scholarly journals THE EFFECT OF COVID-19 PANDEMIC ON MACROECONOMIC STABILITY IN ETHIOPIA

2020 ◽  
Author(s):  
Habtamu Demiessie
Keyword(s):  
Fiscal Policy ◽  
Aggregate Demand ◽  
Food Prices ◽  
Food Price ◽  
Demand Shock ◽  
Shock Effect ◽  
Supply Shock ◽  
The Government ◽  
Macroeconomic Stability

<div>This study investigated the impact of COVID-19 pandemic uncertainty shock on the macroeconomic stability in Ethiopia in the short run period. The World Pandemic Uncertainty Index (WPUI) was used a proxy variable to measure COVID-19 Uncertainty shock effect. The pandemic effect on core macroeconomic variables like investment, employment, prices (both food & non food prices), import, export and fiscal policy indicators was estimated and forecasted using Dynamic Stochastic General Equilibrium (DSGE) Model. The role of fiscal policy in mitigating the shock effect of coronavirus pandemic on macroeconomic stability is also investigated. <br></div><div>The finding of the study reveals that the COVID-19 impact lasts at least three years to shake the economy of Ethiopia. Given that the Ethiopian economy heavily relies on import to supply the bulk of its consumption and investment goods, COVID-19 uncertainty effect starts as supply chain shock, whose effect transmitted into the domestic economy via international trade channel. The pandemic uncertainty shock effect is also expected to quickly transcend to destabilize the economy via aggregate demand, food & non food prices, investment, employment and export shocks.</div><div>The VAR estimate indicates that COVID-19 uncertainty shock results a massive rise in import in the six months following the outbreak of the pandemic. The finding in this regard is expected, as the pandemic triggers massive demand in food and pharmaceuticals, for which Ethiopia is import dependent on both items. In the next two years, however, the import bill of Ethiopia shows a decline. Reduction in aggregate demand (both consumption & investment expenditures) is one explanation for decline in import size in 2013 and 2014 E.C.</div><div>The price dynamics as forecasted in the upcoming three years in Ethiopia tells the direction of impacts of COVID-19 uncertainty shock to shake the macroeconomic order. The findings in this regard revealed the structural breakups of Ethiopian economy, characterized by its inability to withstand shocks. As signaled in forecasted price dynamics on both food and non food price indices, COVID-19 was a supply shock in its first time impact, but quickly transpasses to demand shock. And in the next few years the demand shock outweighs the supply shock. </div><div>The results of estimations indicate that food prices to sky rocketed at least until the end of 2014 E.C (2021/22 E.F.Y). On the other hand, except communication & hotel & restaurant prices, other components of non food price indices show a slump. The decline in non food price level is a clear showcase of under consumption characterizes the economic order in Ethiopia in the coming three years. </div><div>COVID-19 uncertainty shock puts huge loss in the investment sector in Ethiopia at least in the coming two years 2013 and 2014 E.C (2020/21-2021/22). In this regard, the pandemic effect transmitted to shake investment expenditure via the length of the pandemic period itself and export performances, both of which are exogenous shocks. </div><div>The study identified that general under consumption features the Ethiopian economy in the next couple of years. Therefore, the government is expected to enact incentives/policy directions which can boost business confidence. A managed expansionary fiscal policy is found to be key to promote investment, employment and to stabilize food & non-food prices. A particular role of fiscal policy was identified to stabilizing food, transport and communication prices. More importantly, price stabilization policies of the government can have spillover effects in boosting aggregate demand by spurring investments (and widening employment opportunities) in transport/logistics, hotel & restaurant, culture & tourism and export sectors in particular. </div><div><br></div>

scholarly journals THE EFFECT OF COVID-19 PANDEMIC ON MACROECONOMIC STABILITY IN ETHIOPIA

2020 ◽  
Author(s):  
Habtamu Demiessie
Keyword(s):  
Fiscal Policy ◽  
Aggregate Demand ◽  
Food Prices ◽  
Food Price ◽  
Demand Shock ◽  
Shock Effect ◽  
Supply Shock ◽  
The Government ◽  
Macroeconomic Stability

