scholarly journals The Macroeconomic Effects of Exogenous Fiscal Policy Shocks in Germany: A Disaggregated SVAR Analysis

2010 ◽  
Vol 230 (3) ◽  
Author(s):  
Jörn Tenhofen ◽  
Guntram B. Wolff ◽  
Kirsten H. Heppke-Falk
Keyword(s):  
Fiscal Policy ◽  
Public Investment ◽  
Government Expenditure ◽  
German Economy ◽  
Public Employees ◽  
Positive Effects ◽  
Long Run ◽  
Policy Shocks ◽  
Net Revenue ◽  
Direct Government

SummaryWe investigate the effects of fiscal policy shocks on the German economy extending the SVAR approach of Blanchard and Perotti (2002). Direct government expenditure shocks are found to increase output and private consumption on impact. The output multiplier is smaller than one and is falling rather quickly reaching zero after 3 years. Government operating expenditure has size able positive effects on output, in the long run in particular due to public capital formation. Compensation of public employees is not effective in stimulating the economy.Government net revenue shocks do not affect output significantly. Indirect taxes have little effects, while direct taxes lower output significantly. Overall, the effects of fiscal policy are short-lived with the exception of public investment increases.

scholarly journals Does Fiscal Policy stimulate Economic Growth in Ethiopia? An ARDL Approach

2021 ◽  
Author(s):  
Solomon Tilahun Mengistu
Keyword(s):  
Economic Growth ◽  
Fiscal Policy ◽  
Public Investment ◽  
Government Expenditure ◽  
Private Investment ◽  
Future Research ◽  
Tax Revenue ◽  
Annual Data ◽  
Distributed Lag ◽  
Long Run

Abstract Abstract In recent years, a vast literature has appeared on the relationship between fiscal policy and long-run economic growth. With the aim of give an overview of the recent discussion and establish a point of departure for future research, this study used time series techniques and used empirical model by Kneller et al (1999) and Bleaney et al (2000) to investigate the link between various components of fiscal policy on Ethiopia’s economic growth on annual data for the period 1985/86 – 2019. It employed the autoregressive distributed lag estimation technique. Results from the bound tests showed that there was a long-run relationship between the variables. Disaggregating government expenditure into productive and unproductive and tax revenue into distortionary and non-distortionary, this study found unproductive expenditure and non-distortionary tax revenue to be neutral to growth as predicted by economic theory. Moreover, productive expenditure has positive effect on growth while there was evidence of distortionary effects on growth of distortionary taxes. These results give right signal to policy makers in Ethiopia in formulating expenditure and tax policies to ensure unproductive expenditures are reduced while at the same time boosting public investment. Furthermore, there is need to encourage private investment in the country.

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 Fiscal Policy in Association with Sustainable Economic Growth in the Period 2011-2020

2014 ◽  
Vol 220 ◽  
pp. 19-40
Author(s):  
THÀNH SỬ ĐÌNH ◽  
Hoài Bùi Thị Mai ◽  
LÂM MAI ĐÌNH
Keyword(s):  
Economic Growth ◽  
Fiscal Policy ◽  
Fiscal Decentralization ◽  
Public Investment ◽  
Positive Effects ◽  
Long Run ◽  
Endogenous Growth Model ◽  
Fiscal Support ◽  
Sustainable Economic Growth ◽  
Difference Gmm

Employing endogenous growth model, panel data from 62 provinces and cities in 2000-2011 and PMG and Arellano-Bond difference GMM, the research analyzes empirically the relationship between the fiscal policy and economic growth in Vietnam. Its main findings are: (i) fiscal decentralization and economic growth cointegrate in the long run, but government’s efforts to adjust its fiscal policy during economic shocks that cause disequilibrium or make the economy deviate from its long-term trend produce very low effects; (ii) fiscal income decentralization and fiscal support have positive effects on economic growth while expenditure decentralization does not; (iii) current expenditure and spending on education, scientific research, health care and environmental issues produce positive effects on the economic growth while public investment fails to do so.

scholarly journals Do FDI and Public Investment Crowd in/out Domestic Private Investment in the SADC Region

