Assessing The Impacts of TRAIN Law on Consumption, Savings, and Unemployment in the Philippines

The Tax Reform for Acceleration and Inclusion (TRAIN) policy intends to make the tax system simpler, fairer, and more efficient while also encouraging investments, job creation, and poverty reduction. This tax reform package 1 lowers personal income taxes, removes VAT exemptions, and changes the excise tax on petroleum goods and automobiles, making the tax system more equitable while simultaneously rectifying injustice. This study determines the relationship between the TRAIN Law and the increase in income on the country's consumption, savings, and unemployment rate. Using the multiple regression analysis, this study proves that TRAIN Law and the additional income positively affect consumption. The savings also has a significant positive relationship with the increase in income; however, it has a significant negative relationship with TRAIN Law. This study also shows that while the unemployment rate in the country decreases when income rises, the TRAIN law, on the other hand, relates to the increase in the unemployment rate. The results of this research suggest that the said tax reform has had a considerable beneficial impact on consumption, it has had an adverse influence on the growth rate of savings and unemployment in the country, hence in order to improve the delivery of essential services and better future social and economic results, the government should consider modifying the TRAIN Law and introducing a tax or policy that would stimulate private savings and employment.

Monetary Policy Report - October 2021

Macroeconomic summary Economic activity has recovered faster than projected, and output is now expected to return to pre-pandemic levels earlier than anticipated. Economic growth projections for 2021 and 2022 have been revised upward, though significant downward bias remains. (Graph 1.1). Colombia’s economy returned to recovery in the third quarter after significant supply shocks and a third wave of COVID-19 in the second. Negative shocks affecting mobility and output were absent in the third quarter, and some indicators of economic activity suggest that the rate of recovery in demand, primarily in consumption, outpaced estimates from the July Monetary Policy Report (MPR) in the context of widely expansive monetary policy. Several factors are expected to continue to contribute to output recovery for the rest of the year and into 2022, including the persistence of favorable international financial conditions, an expected improvement in external demand, and an increase in terms of trade. Increasing vaccination rates, the expectation of higher levels of employment and the consequent effect on household income, improved investment performance (which has not yet returned to pre-pandemic levels), and the expected stimulus from monetary policy that would continue to be expansive should also drive economic activity. As a result, output is estimated to have returned to its pre-pandemic level in the third quarter (previously expected in the fourth quarter). Growth is expected to decelerate in 2022, with excess productive capacity projected to close faster than anticipated in the previous report. Given the above, GDP growth projections have been revised upward for 2021 (9.8%, range between 8.4% and 11.2%) and 2022 (4.7%, range between 0.7% and 6.5%). If these estimates are confirmed, output would have grown by 2.3% on average between 2020 and 2022. This figure would be below long-term sustainable growth levels projected prior to the pandemic. The revised growth forecast for 2022 continues to account for a low basis of comparison from this year (reflecting the negative effects of COVID-19 and roadblocks in some parts of the country), and now supposes that estimated consumption levels for the end of 2021 will remain relatively stable in 2022. Investment and net exports are expected to recover at a faster pace than estimated in the previous report. Nevertheless, the downward risks to these estimates remain unusually significant, for several reasons. First, they do not suppose significant negative effects on the economy from possible new waves of COVID-19. Second, because private consumption, which has already surpassed pre-pandemic levels by a large margin, could perform less favorably than estimated in this forecast should it reflect a temporary phenomenon related to suppressed demand as service sectors re-open (e.g. tourism) and private savings accumulated during the pandemic are spent. Third, disruptions to supply chains could be more persistent than contemplated in this report and could continue to affect production costs, with a negative impact on the economy. Finally, the accumulation of macroeconomic imbalances could translate to increased vulnerability to changes in international financial conditions or in international and domestic economic agents’ perception of risk in the Colombian economy, representing a downward risk to growth. A higher-than-expected increase in inflation, the persistence of supply shocks, and reduced excess productive capacity have led to an increase in inflation projections above the target on the forecast horizon (Graph 1.2). Inflation increased above expectations to 4.51% in the third quarter, due in large part to the price behavior of foods and regulated items, and to a lesser extent to core inflation. Increased international prices and costs continue to generate upward pressure on various sub-baskets of the consumer price index (CPI), as has the partial reversion of some price relief measures implemented in 2020 in response to the COVID-19 pandemic.

Development Trends of Joint Stock Companies

Joint-stock company is the pinnacle of development of organizational forms of functioning of private capital. Having emerged at a certain stage in the development of the market, a joint-stock company has become the leading form of concentration of private capital and the main source of their further growth including the form of citizens' money savings. The expansion of the size and circle of private capital owners, in turn, required further development of the specific composition of joint-stock companies, on the one hand, towards increasing their publicity and increasing the number of shareholders, and, on the other hand, in order to ensure the processes of the fastest, cheapest, complete and the relatively “safe” inclusion of small private savings in total equity. This revealed the specific process of the division of labor in the field of investment. Investment funds that specialized in "collecting" private savings for their investment in stakes in different companies have emerged, and professional financial intermediaries have developed in order to provide all the necessary services to ensure the process of mass investment in shares. Taken together, all these processes reflect the growth of the social character of modern private capital uniting in joint-stock companies and similar organizations. However, this process of growth of "socialization" of private capital has its own internal limit, which is that any form of pooling of private capital should not cease to be a source of growth of private capital and personal wealth of members of modern society.

