scholarly journals A Pitfall with Estimated DSGE-Based Government Spending Multipliers

2013 ◽  
Vol 5 (4) ◽  
pp. 141-178 ◽  
Author(s):  
Patrick Fève ◽  
Julien Matheron ◽  
Jean-Guillaume Sahuc
Keyword(s):  
Government Policy ◽  
Government Spending ◽  
Private Consumption ◽  
Government Expenditures ◽  
Long Run ◽  
The Government ◽  
Endogenous Component

This paper examines issues related to the estimation of the government spending multiplier (GSM) in a DSGE context. We stress a source of bias in the GSM arising from the combination of endogenous government expenditures and Edgeworth complementarity between private consumption and government expenditures. Due to cross-equation restrictions, omitting the endogenous component of government policy at the estimation stage would lead an econometrician to underestimate the degree of Edgeworth complementarity and, consequently, the long-run GSM. An estimated version of our model with US postwar data shows that this bias matters quantitatively. The results are robust to a number of perturbations. (JEL E13, E23, E32, E62, H50)

scholarly journals Fiscal Policy Shocks and Private Consumption in Nigeria: Blanchard-Perotti (2002) Approach

2015 ◽  
Vol 7 (6(J)) ◽  
pp. 42-60
Author(s):  
OSENI Isiaq Olasunkanmi
Keyword(s):  
Fiscal Policy ◽  
Government Spending ◽  
Private Consumption ◽  
Government Expenditure ◽  
Structural Var ◽  
Long Run ◽  
Short Period ◽  
Policy Shocks ◽  
Negative Effect ◽  
The Government

This paper examines the effects of fiscal policy shocks on private consumption in Nigeria. Albeit, there is a considerable number of works examining the effects of fiscal policy shocks on private consumption globally but in Nigeria, no study has used the structural VAR approach by Blanchard and Perotti (2002) as used in this paper. This approach relies on institutional information about the tax and transfer systems and the timing of tax collection to identify the automatic response of taxes and spending to private consumption as well as to infer fiscal shocks. The key result of this paper is that positive government spending shocks in Nigeria have an instantaneous negative effect on private consumption. The effect becomes significant in the period following the shock. Also, positive tax shocks have a negative effect on private consumption in the period of a shock and the effect becomes statistically insignificant afterwards. On this premises, one-off changes in government spending and taxes in Nigeria are long-lived and short-lived respectively. Thus, the government expenditure changes can be used to support private consumption in the long-run while that of taxes can only be used to support private consumption for a short period.

scholarly journals IMPACT OF FINANCIAL INCLUSION, GOVERNMENT EXPENDITURES IN EDUCATION AND HEALTH SECTORS ON HUMAN DEVELOPMENT IN INDONESIA

2020 ◽  
Vol 9 (2) ◽  
pp. 5
Author(s):  
Mulia Simatupang
Keyword(s):  
Human Development ◽  
Government Policy ◽  
Human Development Index ◽  
Health Sector ◽  
Financial Inclusion ◽  
Government Expenditures ◽  
Development Index ◽  
Education And Health ◽  
The Government ◽  
The Impact

ABSTRACT The purpose of this paper in to assess the impact of financial inclusion and  government expenditures in education and health sectors in order to increase human development index. Government expenditures has important role to support economic growth and welfare for its people. Fiscal policy expenditures in education and health sectors are kind of significant government policy to increase human development. It is believed that financial inclusion has also important role  to reduce poverty and indirectly increase human development index. Financial inclusion  has positive impacts to human development index component along with government  expenditures in education and health sector. In the years ahead, The Government should prioritize and increase budget in order to increase human  resources quality in Indonesia.