2021 ◽  
Vol 19 (1) ◽  
pp. 3-25
Author(s):  
Eslon Ngeendepi ◽  
Andrew Phiri
Keyword(s):  
Capital Expenditure ◽  
Public Investment ◽  
Trade Openness ◽  
Government Expenditure ◽  
Private Investment ◽  
Policy Implications ◽  
Domestic Investment ◽  
Government Investment ◽  
Long Run ◽  
Short Run

Our study examines the crowding-in/out effect of foreign direct investment and government expenditure on private domestic investment for 15 members of the Southern African Development Community (SADC) for the period 1991–2019. The study employed the panel Pool Mean Group (PMG)/ARDL technique in estimating the short-run and long-run cointegration relationships between FDI, government capital expenditure and domestic private investment and adds three more variables for control purposes (interest rate, GDP growth rate and trade openness). For the full sample, FDI crowds-in domestic investment whilst government crowds-out domestic investment. However, in performing a sensitivity analysis, in which the sample was segregated into low and high income economies, both FDI and government investment crowd-in domestic investment whilst government expenditure crowds-out domestic investment in lower income SADC countries with no effect of FDI on domestic investment. Policy implications are discussed.

scholarly journals Impact of Public Debt, Deficit and Debt Financing on Private Investment in a Large Country: Evidence from the United States

2020 ◽  
Vol 6 (2) ◽  
pp. 139-161
Author(s):  
Amir Kia
Keyword(s):  
Public Debt ◽  
Public Investment ◽  
Government Expenditure ◽  
Private Investment ◽  
Adjustment Costs ◽  
The United States ◽  
Direct Impact ◽  
Large Country ◽  
Long Run ◽  
Short Run

This paper analyses the direct impact of fiscal variables on private investment. The current literature ignores one or more fiscal variables and, in many cases, the foreign financing of debt. In this paper, an aggregate investment function for an economy in which firms incur adjustment costs in their investment process is developed. The developed model incorporates the direct impact of government expenditure, public debt and investment, deficits and foreign-financed debt on private investment. The model is tested on US data. It is found that public investment does not have any impact on private investment, but government expenditure, deficit, debt and foreign-financed debt crowd out private investment over the long run. However, deficit crowds in the private investment over the short run.

scholarly journals Does Government Expenditure Reduce GDP Gap? Evidence from Bangladesh

2007 ◽  
Vol 3 (1) ◽  
pp. 1-8
Author(s):  
M. Rafiqul Islam ◽  
A.F.M. Kamrul Hassan
Keyword(s):  
Fiscal Policy ◽  
Dominant Role ◽  
Government Expenditure ◽  
Equilibrium Path ◽  
Role Of Government ◽  
Business Studies ◽  
Long Run ◽  
Short Run ◽  
Gdp Gap ◽  
Long Run Equilibrium

In Keynesian macroeconomics fiscal policy plays the dominant role to steer the economy along its long run equilibrium path and also to cure the short run deviation from its long run level. Present paper examines this role of government expenditure, a tool of fiscal policy, in the context of the economy of Bangladesh. The paper employs cointegration and Error Correction Mechanism (ECM) to examine the short and long run relationship between economic growth and government expenditure. Findings of the study indicate that, in the short run, government expenditure does not play any statistically significant role in eliminating the gap between actual and potential output. However, a statistically significant cointegrating relationship is found between government expenditure and long run equilibrium output Journal of Nepalese Business Studies 2006/III/1 pp. 1-8

scholarly journals Is Fiscal Policy Effective in Generating Higher Real Output? A Case of Pakistan

2013 ◽  
Vol 1 (2) ◽  
pp. 47-58
Author(s):  
Hafiz Saqib Mehmood Najmi ◽  
Farrukh Bashir ◽  
Saman Maqsood
Keyword(s):  
Fiscal Policy ◽  
Time Series Data ◽  
Government Expenditure ◽  
Cointegration Test ◽  
Series Data ◽  
Government Revenue ◽  
Real Gdp ◽  
Long Run ◽  
Johansen Cointegration Test ◽  
Motivating Factor

