scholarly journals The Fiscal Reaction Function and the Transmission Mechanism for Pakistan

2007 ◽  
Vol 46 (4II) ◽  
pp. 435-447 ◽  
Author(s):  
Mahmood Khalid ◽  
Wasim Shahid Malik ◽  
Abdul Sattar
Keyword(s):  
Monetary Policy ◽  
Side Effects ◽  
Fiscal Policy ◽  
Supply And Demand ◽  
New Keynesian ◽  
Supply Side ◽  
Demand Side ◽  
Long Run ◽  
Short Run ◽  
Macro Variables

Modern macroeconomics literature emphasises both the short run and long run objectives of fiscal policy [Romer (2006)]. In the short run it can be used to counter output cyclicality and/or stabilise volatility in macro variables, which is descriptively same as of effects of the short run monetary policy. Further for the long-run, fiscal policy can also affect both the demand and supply side of the economy. But in most traditional analyses it is assumed that fiscal policy would adjust to ensure the intertemporal budget constraint to be satisfied, while monetary policy is free to adjust its instruments [‘Ricardian Regime’ by Sargent (1982)] such as stock of money supply or the nominal interest rate [Walsh (2003)]. The debt financing methods, expenditure and tax powers of fiscal authorities i.e. the fiscal policy has also been seen as to affect both the supply and demand side of the economy. As noted by Baxter and King (1993), the initial Real Business Cycle models had only the supply side effects of the fiscal policy, where these were transmitted through the wealth effect and labourleisure choices of the household. Recently also New-Keynesian type models with micro-foundations and sticky prices argue that still through the supply side fiscal policy management could be accorded for stabilisation [Linnemann and Schabert (2003)]. The demand side effects of the fiscal policy could also be found only with more imperfections such as ‘Rule of Thumb’ consumers or those with liquidity constraints, which lead to exclusion of Ricardian equivalence [Gali, et al. (2005)]. But all that depends on the structure of the economy, as Blanchard and Perotti (2002) stated:

scholarly journals An econometric analysis of the effectiveness of fiscal and monetary policies in India

2021 ◽  
Author(s):  
Anand Nadar
Keyword(s):  
Economic Growth ◽  
Monetary Policy ◽  
Fiscal Policy ◽  
Money Supply ◽  
Series Data ◽  
Monetary Policies ◽  
Indian Economy ◽  
Long Run ◽  
Short Run ◽  
Bound Test

This study investigatesthe effectiveness of fiscal policy and monetary policy in India. We collected thetime series data for India ranging from 1960 to 2019 from World Development Indicator (WDI). Weapplied the bound test co-integration approach to check the long-run relationship between fiscalpolicy, monetary policy, and economic growth in the context of Indian economy. The short-run andlong-run effects of fiscal policy and monetary policy have been estimated using ARDL models. Theresults showed that there is a long-run relationship between fiscal and monetary policies witheconomic growth. The estimated short-run coefficients indicated that a few immediate short runimpacts of fiscal and monetary policies are insignificant. However, the short-run impacts becomesignificant as time passes. The long-run results suggested that the long-run impact of both fiscal andmonetary policies on economic growth are positive and significant. More specifically, the GDP levelincreases if the money supply and government expenditure increase (Expansionary fiscal andmonetary policies). On the other hand, the GDP level decreasesif the money supply and governmentexpenditure decrease (contractionary fiscal and monetary policies). Therefore, this studyrecommends to use expansionary policies to spur the Indian economy.

scholarly journals Supply-Side and Demand-Side Cost Sharing in Health Care

1993 ◽  
Vol 7 (4) ◽  
pp. 135-151 ◽  
Author(s):  
Randall P Ellis ◽  
Thomas G McGuire
Keyword(s):  
Health Care ◽  
Cost Sharing ◽  
Health Care Services ◽  
Financial Risk ◽  
Supply And Demand ◽  
Supply Side ◽  
Demand Side ◽  
Health Care Demand ◽  
Financial Risk Protection ◽  
Long Run