<div>This study investigated the impact of COVID-19 pandemic uncertainty shock on the macroeconomic stability in Ethiopia in the short run period. The World Pandemic Uncertainty Index (WPUI) was used a proxy variable to measure COVID-19 Uncertainty shock effect. The pandemic effect on core macroeconomic variables like investment, employment, prices (both food & non food prices), import, export and fiscal policy indicators was estimated and forecasted using Dynamic Stochastic General Equilibrium (DSGE) Model. The role of fiscal policy in mitigating the shock effect of coronavirus pandemic on macroeconomic stability is also investigated. <br></div><div>The finding of the study reveals that the COVID-19 impact lasts at least three years to shake the economy of Ethiopia. Given that the Ethiopian economy heavily relies on import to supply the bulk of its consumption and investment goods, COVID-19 uncertainty effect starts as supply chain shock, whose effect transmitted into the domestic economy via international trade channel. The pandemic uncertainty shock effect is also expected to quickly transcend to destabilize the economy via aggregate demand, food & non food prices, investment, employment and export shocks.</div><div>The VAR estimate indicates that COVID-19 uncertainty shock results a massive rise in import in the six months following the outbreak of the pandemic. The finding in this regard is expected, as the pandemic triggers massive demand in food and pharmaceuticals, for which Ethiopia is import dependent on both items. In the next two years, however, the import bill of Ethiopia shows a decline. Reduction in aggregate demand (both consumption & investment expenditures) is one explanation for decline in import size in 2013 and 2014 E.C.</div><div>The price dynamics as forecasted in the upcoming three years in Ethiopia tells the direction of impacts of COVID-19 uncertainty shock to shake the macroeconomic order. The findings in this regard revealed the structural breakups of Ethiopian economy, characterized by its inability to withstand shocks. As signaled in forecasted price dynamics on both food and non food price indices, COVID-19 was a supply shock in its first time impact, but quickly transpasses to demand shock. And in the next few years the demand shock outweighs the supply shock. </div><div>The results of estimations indicate that food prices to sky rocketed at least until the end of 2014 E.C (2021/22 E.F.Y). On the other hand, except communication & hotel & restaurant prices, other components of non food price indices show a slump. The decline in non food price level is a clear showcase of under consumption characterizes the economic order in Ethiopia in the coming three years. </div><div>COVID-19 uncertainty shock puts huge loss in the investment sector in Ethiopia at least in the coming two years 2013 and 2014 E.C (2020/21-2021/22). In this regard, the pandemic effect transmitted to shake investment expenditure via the length of the pandemic period itself and export performances, both of which are exogenous shocks. </div><div>The study identified that general under consumption features the Ethiopian economy in the next couple of years. Therefore, the government is expected to enact incentives/policy directions which can boost business confidence. A managed expansionary fiscal policy is found to be key to promote investment, employment and to stabilize food & non-food prices. A particular role of fiscal policy was identified to stabilizing food, transport and communication prices. More importantly, price stabilization policies of the government can have spillover effects in boosting aggregate demand by spurring investments (and widening employment opportunities) in transport/logistics, hotel & restaurant, culture & tourism and export sectors in particular. </div><div><br></div>

scholarly journals COVID-19 Pandemic Uncertainty Shock Impact on Macroeconomic Stability in Ethiopia

2020 ◽  
Vol 11 (2) ◽  
pp. 132
Author(s):  
Habtamu Girma DEMIESSIE
Keyword(s):  
Fiscal Policy ◽  
Aggregate Demand ◽  
Spillover Effects ◽  
Food Prices ◽  
Shock Effect ◽  
Food Transport ◽  
The Government ◽  
The Impact ◽  
Macroeconomic Stability