The Causal Link Between Savings and Economic Growth in Bosnia and Herzegovina

The causal link between savings and economic growth has been extensively discussed in the economic growth and development literature, but the question of the direction of this link has not yet been clearly defined. The aim of this paper is to determine the direction and intensity of savings causality (components of private savings) and economic growth in Bosnia and Herzegovina. Granger’s causality test, the Toda-Yamamoto procedure, was applied to test for causality between savings and economic growth. The results of Granger’s causality test indicated that there is no causal link between components of private savings with economic growth in Bosnia and Herzegovina. It was found that among the variables there is cointegration, but not causality, which means that the variables have a common stochastic trend. This fully corresponds to the characteristics of the Bosnia and Herzegovina’s economy.

The Impact of Income Terms of Trade Changes on Private Savings

The terms-of-trade fluctuations have been an important factor in explaining macroeconomic capacity while foreign demand for certain export commodities is inflexible and has a significant impact on their economies in the shocks of external terms of trade. Changes in the external terms of trade might harm private savings while higher inflation rates and lower levels of social security tend to increase private savings due to higher uncertainty. This paper analyzes the characteristics of China’s income terms of trade (ITT) and private savings from 2000 to 2019 based on the related macroeconomic literature and the functioning factors affecting the long-term private savings. Empirical regression models are constructed, and the results suggest that improvement of income terms of trade by 1% leads to an increase in private saving rate by 0.413%, but this relationship has the opposite effect after the 2008 global financial crisis. Policy recommendations are proposed on the promotion of independent innovation ability of foreign trade and the optimization of trade structure along with other progressive analyses on China’s current problems in foreign trade.

Dynamics of Twin Deficits, Ricardian Equivalence, and Feldstein-Horioka Puzzle in South Asian Countries

This study examines the relationship between budget deficit and current account deficit, specifically twin deficits hypothesis, Ricardian equivalence hypothesis, and Feldstein-Horioka puzzle in South Asian countries. Results show that budget deficit and private savings investment balance do not affect current account deficit in the long run and rejects the Keynesian view of twin deficits hypothesis in South Asian countries. No causality exists between current account deficit and budget deficit in India, Pakistan, and Sri Lanka in short run, while bidirectional causality exists in Bangladesh. Ricardian equivalence hypothesis is rejected in Bangladesh and Sri Lanka, while it holds in India and Pakistan. Feldstein-Horioka puzzle exists in Bangladesh and Sri Lanka, while it does not exist in India and Pakistan. Structural reforms in fiscal and trade sector are required to avoid emergence of twin deficits, while an active and effective role of government is required for sustainable economic growth.

Demographic Change and Private Savings in India

India is on the edge of a demographic revolution with a rapidly rising working-age population. For the first time in this study, we investigate the role of the rising working-age population on per capita small savings in post offices and banks net of socio-economic characteristics using state-level panel data compiled from multiple sources for the period 2001-2018. Our comprehensive econometric assessment with multiple robustness checks provide three key findings: (1) Per capita private savings is increasing because of India’s growing working-age population, thus the ‘economic life cycle hypothesis’ is supported. (2) The demographic factors contribute around one-fourth of the per capita private savings inequality across Indian states. (3) The demographic window of economic opportunity for India can yield maximum benefits in terms of private savings when accompanied by favourable socio-economic policies on education, health, gender equity, and economic growth.

Incorporating Private Savings Behavior in Product Offerings: A Case Study of Pakistan

In order to enhance understanding about the actual savings behaviour and impulses which drive savings behaviour, it is interesting to study the micro foundations of savings behaviour. Collecting micro data through filled questionnaire from households in urban areas, this study identifies the motives of savings and the instruments and channels where the savings are invested in Pakistan. The results reveal that investment motive, higher income and greater frequency of household members joining labor force for earning incomes enhance the monthly savings rate. The results can be used to offer Islamic investment deposits in an attractive way. If the investment deposits are pitched properly by highlighting the stable ex-post investment returns and low ex-post volatility, then people with an investment motive parking their savings in fixed income mutual funds would be attracted towards Islamic investment deposits. Likewise, incremental long term savings plans wherein periodic investments increase over a period of time can be offered given that monthly savings rate are found to be positively associated with income. Finally, joint investment accounts can be offered given the finding that monthly savings rate is higher in households with greater number of earning members in family.JEL Classification: G11, G21, G23How to Cite:Shaikh, S. A. (2021). Incorporating Private Savings Behavior in Product Offerings: A Case Study of Pakistan. Signifikan: Jurnal Ilmu Ekonomi, 10(2), 247-258. https://doi.org/10.15408/sjie.v10i2.20139.