In health markets, the price paid by insured consumers when health care services are demanded can be set separately from the price paid to providers when services are supplied. This fact suggests two alternate strategies for controlling the costs of health care: demand-side cost sharing, where patients must pay more in co-payments or deductibles, and supply-side cost sharing, which seeks to alter the incentives of health care workers to provide certain services. We review the rationale, limits, and comparative advantage of demand- and supply-side cost sharing in health care while primarily focusing on the short-run pursuit of consumer financial risk protection and efficiency. We then turn briefly to the long-run issue of technology adoption, as well as the how supply- and demand-side cost sharing may affect the fairness of the health system.

scholarly journals Cyclical Fluctuation, Growth, and Stabilization: An Empirical Investigation of Dual Policy Objectives in Bangladesh

2020 ◽  
Author(s):  
Richmond Sam Quarm ◽  
Mohamed Osman Elamin Busharads
Keyword(s):  
Monetary Policy ◽  
Fiscal Policy ◽  
Business Cycle ◽  
Interest Rates ◽  
Money Supply ◽  
Macroeconomic Policy ◽  
Output Growth ◽  
Long Run ◽  
Short Run ◽  
The Business Cycle

In conventional economics, two types of macroeconomic policy i.e. fiscal policy and monetary policy are used to streamline the business cycle. This paper has examined the cyclical behavior of these variables over the business cycle of Bangladesh. The objective of this examination is to show whether policies (fiscal policy and monetary policy) in Bangladesh are taken with a motive to stabilize the economy or only to promote economic growth. In other words, it has examined whether the policies in Bangladesh are procyclical or countercyclical or acyclical. Hodrick Prescott (HP) filter has been used to separate the cyclical component of considered variables. Both correlation and regression-based analysis have provided that in Bangladesh government expenditure and interest rates behave procyclically, but money supply behaves acyclically over the business cycle. Besides, this paper has tried to identify the long-term as well as the short-term relationship between real GDP and the macroeconomic policy variables with the help of the Johansen cointegration test, vector error correction model (VECM), and block exogeneity Wald test. Through these analyses, this study has found that fiscal policy has a significant impact on GDP growth both in the short-run and long-run. In the case of monetary policy, although the interest rate has an impact on real output both in the short-run and long-run, the money supply has neither a short-run nor long-run effect on output growth.

scholarly journals Impact of Monetary Policy Uncertainty and Fiscal Policy Uncertainty on CO2 Emissions in the Us

2020 ◽  
Author(s):  
Khalid Anser ◽  
Qasim Syed ◽  
Noreen Khalid ◽  
Jamshid Ali Turi ◽  
Juned Ali Shah
Keyword(s):  
Monetary Policy ◽  
Fiscal Policy ◽  
Environmental Degradation ◽  
Carbon Emissions ◽  
Annual Data ◽  
Policy Uncertainty ◽  
Policy Makers ◽  
Long Run ◽  
Short Run ◽  
The Impact

Abstract Nowadays, environmental degradation is perceived as one of the serious concerns across the globe. One of the prime reasons behind environmental degradation is CO2 emissions. Therefore, researchers are actively putting their efforts to explore the determinants of CO2 emissions to mitigate CO2 emissions. On this basis, the present study contributes to the existing literature by investigating the impact of monetary policy uncertainty (MPU) and fiscal policy uncertainty (FPU) on CO2 emissions (environmental degradation). The current study employs ARDL methodology and uses annual data ranging from 1985 to 2019 for US. The results from the ARDL model report that there is an existence of long-run relationship among the variables. Moreover, MPU escalates the carbon emissions in both short-run and long-run. This implies that increase in MPU is responsible for rise in environmental degradation. On the contrary, FPU plunges the carbon emissions in both short- and long-run. This indicates that increase in FPU decreases the environmental degradation. Findings from the current study propose that policy makers should introduce reforms and launch policies to shrink MPU. Next, this study proposes that rule should be adopted as monetary policy making framework in lieu of discretion. Furthermore, the current study recommends that FPU should not be utilized as a tool to mitigate environmental degradation, because FPU has severe economic impacts.

scholarly journals The Effectiveness of Fiscal and Monetary Policy: Case of Uzbekistan