John Maynard Keynes

2017 ◽  
Author(s):  
John Kenneth Galbraith
Keyword(s):  
General Theory ◽  
Government Spending ◽  
Full Employment ◽  
Government Expenditures ◽  
John Maynard Keynes ◽  
Winston Churchill ◽  
Modern Economy ◽  
The Government

This chapter examines the economic ideas of John Maynard Keynes. According to Keynes, the modern economy does not necessarily find its equilibrium at full employment; it can find it with unemployment. This is the underemployment equilibrium, in which Say's Law no longer holds; there can be a shortage of demand. The government can and should take steps to overcome this shortage. The chapter discusses in more detail the underemployment equilibrium, the repeal of Say's Law, the call for government spending uncovered by revenues to sustain demand—all of which made up the so-called the Keynesian Revolution. In particular, it considers Keynes's central prescription that there should be government expenditures financed by borrowing to sustain demand and employment. It also analyzes Keynes's criticism of Winston Churchill, his A Treatise on Money (1930), and the economic discussion that followed the publication of The General Theory of Employment Interest and Money (1936).

Fiscal Policy and Government Spending

2010 ◽  
Vol 214 ◽  
pp. F61-F66 ◽  
Author(s):  
Ray Barrell ◽  
Simon Kirby
Keyword(s):  
Fiscal Policy ◽  
Government Spending ◽  
Future Generations ◽  
Coalition Government ◽  
The Third ◽  
Long Run ◽  
Full Capacity ◽  
Government Deficit ◽  
The Government ◽  
The Cost

In June the Coalition Government produced a budget that aimed to reduce the government deficit quickly. The plan was based mainly on cuts in current expenditure and reductions in transfers to individuals. There are four possible reasons for reducing the deficit, and all have been used to justify the policy. The first reason might be that the cost of borrowing is currently too high, and the second could be that if deficits persist the markets could lose confidence and the cost of borrowing would rise. The third reason might be that we have to reduce the debt stock in order that we prepare for the next crisis, whilst the fourth, and perhaps most persuasive in the long run, is that it is unfair to borrow so much and therefore reduce the consumption of future generations. If either of the first two had merit there would be a case for swift consolidation, whilst if the third or fourth predominate, we should not be in any rush to act until output is nearer full capacity.

scholarly journals Analysis of the Viability of Fiscal and Monetary Policies on the Recovery of Household Consumption Expenditures Because of the Covid-19 Pandemic

2021 ◽  
Vol 3 (1) ◽  
Author(s):  
Fahrul Riza ◽  
William Wiriyanata
Keyword(s):  
Monetary Policy ◽  
Interest Rates ◽  
Government Spending ◽  
Positive Impact ◽  
Household Consumption ◽  
Series Data ◽  
Consumption Expenditure ◽  
Consumption Expenditures ◽  
Long Run ◽  
The Government

The Covid-19 outbreak disrupted economic activity in almost all countries. The Indonesian economy entered a recession phase as a result of the continued contraction in economic growth in the second and third quarters of 2020. According to Keynesian economic theory, the combination of fiscal policy and monetary policy was more effective in recovering the economy from the crisis, this study aims to measure the effect of government spending, money supply, inflation and interest rates on aggregate household consumption expenditure. This study used a quantitative method, using monthly time series data from January 2015 to December 2020. The data were analyzed using the Vector Error Correction Model (VECM). The results show that government spending has a negative impact on household aggregate expenditure in the long run meanwhile interest rate has a positive impact on household consumption expenditure. Inflation do not affect aggregate household consumption expenditure, both in the short and long term. The results of the analysis are useful for evaluating the policies taken by the government to overcome the economic crisis due to the spread of the Covid-19 outbreak. The government increases aggregate expenditure to cover the decline in household aggregate consumption expenditure due to a decrease in household real income. Then expansionary monetary policy in the long run will increase aggregate demand. Therefore, the Ministry of Finance together with Bank Indonesia needs to design other policies that will have a positive impact on economic recovery in the short term. This study has not included other macro indicators that affect household consumption expenditures such as unemployment, taxes and the household marginal propensity to saving (MPS). Keywords: Household Aggregate Expenditure; Government Expenditure; Inflation; VECM

South Korea's Economy: Moderate Expansion Fuelled by Stimulus Policies

2016 ◽  
Vol 08 (01) ◽  
pp. 144-156
Author(s):  
Min-Hua CHIANG
Keyword(s):  
Middle East ◽  
Gross Domestic Product ◽  
Government Spending ◽  
Private Consumption ◽  
Value Added ◽  
High Technology ◽  
Middle East Respiratory Syndrome ◽  
Domestic Product ◽  
Intermediate Goods ◽  
Long Run

South Korea's gross domestic product expanded 2.6% in 2015, from 3.3% in 2014. The feeble private consumption following the Middle East respiratory syndrome outbreak and slumping exports held down growth. The unclear export prospect has led Korean policymakers to remain dependent on extra government spending for maintaining growth in 2016. In the long run, its growth will depend on its shift from exporting intermediate goods to high technology intensive products and high value-added services.

