scholarly journals The Role of Fiscal Policy in The Inflation: VAR Analysis of Kazakhstan’s Economy, 2005-2020

2021 ◽  
Author(s):  
Zhandos Ybrayev
Keyword(s):  
Fiscal Policy ◽  
Open Economy ◽  
Inflation Rate ◽  
Social Protection ◽  
Government Expenditure ◽  
Small Open Economy ◽  
Positive Effects ◽  
Rate Vector ◽  
The Government ◽  
Domestic Inflation

Abstract The paper analyzes the patterns of dynamic effects of fiscal policy to domestic inflation in the context of a small open economy. Using 4-variable (government spending, fiscal deficit, money stock (M2), and domestic inflation rate) vector autoregression model estimated with quarterly data for Kazakhstan’s economy in the period of 2005Q1-2020Q1. We distinguish between government expenditure on consumption and investment. As a result, we find that a fiscal policy shock have certain positive effects on the inflation rate. In particular, social protection spending adds 1% to the inflation rate in the following four quarters, while the government capital purchases do not produce sizable effect on inflation dynamics even in the longer term horizons. Overall, for the fiscal policy to become inflation-neutral, we suggest several policy recommendations.

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.

Prescribing for the tourism-induced Dutch disease: A DSGE analysis of subsidy policies

2018 ◽  
Vol 25 (6) ◽  
pp. 942-963 ◽  
Author(s):  
Hongru Zhang ◽  
Yang Yang
Keyword(s):  
Open Economy ◽  
Manufacturing Sector ◽  
Small Open Economy ◽  
Dutch Disease ◽  
Welfare Gains ◽  
Positive Effects ◽  
Tourism Sector ◽  
Dynamic Stochastic ◽  
The Government ◽  
Production Subsidies

Tourism-induced Dutch disease can be particularly detrimental to small open economies due to deindustrialization and potential long-term welfare loss. This study adopts an innovative macroeconomic modelling tool, dynamic stochastic general equilibrium modelling, to investigate the effects of external inbound tourism booms on the national economic account of a small open economy. The results confirm the existence of Dutch disease, but tourism booms also bring welfare gains to the destination country. We further model the effects of two strategies to mitigate the Dutch disease by assuming that the government can tax the tourism sector and subsidize the manufacturing sector in two ways: production subsidies and investment subsidies. The results show that the effectiveness of production subsidies is very modest, while investment subsidies can almost completely overturn the Dutch disease. In terms of welfare, investment subsidies lower welfare gains in the very short term, but the positive effects persist over the longer term, which is different from the production subsidy case. Last, practical implications are provided.

scholarly journals Fiscal Impacts on Output in a Small Open Economy: The Case of Albania

2016 ◽  
Vol 63 (2) ◽  
pp. 161-169
Author(s):  
Nikolay Patonov
Keyword(s):  
Open Economy ◽  
Government Expenditure ◽  
Small Open Economy ◽  
Tax Revenue ◽  
Vector Autoregressive ◽  
Gdp Growth Rate ◽  
Fiscal Impacts ◽  
Policy Impacts ◽  
The Government ◽  
Empirical Methodology

The paper is intended to study the effects of total government spending and tax revenue on the annual GDP growth rate in Albania. On this base, we can examine whether and to which extent the macroeconomic governance could rely on those fiscal instruments in terms of a small open economy. The empirical methodology is based on regression analysis which includes OLS estimation on simply specified regression model and Vector Autoregressive estimates. The results support the assumptions that government expenditure is a weak instrument for policy impacts and the government must rely on taxation to stimulate economic growth.

HABIT FORMATION AND GOVERNMENT SPENDING IN A SMALL OPEN ECONOMY

2003 ◽  
Vol 7 (3) ◽  
pp. 407-423 ◽  
Author(s):  
Cem Karayalçin
Keyword(s):  
Fiscal Policy ◽  
General Equilibrium ◽  
Current Account ◽  
Open Economy ◽  
Equilibrium Model ◽  
Government Spending ◽  
Time Preference ◽  
Small Open Economy ◽  
Long Run ◽  
Fiscal Shocks

The paper studies the effects of an expansionary fiscal policy in a general equilibrium model of a small open economy. Households are assumed to possess habit-forming, endogenous rates of time preference. In response to fiscal shocks, the model generates cyclical endogenous persistence and procyclical time paths for consumption, employment, and investment, as well as a countercyclical path for the current account. Furthermore, fiscal shocks are shown to have positive long-run effects on output and negative long-run effects on consumption.

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.

FINANCIAL TSUNAMI, ECONOMIC INSECURITY AND SOCIAL PROTECTION: THE CASE OF HONG KONG

2009 ◽  
Vol 43 (02) ◽  
pp. 97-119 ◽  
Author(s):  
KIM MING LEE ◽  
CHING YIN CHENG
Keyword(s):  
Hong Kong ◽  
Social Policy ◽  
Open Economy ◽  
Global Economy ◽  
Social Protection ◽  
The United States ◽  
Protection System ◽  
Economic Insecurity ◽  
The Social ◽  
The Government

Rising economic inequality becomes an important concern for both advanced and developing countries. Nonetheless, political and business elites around the world never question the neoliberal agenda, despite economic crises happening every now and then. The year 2007 may mark the turning point of neoliberal globalisation. As the global financial tsunami kicked off from the burst of the subprime mortgage bubble in the United States in 2007, the global economy is facing an economic hardship never heard of since the Great Depression in the 1930s. Hong Kong as a highly open economy is also severely hurt by the financial tsunami. In every economic recession, all Hong Kong people suffer, but lower classes suffer most. This raises a serious question about whether the current social protection system adequately protects people against an increasingly risky global economic environment. By examining the social policy package adopted by the HK government in fighting against the financial tsunami, we show the lack of long-term strategies and commitments of the government in protecting HK people against globalisation risks and economic insecurity. By drawing experiences from other countries, we suggest that active labour market policies (ALMPs) may be the social policy tools the government can use to reform the social protection system.

scholarly journals Savers, Spenders and Fiscal Policy in a Small Open Economy

2007 ◽  
Vol 7 (1) ◽  
Author(s):  
Egil Matsen ◽  
Tommy Sveen ◽  
Ragnar Torvik
Keyword(s):  
Fiscal Policy ◽  
Open Economy ◽  
Small Open Economy

WHICH INFLATION TO TARGET? A SMALL OPEN ECONOMY WITH STICKY WAGES

2012 ◽  
Vol 18 (1) ◽  
pp. 145-174 ◽  
Author(s):  
Alessia Campolmi
Keyword(s):  
Open Economy ◽  
Inflation Targeting ◽  
Consumer Price Index ◽  
Small Open Economy ◽  
Target Variable ◽  
Price Inflation ◽  
Standard Result ◽  
Trade Elasticity ◽  
Sticky Wages ◽  
Domestic Inflation

There is common agreement on price inflation stabilization being one of the objectives of monetary policy. But, in an open economy, two alternative measures of inflation coexist: domestic inflation and consumer price inflation. Which of the two should be the target variable? Most of the new open economy macroeconomics (NOEM) literature suggests that the monetary authority should stabilize domestic inflation. This is in sharp contrast with the practice of many inflation-targeting central banks that are using consumer price index (CPI) inflation as target variable. The paper shows that the standard result in the NOEM literature is derived under the simplifying assumption of flexible wages. The inclusion of sticky wages in an otherwise standard small open economy model is shown to rationalize CPI inflation targeting. This conclusion is robust to changes in key parameters, including the trade elasticity.

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