This study investigated the impact of COVID-19 pandemic uncertainty shock on the macroeconomic stability in Ethiopia in the short run period. The World Pandemic Uncertainty Index (WPUI) was used a proxy variable to measure COVID-19 Uncertainty shock effect. The pandemic effect on core macroeconomic variables like investment, employment, prices (both food & non-food prices), import, export and fiscal policy indicators was estimated and forecasted using Dynamic Stochastic General Equilibrium (DSGE) Model. The role of fiscal policy in mitigating the shock effect of coronavirus pandemic on macroeconomic stability is also investigated. The finding of the study reveals that the COVID-19 impact lasts at least three years to shake the economy of Ethiopia. Given that the Ethiopian economy heavily relies on import to supply the bulk of its consumption and investment goods, COVID-19 uncertainty effect starts as supply chain shock, whose effect transmitted into the domestic economy via international trade channel. The pandemic uncertainty shock effect is also expected to quickly transcend to destabilize the economy via aggregate demand, food & non-food prices, investment, employment and export shocks. The overall impact of COVID-19 pandemic uncertainty shock is interpreted into the economy by resulting under consumption at least in the next three years since 2020. Therefore, the government is expected to enact incentives/policy directions which can boost business confidence. A managed expansionary fiscal policy is found key to promote investment, employment and to stabilize food & non-food prices. A particular role of fiscal policy was identified to stabilizing food, transport and communication prices. The potency of fiscal policies in stabilizing food, transport and communication prices go in line with the prevailing reality in Ethiopia where government has strong hands to control those markets directly and/or indirectly. This suggests market failure featuring COVID-19 time, calling for managed interventions of governments to promote market stabilities. More importantly, price stabilization policies of the government can have spillover effects in boosting aggregate demand by spurring investments (and widening employment opportunities) in transport/logistics, hotel & restaurant, culture & tourism and export sectors in particular.

scholarly journals The effects of income distribution and fiscal policy on aggregate demand, investment and the budget balance: the case of Europe1

2020 ◽  
Vol 44 (6) ◽  
pp. 1221-1243 ◽  
Author(s):  
Thomas Obst ◽  
Özlem Onaran ◽  
Maria Nikolaidi
Keyword(s):  
Fiscal Policy ◽  
Income Distribution ◽  
Aggregate Demand ◽  
Economic Effects ◽  
Simultaneous Increase ◽  
Budget Balance ◽  
Wage Share ◽  
The Government ◽  
Role Of The Government

Abstract This paper develops a multi-country post-Kaleckian model that incorporates the role of the government. One key novelty of the model is that it integrates cross-country effects of changes in both income distribution and fiscal policy. The model is used to estimate econometrically the effects of income distribution and fiscal policy on the components of aggregate demand and the budget balance in EU15 countries. The results show that a simultaneous increase in the wage share in all EU15 countries would increase demand and the primary budget balance in all countries. A simultaneous increase in government spending turns out to boost economic activity in all the EU15 countries, indicating the positive economic effects of expansionary fiscal policy. Moreover, a progressive tax policy that would be implemented simultaneously at the EU level would lead to an increase in output in all countries.

scholarly journals BUDGETARY PROJECTION IN THE SYSTEM OF FINANCIAL AND ECONOMIC REGULATION OF SOCIAL PROCESSES

2020 ◽  
Vol 6 (1) ◽  
pp. 130
Author(s):  
Igor Chugunov ◽  
Valentina Makohon
Keyword(s):  
Time Series ◽  
Fiscal Policy ◽  
Dynamic Balance ◽  
Social Processes ◽  
System Stability ◽  
Policy Outcomes ◽  
Institutional Changes ◽  
Economic Regulation ◽  
Macroeconomic Stability

