Empirical Analysis of the Effect of Fiscal Policy Shocks in China

2021 ◽  
Vol 0 (0) ◽  
Author(s):  
Jia Ji
Keyword(s):  
Fiscal Policy ◽  
Interest Rates ◽  
Government Spending ◽  
Policy Design ◽  
Policy Decision ◽  
Growth Stimulation ◽  
Economic Activities ◽  
Policy Makers ◽  
Policy Shocks ◽  
Tax Shocks

Abstract The central issues concerning fiscal policy makers include macroeconomic stability and growth stimulation. The policy decision process is facilitated by investigation on the effects of fiscal policy, such as a change in government spending or taxes on macroeconomic variables comprising inflation, aggregate output, and interest rates. Build on the Blanchard-Perotti identification approach, this paper empirically analyses the influence of fiscal policy to aggregate economic activities in China, and the estimated results are compared between China and the advanced economies. The findings demonstrate that the impulse responses incurred by tax shocks are generally stimulative, although government spending shocks tend to be neutral, revealing meaningful implications for the fiscal space and policy design.

The Impact of Fiscal Policy on Economic Activity over the Business Cycle: An Empirical Investigation in the Case of Algeria

2019 ◽  
Vol 15 (3) ◽  
Author(s):  
Abderrahim Chibi ◽  
Sidi Mohamed Chekouri ◽  
Mohamed Benbouziane
Keyword(s):  
Fiscal Policy ◽  
Business Cycle ◽  
Government Spending ◽  
Economic Recession ◽  
Policy Decision ◽  
Vector Autoregressive ◽  
Asymmetric Effects ◽  
The Business Cycle ◽  
The Right ◽  
The Impact

Abstract In this paper, we aim to analyze whether the effect of fiscal policy on economic growth in Algeria differs throughout the business cycle. To tackle this question, we use a Markov Switching Vector Autoregressive (MSVAR) framework. We find evidence of asymmetric effects of fiscal policy through regimes, defined by the state of the business cycle (recession and boom). The results show small positive government spending and revenue multipliers in the short term in both regimes. Most importantly, fiscal policy shocks have a stronger impact in times of economic recession than in times of expansion, which confirm the hypothesis of asymmetric effects. However, the impact of government spending is stronger than the impact of public revenue during recession periods. In addition, fiscal policy decision-makers interact with Anti-Keynesian view (pro-cyclical). Our results imply that there is something to gain by using the "right instrument" at the "right time".

scholarly journals Analisis Dampak Kebijakan Fiskal terhadap Pertumbuhan Ekonomi di Indonesia

2010 ◽  
Vol 10 (2) ◽  
pp. 159-174 ◽  
Author(s):  
Ahmad Nawawi ◽  
Ferry Irawan
Keyword(s):  
Fiscal Policy ◽  
Dynamic Response ◽  
Disposable Income ◽  
Government Expenditures ◽  
Impulse Responses ◽  
Tax Revenues ◽  
Policy Shocks ◽  
Tax Shocks

This paper presents an analysis of the effect of fiscal policy in Indonesia based on a VAR approach. Fiscal policy shocks are identified as a structural residuals related to unexpected government expenditures and tax revenues. Impulse responses are then used to simulate the dynamic response of key macroeconomics variables of shocks. The analysis shows that GDP responses negatively to tax shocks, and positively to expenditure shock. Moreover, disposable income and private consumptionreact negatively to taxation and positively to government expenditures. Altogether the results are consistent with that of Keynesian models.

scholarly journals PENERAPAN METODE VECTOR AUTO REGRESSION DALAM INTERAKSI KEBIJAKAN FISKAL DAN MONETER DI INDONESIA

2013 ◽  
Vol 14 (1) ◽  
pp. 66
Author(s):  
Adrian Sutawijaya ◽  
Etty Puji Lestari
Keyword(s):  
Monetary Policy ◽  
Fiscal Policy ◽  
Interest Rates ◽  
National Income ◽  
Policy Instruments ◽  
Coherent System ◽  
Inflation Rates ◽  
Policy Shocks ◽  
System Variables ◽  
Fiscal And Monetary Policy

The purpose of this study is to analyze the interaction of fiscal and monetary policy in Indonesia, especially after the introduction of fiscal and monetary policy shocks. The research method used is the vector autoregression (VAR). VAR is usually used for projecting coherent system variables and time to analyze the dynamic impact of disturbance factors contained in the system variables. Variables used in this study is the level of interest rates as a proxy for monetary policy instruments, government expenditures as a proxy for fiscal policy, inflation rates and national income. The results show that fiscal policy is a negative shock to inflation and responded with a tight monetary policy, while the shock in monetary policy will reduce national income. The application of fiscal and monetary policies that will effectively promote economic growth.

