Download or read book Flexible Fiscal Rules and Countercyclical Fiscal Policy written by Ms.Martine Guerguil and published by International Monetary Fund. This book was released on 2016-01-22 with total page 47 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper assesses the impact of different types of flexible fiscal rules on the procyclicality of fiscal policy with propensity scores-matching techniques, thus mitigating traditional self-selection problems. It finds that not all fiscal rules have the same impact: the design matters. Specifically, investment-friendly rules reduce the procyclicality of both overall and investment spending. The effect appears stronger in bad times and when the rule is enacted at the national level. The introduction of escape clauses in fiscal rules does not seem to affect the cyclical stance of public spending. The inclusion of cyclical adjustment features in spending rules yields broadly similar results. The results are mixed for cyclically-adjusted budget balance rules: enacting the latter is associated with countercyclical movements in overall spending, but with procyclical changes in investment spending. Structural factors, such as past debt, the level of development, the volatility of terms of trade, natural resources endowment, government stability, and the legal enforcement and monitoring arrangements backing the rule also influence the link between fiscal rules and countercyclicality. The results are robust to a wide set of alternative specifications.

Download or read book Countercyclical Fiscal Policy written by Carlos Budnevich L. and published by . This book was released on 2002 with total page 34 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Procyclical Fiscal Policy written by Toshihiro Ihori and published by Springer. This book was released on 2018-12-28 with total page 68 pages. Available in PDF, EPUB and Kindle. Book excerpt: Conventional wisdom dictates that a fiscal policy should be counter-cyclical. However, contrary to this conventional views, recent research has demonstrated that fiscal policy is actually procyclical in most developing countries. In this book, we attempt to propose a new interpretation of this procyclicality after reviewing theoretical and empirical evolution of the research. In particular, by incorporating the political effort behavior of private agents into a weak government model, we explore how income fluctuations affect the optimal budget deficits in a political economy. If the government can control the political behavior, normally, the optimal budget deficit should rise in a recession as a first-best case; however, interestingly, a recession does not necessarily prompt an increase in the budget deficits in a second-best political economy. The response of the budget deficits to income fluctuations mainly depends on the efficiency of political effort, which may correspond to the degree of democracy and bureaucratic efficiency of the governments. We test the prediction of the pro-cyclical fiscal policy and find it applicable for democratic countries with semi-efficient governments including Japan.

Download or read book Why is Fiscal Policy Often Procyclical written by Alberto Alesina and published by . This book was released on 2005 with total page 62 pages. Available in PDF, EPUB and Kindle. Book excerpt: Many countries, especially developing ones, follow procyclical fiscal polices, namely spending goes up (taxes go down) in booms and spending goes down (taxes go up) in recessions. We provide an explanation for this suboptimal fiscal policy based upon political distortions and incentives for less-than-benevolent government to appropriate rents. Voters have incentives similar to the "starving the Leviathan" classic argument, and demand more public goods or fewer taxes to prevent governments from appropriating rents when the economy is doing well. We test this argument against more traditional explanations based purely on borrowing constraints, with a reasonable amount of success.

Download or read book Revisiting the Countercyclicality of Fiscal Policy written by João Tovar Jalles and published by International Monetary Fund. This book was released on 2023-04-29 with total page 31 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper provides a novel dataset of time-varying measures on the degree of countercyclicality of fiscal policies for advanced and developing economies between 1980 and 2021. The use of time-varying measures of fiscal stabilization, with special attention to potential endogenity issues, overcomes the major limitation of previous studies and alllows the analysis to account for both country-specific as well as global factors. The paper also examines the key determinants of countercyclicality of fiscal policy with a focus on factors as severe crises, informality, financial development, and governance. Empirical results show that (i) fiscal policy tends to be more counter-cyclical during severe crises than typical recessions, especially for advanced economies; (ii) fiscal counter-cyclicality has increased over time for many economies over the last two decades; (iii) discretionary and automatic countercyclicality are both strong in advanced economies but acyclical (at times procyclical) in low-income countries, (iv) fiscal countercyclicality operates primarily through the expenditure channel, particularly for social benefits, (vi) better financial development, larger government size and stronger institutional quality are associated with larger countercyclical effects of fiscal policy. Our results are robust to various specifications and endogeneity checks.

Download or read book Fiscal Rules and Countercyclical Policy written by Mr.Evan Tanner and published by International Monetary Fund. This book was released on 2003-11-01 with total page 30 pages. Available in PDF, EPUB and Kindle. Book excerpt: Fiscal rules—legal restrictions on government borrowing, spending, or debt accumulation (like the Gramm-Rudman-Hollings Act in the United States)—have recently been adopted or considered in several countries, both industrial and developing. Previous literature stresses that such laws restrict countercyclical government borrowing, thus preventing intertemporal equalization of marginal deadweight losses of taxation—an idea associated with Frank Ramsey. However, such literature typically abstracts from persistent current deficits that are financed by future tax increases. Eliminating such deficits may substantially reduce tax rate variability—the very goal of countercyclical borrowing—even over a finite horizon. Thus, Gramm-Rudman-Hollings and Frank Ramsey are not necessarily enemies and they may even be good friends!