2020 ◽  
Vol 6 (3) ◽  
pp. 266-274
Author(s):  
Sh. Sitmuratov
Keyword(s):  
Monetary Policy ◽  
Fiscal Policy ◽  
Interest Rate ◽  
Current Period ◽  
Long Run ◽  
Equilibrium Relationship ◽  
Goods Market ◽  
Short Run ◽  
Monetary And Fiscal Policy ◽  
Fiscal And Monetary Policy

The article examines an effectiveness of government monetary and fiscal policy for Uzbekistan by constricting IS-curve for goods market and LM-curve for money market, simultaneously. For the both markets equilibrium interest rate is also determined. The results show that the variables are co integrated, that the variables have long-run or short-run equilibrium relationship between them. According to the empirical results, the long-run equilibrium interest rate for covered period was 22.0% for Uzbekistan, for the current period we recommend the equilibrium interest rate around 15%.

Short Run Costs of Structural Reforms

2018 ◽  
Author(s):  
Rana Sajedi
Keyword(s):  
Monetary Policy ◽  
Fiscal Policy ◽  
Potential Role ◽  
Product Market ◽  
Labour Markets ◽  
Structural Reforms ◽  
Costs And Benefits ◽  
Trade Off ◽  
Long Run ◽  
Short Run

Structural reforms that increase competition in product markets, or increase flexibility in labour markets, can entail short run output costs unless offset by a demand expansion. When monetary policy is constrained and cannot carry out this short run expansion, there is a potential role for fiscal policy. This chapter quantifies these short run fiscal costs and long run fiscal benefits of reforms, and investigates how the design of reforms can affect this trade-off. In the model, both the costs and benefits of reforms are generally small, although increasingly large reforms entail larger rises in deficit-to-GDP in the short run. Results suggest that reforms in labour markets have little effect on public finances in the long run, but can help to ameliorate the short run costs of product market reforms.

scholarly journals Cyclical Fluctuation, Growth, and Stabilization: An Empirical Investigation of Dual Policy Objectives in Bangladesh

2020 ◽  
Vol 3 (4) ◽  
Author(s):  
Sakil Ahmmed ◽  
◽  
Jonaed Jonaed
Keyword(s):  
Monetary Policy ◽  
Fiscal Policy ◽  
Business Cycle ◽  
Interest Rates ◽  
Money Supply ◽  
Macroeconomic Policy ◽  
Output Growth ◽  
Long Run ◽  
Short Run ◽  
The Business Cycle

In conventional economics, two types of macroeconomic policy i.e. fiscal policy and monetary policy are used to streamline the business cycle. This paper has examined the cyclical behavior of these variables over the business cycle of Bangladesh. The objective of this examination is to show whether policies (fiscal policy and monetary policy) in Bangladesh are taken with a motive to stabilize the economy or only to promote economic growth. In other words, it has examined whether the policies in Bangladesh are procyclical or countercyclical or acyclical. Hodrick Prescott (HP) filter has been used to separate the cyclical component of considered variables. Both correlation and regression-based analysis have provided that in Bangladesh government expenditure and interest rates behave procyclically, but money supply behaves acyclically over the business cycle. Besides, this paper has tried to identify the long-term as well as the short-term relationship between real GDP and the macroeconomic policy variables with the help of the Johansen cointegration test, vector error correction model (VECM), and block exogeneity Wald test. Through these analyses, this study has found that fiscal policy has a significant impact on GDP growth both in the short-run and long-run. In the case of monetary policy, although the interest rate has an impact on real output both in the short-run and long-run, the money supply has neither a short-run nor long-run effect on output growth.

scholarly journals Monetary and Fiscal Policy in the Presence of Informal Labour Markets: A DSGE Approach

2021 ◽  
Vol 12 (1) ◽  
pp. 213
Author(s):  
Omobola Adu ◽  
Philip Alege ◽  
Oluranti Olurinola
Keyword(s):  
Monetary Policy ◽  
Fiscal Policy ◽  
Informal Economy ◽  
New Keynesian ◽  
Policy Shocks ◽  
Informal Labour ◽  
Short Run ◽  
Dynamic Stochastic ◽  
Monetary Policy Shock ◽  
Monetary And Fiscal Policy