Keeping in view the objective that is to observe the usefulness of fiscal policy on real GDP of Pakistan, the study collects time series data from 1976 to 2012 through reliable sources of statistical bureaus of Pakistan. Using Johansen Cointegration test, the long run results demonstrate investment and government expenditure as raising factor for real GDP of Pakistan while GDP Deflator and government revenue as de-motivating factor for real GDP of Pakistan in the long run.

scholarly journals Determinants of fiscal policy behavior in Nigeria

2019 ◽  
Vol 16 (2) ◽  
pp. 1-13 ◽  
Author(s):  
Patrick Ologbenla
Keyword(s):  
Fiscal Policy ◽  
Government Expenditure ◽  
Commodity Price ◽  
Oil Price ◽  
Annual Data ◽  
Government Revenue ◽  
Long Run ◽  
Short Run ◽  
Fiscal Behavior ◽  
Policy Behavior

The study investigated the factors that determine fiscal behavior in Nigeria. The vulnerability of fiscal policy framework in Nigeria to different shocks and the attendant effects on the behavior of fiscal policy are parts of the reasons that prompted this research work. Annual data between 1980 and 2015 on core fiscal variables such as government revenue, government expenditure, fiscal balance, public debt, as well as other variables such as oil price, exchange rate, and inflation rate commodity price among others, are used. The Auto-Regressive Distributed Lag ARDL estimating technique is used to analyze both the long-run and short-run effects of these variables on fiscal behavior in Nigeria. Findings from the study show that fiscal policy in Nigeria is highly vulnerable to shocks from these variables mostly in the short run. Notwithstanding, variables like government revenue, government expenditure, regime of administration, oil price and commodity price volatilities all have sustained effects till the long-run periods. It was discovered that oil price movements is not the only external factor that has pronounced effects on fiscal behavior, but commodity prices volatility generally constitutes an important influential factor in determination of fiscal policy behavior in Nigeria.

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.

The composition of productive government expenditure

2008 ◽  
Vol 1 (1) ◽  
pp. 57-83 ◽  
Author(s):  
Goncalo Monteiro ◽  
Stephen J. Turnovsky
Keyword(s):  
Economic Growth ◽  
Human Capital ◽  
Government Spending ◽  
Public Investment ◽  
Government Expenditure ◽  
Physical Capital ◽  
Content Type ◽  
Trade Offs ◽  
Long Run ◽  
Productive Government Spending

PurposeRecent research supports the role of productive government spending as an important determinant of economic growth. Previous analyses have focused on the separate effects of public investment in infrastructure and on investment in education. This paper aims to introduce both types of public investment simultaneously, enabling the authors to address the trade‐offs that resource constraints may impose on their choice.Design/methodology/approachThe authors employ a two‐sector endogenous growth model, with physical and human capital. Physical capital is produced in the final output sector, using human capital, physical capital, and government spending on infrastructure. Human capital is produced in the education sector using human capital, physical capital, and government spending on public education. The introduction of productive government spending in both sectors yields an important structural difference from the traditional two‐sector growth models in that the relative price of human to physical capital dynamics does not evolve independently of the quantity dynamics.FindingsThe model yields both a long‐run growth‐maximizing and welfare‐maximizing expenditure rate and allocation of expenditure on productive capital. The welfare‐maximizing rate of expenditure is less than the growth‐maximizing rate, with the opposite being the case with regard to their allocation. Moreover, the growth‐maximizing value of the expenditure rate is independent of the composition of government spending, and vice versa. Because of the complexity of the model, the analysis of its dynamics requires the use of numerical simulations the specific shocks analyzed being productivity increases. During the transition, the growth rates of the two forms of capital approach their common equilibrium from opposite directions, this depending upon both the sector in which the shock occurs and the relative sectoral capital intensities.Research limitations/implicationsThese findings confirm that the form in which the government carries out its productive expenditures is important. The authors have retained the simpler, but widely employed, assumption that government expenditure influences private productivity as a flow. But given the importance of public investment suggests that extending this analysis to focus on public capital would be useful.Originality/valueTwo‐sector models of economic growth have proven to be a powerful tool for analyzing a wide range of issues in economic growth. The originality of this paper is to consider the relative impact of government spending on infrastructure and government spending on human capital and the trade‐offs that they entail, both in the long run and over time.

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