The purpose of the article is to reveal the role of budgetary projection in the system of financial and economic regulation of social processes within the framework of improving the efficiency of fiscal policy intended to macroeconomic stability maintenance in both countries with transformational and advanced economies. The comparative and factorial methods allowed to developthe features of the institutional environment of the budgetary progection methodology, to identify approaches for its improvement. Methodology. Substantiation of the role of budget forecasting in the system of financial and economic regulation of social processes, determination of provisions for improving its methodology is based on generalized and systematic approaches that are applied in both developed and transformational economies. An analysis of the stages of the process and the budgetary projection methods evaluation, that are used in different countries, have been carried out. Results showed that the efficient budgetary projection methodology is the basis for sound fiscal policy. The development of realistic budgetary projections facilitates justified management decisions aimed at ensuring the country financial firmness. Devia-tions from budget revenues from the projected indicators do not make it possible to achieve certain fiscal policy outcomes and, accordingly, cause a budget cut. In order to develop realistic budgetary projections, a welldesigned and coherent database is needed for all time series, necessary to analyze and project budget revenues. Time series of key determinants affecting the budget revenues level should be available at different frequencies (monthly, quarterly, annually). Where data reflecting similar economic processes by different revenue sources are available, any differences between them shall be determined by reference to their coverage and methodology. Practical implications. Budgetary projections are the basis for the formation of effective fiscal policy and the benchmark of the reproduction process. Adequate level of justification for budget projection will help to provide a dynamic balance of budgetary indicators and the budgetary system stability. Institutional changes to the budgetary projection methodology should be made on the basis of taking into account the dynamic interrelation of budgetary and macroeconomic indicators. The remarkable task here is the development of an economic and mathematical model based on the assessment of the national economy capabilities by reference to the assessment of macroeconomic proportions and the corresponding social and economic conditions of social production. Value/ originality. Developing the budgetary projection approaches in the context of improvement of the fiscal policy efficiency is an important precondition for ensuring macroeconomic stability. In order to increase the budget projection justifiability, it is advisable to make institutional changes to its methodology. Based on the methioned above, the article reveals the essence and role of the budgetary projection in the system of financial and economic regulation of social processes in the context of improving the fiscal policy effectiveness aimed at macroeconomic stability maintenance; approaches to improving the budgetary projection methodology have been identified, and it has been determined that the soundness and feasibility of budgetary projection are the basis for effective fiscal policy. The predictability of budgetary criteria, budgetary architectonics contribute to improving the efficiency of transformations in the public finance system.

scholarly journals Utjecaj proračunskog zakona na upravljanje državom u uvjetima razvoja digitalnog gospodarstva

2019 ◽  
Vol 52 (1-2) ◽  
pp. 17-27
Author(s):  
Imeda Tsindeliani ◽  
Olga Gorbunova ◽  
Elena Matyanova ◽  
Kirill Pisenko ◽  
Oksana Palozyan ◽  
...  
Keyword(s):  
Economic Development ◽  
Fiscal Policy ◽  
Network Management ◽  
Management Model ◽  
Budget Control ◽  
Socio Economic Development ◽  
The Government ◽  
Role Of The Government ◽  
Rule Making

The subjects of this study are the effectiveness of budget innovations in the field budgetary rule making and the role of the government in shaping fiscal policy in a digital economy. The article makes a case for new approaches to budget formation, for the enhanced use of budgetary levers to boost socio-economic development in the context of global digitalization. In order to make the influence of social informatization on economic development more effective, the economy has to move to a flat (network) management model. The problems of budget control are analyzed

Fiscal Adjustment for Stability and Growth

Policy Papers ◽  
2006 ◽  
Vol 2006 (1) ◽  
Author(s):  
Keyword(s):  
Fiscal Policy ◽  
Individual Country ◽  
Fiscal Institutions ◽  
Fiscal Adjustment ◽  
Macroeconomic Stability

This paper aims to inform policymakers, and other interested parties, about the IMF’s approach to fiscal adjustment. The approach focuses on the role of sound and sustainable government finances in promoting macroeconomic stability and growth. Achieving, and maintaining, such a fiscal position often requires adjusting fiscal policy, as well as strengthening fiscal institutions. Fiscal adjustment may involve either tightening or loosening the fiscal stance, depending on individual country circumstances.

scholarly journals The Relationship Between External Debt, Economic Growth, Unemployment and National Expenditure in Viet Nam

2018 ◽  
Vol 1 (2) ◽  
pp. p129
Author(s):  
Anh Tru Nguyen
Keyword(s):  
Economic Growth ◽  
Monetary Policy ◽  
Fiscal Policy ◽  
External Debt ◽  
Viet Nam ◽  
Credit Growth ◽  
Short Run ◽  
The Government ◽  
The Relationship ◽  
Macroeconomic Stability

