The long- run and the short- run effects of fiscal policy: simulation analysis with a forward- looking macroeconometric model

2012 ◽  
pp. 220-248
Keyword(s):  
Fiscal Policy ◽  
Simulation Analysis ◽  
Policy Simulation ◽  
Macroeconometric Model ◽  
Long Run ◽  
Short Run ◽  
Forward Looking

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 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

AN ANALYSIS OF THE MANAGEMENT OF FISCAL DEFICIT OF PAKISTAN: AN ECONOMETRIC STUDY OF AUTO-REGRESSIVE DISTRIBUTIVE LAGS (ARDL) APPROACH

2018 ◽  
pp. 1-30 ◽  
Author(s):  
KHURRAM EJAZ CHANDIA ◽  
MUHAMMAD BADAR IQBAL ◽  
SAIRA AZIZ ◽  
IFRA GUL ◽  
BINESH SARWAR
Keyword(s):  
Fiscal Policy ◽  
Federal Government ◽  
Government Expenditures ◽  
Fiscal Deficit ◽  
Policy Reforms ◽  
Causality Test ◽  
Long Run ◽  
Ardl Approach ◽  
Short Run ◽  
Auto Regressive

Fiscal policy is an essential ingredient of economic performance. The fiscal policy is considered as a short-run measure; however, this has long-lasting outcomes for any economy. The current study has examined the connection among different constituents of fiscal policy, i.e., federal government revenues and federal government expenditures; federal government revenues and different components of federal government expenditures; federal government expenditures and different components of federal government revenues and fiscal deficit and influential budgetary variables in the context of the economy of Pakistan. The study has empirically investigated the relationship among the budgetary variables for Pakistan from 1979 to 2017. For data analysis, time-series econometric techniques such as auto-regressive distributive lag (ARDL) approach and Granger causality test have been employed. The results of ARDL bounds test approach suggest the existence of long-run equilibrium relationship among the variables. The result of CUSUM and CUSUMSQ shows the stability of functional relationship tested in this study, which means that model is a useful instrument for policymaking. So, a rise or fall in budgetary variables causes changes in fiscal deficit in long run. The results of study endorse the proof of spent-and-tax hypothesis in the economy of Pakistan. The study suggests the need for extensive fiscal policy reforms in Pakistan.

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 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.

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.

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