Does Infrastructure Matters in Government Spending? A Case Study of Jammu and Kashmir (India) with Cointegration Approach

2017 ◽  
Vol 9 (2) ◽  
pp. 82-97 ◽  
Author(s):  
Samir Ul Hassan ◽  
Biswambhara Mishra
Keyword(s):  
Government Spending ◽  
Time Series Data ◽  
Government Expenditure ◽  
Jel Classification ◽  
Series Data ◽  
Data Set ◽  
Jammu And Kashmir ◽  
Long Run ◽  
The Government ◽  
The Impact

This study is an attempt to investigate the impact of infrastructure level on government spending in short and long run and also to find the tendency of infrastructure level to stabilise any disequilibrium in government spending in long run. Infrastructure is related to the quality and quantity of goods and services provided by government to the population, to fulfil their diverse demands. The state of Jammu and Kashmir (J&K) is not an exception; the increasing trend in different aspects of population and rising needs and aspirations of the growing population forces the government to increase expenditure on that count, which results in increase in aggregate government spending. Using multivariate cointegration technique followed by vector error correction model (VECM) model on annual time-series data for the period from 1984 to 2013 with broader data set of infrastructure dimension, the study found that the infrastructure variables cause major variation in government expenditure in short as well as in long run. Study shows that infrastructure related to health, education, roads and portable water produce positive and significant impact on the growth of government spending and infrastructure related to these dimensions has significant tendency to stabilise any disequilibrium in government spending in long run. JEL Classification: H3, H5, H53, I

scholarly journals Labor efficiency, government spending and productivity nexus based on panel ARDL approach: Evidence from selected European countries

2020 ◽  
Author(s):  
Wen Xuezhou ◽  
Rana Yassir Hussain ◽  
Haroon Hussain ◽  
Muhammad Saad ◽  
Sikandar Ali Qalati ◽  
...  
Keyword(s):  
Government Spending ◽  
Negative Impact ◽  
Human Life ◽  
Government Expenditure ◽  
European Countries ◽  
Panel Ardl ◽  
Long Run ◽  
Ardl Approach ◽  
Significant Negative Impact ◽  
The Government

Abstract The current study advocates the role of efficient labor, average gross earnings per person, government spending, and quality of human life in defining the productivity of thirteen European countries. This study applied panel ARDL approach for data period ranging from 2001 to 2016. The results, in the long run, suggested that more efficient labor, increased gross earnings, and higher HDI causes higher productivity in the selected European countries. However, the results for the gross earnings were positive but insignificant. Government spending and inflation had a significant negative impact on productivity. These results suggest to keep inflation in check and limit the government expenditure to human development and to the productive uses in the selected countries.

scholarly journals Budget Balance through Revenue or Spending Adjustment: Evidence from Pakistan

2010 ◽  
Vol 49 (4II) ◽  
pp. 611-630 ◽  
Author(s):  
Nadeem Iqbal ◽  
Wasim Shahid Malik
Keyword(s):  
Government Spending ◽  
Budget Deficit ◽  
Budget Constraint ◽  
Government Expenditures ◽  
Budget Balance ◽  
Debt Sustainability ◽  
Long Run ◽  
The Future ◽  
Tax Hypothesis

Government cannot roll over the debt forever (ponzi game is not allowed). In the long run, inter-temporal budget constraint has to be satisfied, which is possible either through government spending adjustment or increasing government revenues. So current budget deficit calls for adjustment, in the future, in spending or revenues. There are four hypotheses, in the literature, in this regard: the tax-and-spending hypothesis, the spending-and-tax hypothesis, bi-directional causality between government revenues and government expenditures, and independence of taxes and expenditures hypothesis. The last hypothesis, however, have negative implications, in the long run, in terms of debt sustainability and inflation

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