 2007-2009 (GFC). We employ the least square dummy variable correction and find that East Asian firms have a slower adjustment of long-term debt over time. Besides, the decrease in adjustment speed of long-term debt after the GFC is more compared to the decrease after the AFC. Further analysis shows the optimal debt maturity differs across countries and industries. Another important implication of our results is that firms in high governance countries are more likely to close the gap between the actual and target debt maturity in time. Overall, debt holders and investors should consider financial uncertainties.