In this paper, we investigate the transmission mechanism of monetary and fiscal policy shocks on inflation and output in the presence of an informal economy in Nigeria. To achieve this, a New Keynesian Dynamic Stochastic General Equilibrium (DSGE) model is modified to include informality in the labour and product market. The model is estimated using the Bayesian technique and the findings shows that in the case of a monetary policy shock, formal output tends to decline, while there is an expansion in informal output, at least in the short-run. The results also reveal that a fiscal policy shock brings about an initial decline in informal output. Hence, it is imperative for policymakers to strive to formalise the informal sector in order to ensure the effectiveness of monetary policy.

scholarly journals Tackling inflation in Nigeria: Monetary or fiscal policy? An empirical assessment of the effectiveness of the simultaneous implementation of the policies

2020 ◽  
Vol 1 (Number 1) ◽  
pp. 26-45
Author(s):  
Ibrahim Abdulhami Danlami ◽  
Mohamad Helmi Hidthiir ◽  
Sallahuddin Hassan
Keyword(s):  
Monetary Policy ◽  
Fiscal Policy ◽  
Market Equilibrium ◽  
Product Market ◽  
Fiscal Policies ◽  
Distributed Lag ◽  
Distributed Lag Model ◽  
Long Run ◽  
Short Run ◽  
Lag Model

The study is aimed at empirically assessing between monetary policy and fiscal policy, the most effective in combating and tackling inflation in Nigeria, especially when implemented simultaneously – the effect of the concurrent implementation of the two policies on inflation. The variables of the policies are based on market information, money market equilibrium (LM Curve) for monetary policy, and product market equilibrium (IS Curve) for fiscal policy. The research makes use of the Autoregressive Distributed Lag Model (ARDL). Data for Nigerian was used from 1970 – 2016. The findings show that monetary and fiscal policies can be implemented concurrently as monetary policy is the best for a short-run solution during the fiscal policy for a long-run solution. The findings of the study are based on Nigerian data utilized for the period 1970 – 2016 and the method of data analysis adopted – ARDL, as well as variables selection based on the general equilibrium of money and product market. The findings of the study clearly show that monetary and fiscal policies can be used simultaneously to tackle inflation in Nigeria successfully, being effective in combating inflation in different periods (short-run or long-run). The study attempted to harmonize the incompatible theories and their policies to see whether the policies can be utilized concurrently since the policies are aimed at effecting price stability. The research’s findings confirm the feasibility of implementing the two policies concurrently and their effects to be felt or realized in different periods – short-runs and long-runs.

scholarly journals WHAT DRIVES MICROFINANCE CREDIT DISBURSEMENT? AN EMPIRICAL EVIDENCE FROM INDONESIA’S RURAL BANKS (BPRs)

2018 ◽  
Vol 25 (2) ◽  
pp. 21-32
Author(s):  
Nika Pranata ◽  
Nurzanah Nurzanah
Keyword(s):  
Consumer Price Index ◽  
Small Enterprises ◽  
Supply Side ◽  
Demand Side ◽  
Monthly Data ◽  
Distributed Lag ◽  
Autoregressive Distributed Lag ◽  
Long Run ◽  
Short Run ◽  
Micro And Small Enterprises

The paper investigates determinants of Indonesia’s microfinance credit disbursement, case taken from Indonesia’s rural banks (BPRs) which primarily focus on providing funding to the Micro and Small Enterprises (MSEs). The study applies Autoregressive Distributed Lag (ARDL) model by using monthly data over the period of January 2009 to January 2016. Result indicates that rural banks credit disbursement is more determined by demand side rather than supply side as variable representing demand side (production index) has significant effect to credit disbursement both long run and short run. In terms of supply side, the amount of credit disbursement is affected by interbank fund in the long run, whereas in the short run the significant variables are customer fund and internal fund. In addition, Consumer Price Index (CPI) and Non-Performing Loan (NPL) impose significant effect to the microfinance credit disbursement; yet, interestingly, interest rate is not a significant factor in microfinance’s case. 

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