Building the tools to speed up the policy design cycle: letting policy makers work with hydrologic models themselves through eWaterCycle

2021 ◽  
Author(s):  
Nick van de Giesen ◽  
Rolf Hut ◽  
Niels Drost ◽  
Keyword(s):  
Web Applications ◽  
Policy Design ◽  
Policy Decision ◽  
Low Flow ◽  
Hydrologic Models ◽  
Policy Makers ◽  
Design Cycle ◽  
Research Platform ◽  
Speed Up ◽  
Political Decisions

<p>Building the tools to speed up the policy design cycle: letting policy makers work with hydrologic models themselves through eWaterCycle</p><p> </p><p>Hydrologists are important experts that policy makers rely on when making water related decisions. Through policy briefs, often including scenario simulations, policy makers are informed about the consequences their (intended) policies (or lack thereof) will have.</p><p> </p><p>In drafting policy briefs, or choosing which scenario to run, scientists inevitably make political decisions, from obvious ones (how to weigh the importance of one land use type over another) to more hidden ones (using Kling-Gupta efficiency, which focuses more on low flow, to calibrate a model instead of Nash-sutcliffe efficiency, which focuses more on high flows). Ideally one wants to design the policymaker - scientist interaction such that most political decisions are made by the policymaker, without requiring her/him to become an expert hydrologist in the process. Any remaining (inevitable) decisions made by the hydrologist should be as transparent as possible.</p><p> </p><p>The eWaterCyle hydrologic research platform facilitates this type of policy maker - hydrologists interaction. Within the platform experiments such as scenario runs are Jupyter notebooks that a governmental data-scientist can construct without having to be an expert in the hydrological models used: these are stored in (OPEN and FAIR) containers. Interactive web applications  can be easily built on top of these notebooks using widgets, to allow the ultimate political decision maker to explore a broader range of policy options, instead of having to choose from a view of pre-run scenarios. </p><p> </p><p>We will present a few examples of how the eWaterCycle hydrological research platform can be used to support water-relevant policy decision making.</p>

HOME BIAS IN GOVERNMENT SPENDING AND QUASI NEUTRALITY OF FISCAL SHOCKS

2005 ◽  
Vol 9 (2) ◽  
pp. 288-294 ◽  
Author(s):  
GIOVANNI GANELLI
Keyword(s):  
Fiscal Policy ◽  
Government Spending ◽  
Home Bias ◽  
Policy Implications ◽  
Policy Shocks ◽  
Fiscal Shocks

We show how introducing home bias in government spending in the redux model generates quasi neutrality of fiscal policy shocks. We offer an intuitive explanation for this result and we stress its policy implications.

Are there asymmetries in fiscal policy shocks?

2015 ◽  
Vol 42 (2) ◽  
pp. 303-321 ◽  
Author(s):  
Periklis Gogas ◽  
Ioannis Pragidis
Keyword(s):  
Growth Rate ◽  
Fiscal Policy ◽  
Government Spending ◽  
Government Revenue ◽  
Content Type ◽  
Keynesian Theory ◽  
Different Types ◽  
Cyclical Component ◽  
Policy Shocks ◽  
Spending Shocks

Purpose – The purpose of this paper is to test the effects of unanticipated fiscal policy shocks on the growth rate and the cyclical component of real private output and reveal different types of asymmetries in fiscal policy implementation. Design/methodology/approach – The authors use two alternative vector autoregressive systems in order to construct the fiscal policy shocks: one with the simple sum monetary aggregate MZM and one with the alternative CFS Divisia MZM aggregate. From each one of these systems we extracted four types of shocks: a negative and a positive government spending shock and a negative and a positive government revenue shock. These eight different types of unanticipated fiscal shocks were used next to empirically examine their effects on the growth rate and cyclical component of real private GNP in two sets of regressions: one that assumes only contemporaneous effects of the shocks on output and one that is augmented with four lags of each fiscal shock. Findings – The authors come up with three key findings: first, all fiscal multipliers are below unity but with signs as predicted by Keynesian theory. Second, government expenditures have a larger impact as compared to the tax policy and finally, positive government spending shocks are more significant than negative spending shocks. All these results are in line with previous studies and are robust through many tests using structural identification proposed by Blanchard and Perotti (2002). Practical implications – The empirical findings in this manuscript can be used for conducting a more efficient fiscal policy. The importance of government spending shocks is empirically verified along with the asymmetries related to price stickiness predicted by Keynesian theory. According to the results an efficient fiscal policy would: in terms of an expansionary policy, use government spending as a means to stimulate the economy instead of tax cuts and in the case of a contractionary policy use government revenue (higher taxes) so that the costs of this policy in terms of output lost are lower. Originality/value – In this study the authors introduce three main innovations: first, to the best of our knowledge the Divisia monetary aggregates have not yet been used to previous research pertaining to fiscal policy. Second, following Cover’s (1992) procedure of identifying monetary policy shocks we extract the unanticipated fiscal policy shocks on government spending and revenue. Finally, the authors explicitly test for the asymmetric effects on the growth rate and the cyclical component of real private GNP of a contractionary and expansionary fiscal policy.