The article examines the relationship between external debt, economic growth, unemployment and national expenditure in Viet Nam between 1987 and 2016. We found that the influence of a variable on other variables varies in the short run. We found that there are directional relationships between GDP and external debt and GDP and national expenditure. We also found that there are directional relationships between unemployment and external debt, GDP, and national expenditure. Results addressed directional relationships between national expenditure and external debt and GDP. There are two co-integrations among variables. In order to sustain macroeconomic stability in Viet Nam, fiscal policy should be re-examined to meet large development needs and monetary policy should be tightened to reduce credit growth. Specifically, external debt should be effectively managed by the government because an increase in external debt leads to a decrease in GDP and a growth of unemployment. Moreover, GDP should be facilitated to reduce unemployment in the economy. Lastly, unemployment needs to be controlled because it generates a boom of national expenditure and vice versa.

Implications of Food Price Shocks on Availability of Food: Evidences from the Indian Economy

2020 ◽  
pp. 097639962093739
Author(s):  
Arindam Laha ◽  
Subhra Sinha
Keyword(s):  
Government Procurement ◽  
Food Prices ◽  
Food Price ◽  
Relative Price ◽  
Agricultural Commodity ◽  
Price Shocks ◽  
Food Grains ◽  
Domestic Prices ◽  
The Government ◽  
Net Export

In the backdrop of liberalized trade of agricultural commodity in post WTO regime, reform measures is reflected in the change of domestic prices vis-à-vis international prices of food articles. Physical availability of food is purposively selected as a food security indicator in this paper due to its conceptual linkages of food price movement and domestic food supply. A declining trend in the per capita availability of food grains in the post reform period suggests a net export of food grains. Government intervention in procurement and distribution of food grains helps in insulating the shock of food prices in post food crisis situation. Empirical evidences also suggest that there exists a bi-directional causality in between relative price and net export, or food grains production, or government procurement of foodgrains. A responsive change in foodgrains production, net imports, foodgrains procurement and change in the government stock is followed by food price shocks.

United States Fiscal Policy for Social Workers

2021 ◽  
Author(s):  
Karen M. Staller
Keyword(s):  
Fiscal Policy ◽  
Social Workers ◽  
Structural Racism ◽  
Federal Revenue ◽  
Deficit Financing ◽  
Government Deficit ◽  
The Government ◽  
And Function ◽  
Role Of The Government

U.S. fiscal policy is of interest to social workers as it concerns issues including structural racism, economic justice, and income inequality. U.S. fiscal policy refers to the role of the government in taxing and spending, the budget appropriations process, and public budgets (including federal and state revenue and spending). Federal revenue includes payroll and income taxes (personal and corporate). Federal outlays include discretionary and mandatory entitlement spending. There are a number of ongoing contentious debates about U.S. fiscal policy, including those involving the size and function of government, deficit financing and borrowing, inequality, and the redistribution of wealth in tax policies.

Fiscal Policy and Public Debt

2020 ◽  
pp. 417-488
Author(s):  
Christopher Tsoukis
Keyword(s):  
Fiscal Policy ◽  
Empirical Evidence ◽  
Public Debt ◽  
Economic Activity ◽  
Budget Constraint ◽  
Policy Rules ◽  
Fiscal Multipliers ◽  
Fiscal Solvency ◽  
The Government

This chapter looks at fiscal policy, broadly interpreted to include its implications on deficits, debt, and fiscal solvency. It is informally divided in two parts, starting from the latter set of issues. After introducing the budget deficit, debt and the government budget constraint, and related issues, it proceeds to analyse fiscal solvency, deriving formal conditions and discussing extensively indicators and required policy rules. The role of growth in ensuring fiscal solvency is put in sharp relief. Additionally, the ‘dilemma of austerity’ is critically discussed, i.e. whether ‘fiscal consolidations’ can in fact damage public finances by being recessionary. We then turn to the effects of fiscal policy on economic activity: A ‘toolkit’ of static fiscal multipliers is discussed, as is the intertemporal approach to fiscal policy (including Ricardian Equivalence), complemented by empirical evidence.

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