scholarly journals Fiscal Discretion and Its Impact on Pakistan Economy

2012 ◽  
Vol 51 (4II) ◽  
pp. 339-364
Author(s):  
Muhammad Ismail ◽  
Fazal Husain
Keyword(s):  
Fiscal Policy ◽  
Business Cycles ◽  
Government Spending ◽  
Economic Activity ◽  
Banking System ◽  
Economic Activities ◽  
Fiscal Management ◽  
Multiplier Effects ◽  
The Government ◽  
Corrective Response

Macroeconomics addresses output, employment and price fluctuations during business cycles. Business cycles which capture variation in economic activity emerge generally due to instable investment, frequent changes in money and credit through banking system and unmanageable haphazard proceedings of wars or political instability. Business cycles inherent features of mixed economic system where households and businesses composed of different motivations spend and produce, differ in their respective economic activities. The occurrence of this difference results in creation of waves in economic activities, which are the business cycles [Spencer and Amos (1993)]. Output variation in moderate context is either a recession or recovery. During recession the economic activity falls which not only reduces employment opportunities but creates gap between potential and actual output of an economy. The federal government tries to keep the adverse effects of business cycle at bay all together. Economists admit that private sector is unable to protect the economy from uncontrolled variations in employment and inflation. In this scenario the government’s fiscal management is corrective response for the problems of recovery and recession. The government makes use of public spending and taxes to minimise the gap of business cycles. This process is called fiscal policy and the deliberate government involvement to stabilise economy is regarded as discretionary fiscal policy. The government can make use either taxes or government spending or both to stabilise economy but in this study we only used government spending due to its larger and positive multiplier effects.

scholarly journals The impact of fiscal policy on inflation in Nigeria

2015 ◽  
Vol 5 (1) ◽  
pp. 123-132
Author(s):  
Godly Otto ◽  
Wilfred I. Ukpere
Keyword(s):  
Fiscal Policy ◽  
Government Spending ◽  
Academic Staff ◽  
Ordinary Least Squares ◽  
Least Squares Regression ◽  
Monetary Policies ◽  
Policy Makers ◽  
Policy Impacts ◽  
Using Data ◽  
The Impact

nflation is a major problem in Nigeria. To stabilize the economy, policy makers have often used fiscal and monetary policies to address inflation. For efficacy of policy, it is important to know the likely influence of each of these on inflation in order to properly prescribe a solution. This work attempts to see the impact of fiscal policy on inflation. This is necessary because of the current demands of the Academic Staff Union of Universities (ASUU), which is likely to increase government spending and possible inflation. Using data from the Central Bank of Nigeria spanning 32 years, the study used an ordinary least squares regression analysis, and observed that fiscal policy impacts on inflation but such impact is not significant. Therefore, government may on the basis of this study, implement the agreement it had with the Academic Staff Union of Universities without the fear of inflation.

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 Monetary policy decision-making when information search is costly

2016 ◽  
Vol 11 (1) ◽  
pp. 15-22 ◽  
Author(s):  
Alexander Jung ◽  
Francesco Paolo Mongelli
Keyword(s):  
Decision Making ◽  
Monetary Policy ◽  
Interest Rates ◽  
Information Search ◽  
Policy Decision ◽  
Policy Makers ◽  
Voting Rule ◽  
Monetary Policy Committee ◽  
Policy Decision Making ◽  
Policy Committee

This paper explores monetary policy decision-making within an insurance model with expected utility-maximizing policy-makers. The authors consider that policy-makers are different in terms of their backgrounds, experience and skills and they may disagree on the appropriate policy response. In a monetary policy committee, they share information and decide on interest rates by means of an agreed voting rule. The authors show that, in the presence of risk and search costs, it would be optimal for policy-makers to fully insure against the expected loss from a potential policy error. Whether a monetary policy committee sufficiently hedges against this risk will depend on several factors such as the skills of policy-makers, the distribution of members’ beliefs, and the committee’s (statutory) voting rule, but also on other factors not captured by the model

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