Download or read book Countercyclical Fiscal Policy and Gender Employment Evidence from the G 7 Countries written by Mr.Bernardin Akitoby and published by International Monetary Fund. This book was released on 2019-01-11 with total page 33 pages. Available in PDF, EPUB and Kindle. Book excerpt: Would countercyclical fiscal policy during recessions improve or worsen the gender employment gap? We give an answer to this question by exploring the state-dependent impact of fiscal spending shocks on employment by gender in the G-7 countries. Using the local projection method, we find that, during recessions, a positive spending shock of 1 percent of GDP would, on average, lift female employment by 1 percent, while increasing male employment by 0.6 percent. Consequently such a shock would improve the female share of employment by 0.28 percentage point during recessions. Our findings are driven by disproportionate employment changes in female-friendly industries, occupations, and part-time jobs in response to fiscal spending shocks. The analysis suggests that fiscal stimulus, particularly during recessions, could achieve the twin objectives of supporting aggregate demand and improving gender gaps.

Download or read book Fiscal Policy in the European Union written by J. Ferreiro and published by Springer. This book was released on 2008-11-27 with total page 219 pages. Available in PDF, EPUB and Kindle. Book excerpt: This book provides a comprehensive analysis of national fiscal policies in the European Union and in the European Monetary Union. Adopting a critical perspective, the book offers a deep insight into the consequences of the current strategy of national fiscal policies on economic activity.

Download or read book Fiscal Policy in Developing Countries written by Roberto Perotti and published by World Bank Publications. This book was released on 2007 with total page 46 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper surveys fiscal policy in developing countries from the point of view of long-run growth. The first section reviews existing methodologies to estimate the effects of fiscal policy shocks and of systematic fiscal policy, with time series or with cross-sectional methods, and their applicability to developing countries. The second section surveys optimal fiscal policy in developing countries, by considering the role of the intertemporal government budget, and sustainability and solvency. It also reviews the fuzzy debate on "fiscal space" and "macroeconomic space" - and the usefulness (or lack thereof) of these terms for policy analysis. The third section asks what theory tells us about the optimal cyclical behavior of fiscal policy in developing countries. It shows that it very much depends on the assumptions about the interactions between credit market imperfections at the individual, firms, or government level, and on the supply of external funds to the country. Different sets of assumptions lead to different implications about optimal cyclical behavior. The available evidence on the cyclical behavior of fiscal policy, and possible reasons for the observed prevalence of a procyclical behavior in developing countries, is also reviewed. If one agrees that fiscal policy is indeed less countercyclical than we think is optimal, the issue is how to correct the problem. One obvious question is why government do not self-insure, i.e. why they do not accumulate assets in upturns and decumulate them in downturns. This leads to the analysis of fiscal rules and stabilization funds, in the fourth section. The last section concludes with what the author considers important research and policy questions in each part.

Download or read book The Role for Counter cyclical Fiscal Policy in Singapore written by Leif Lybecker Eskesen and published by . This book was released on 2009 with total page 18 pages. Available in PDF, EPUB and Kindle. Book excerpt: Singapore's policymakers have often used fiscal policy as a counter-cyclical tool. Empirical results based on a structural autoregression framework suggest that fiscal policy can be used for demand management, although the impact may be somewhat short lived. The short-lived impact could reflect a number of factors, including the absence of credit-constrained economic agents, a high propensity to save among households, monetary focus on price stability, and leakages due to economic openness. Notwithstanding, fiscal policy should still play a key stabilizing role in the current downturn given the downside risks to growth and the vast fiscal space.

Download or read book Automatic Fiscal Policies to Combat Recessions written by Laurence S. Seidman and published by Routledge. This book was released on 2015-04-08 with total page 255 pages. Available in PDF, EPUB and Kindle. Book excerpt: Drawing on the most prominent research in the field, this timely book offers bold new fiscal policies that can complement current automatic stabilizers and counter-cyclical monetary policy to help combat recessions. Dr. Seidman argues for an independent fiscal policy board or the Federal Reserve to decide changes in the magnitude of Congress's fiscal policy package of stimulus or restraint, with recommendations going into effect immediately, subject only to Congressional override.

Download or read book Countering the Cycle The Effectiveness of Fiscal Policy in Korea written by Mr.Leif Lybecker Eskesen and published by International Monetary Fund. This book was released on 2009-11-01 with total page 30 pages. Available in PDF, EPUB and Kindle. Book excerpt: The Korean authorities having taken decisive and proactive fiscal measures to help stem the fallout from the current global economic and financial crisis, with the size of the fiscal stimulus well-above the average response of other G20 economies. In this context, a key question is how effective fiscal policy is as a stabilization tool, especially considering the high openness of Korea's economy. Results based on a macroeconomic model calibrated for Korea provide a strong case for using counter-cyclical fiscal policy, especially if measures appropriately focus on spending with a direct demand impact such as investment and targeted transfers. It also demonstrates the importance a complementary monetary response and the benefits to an open economy such as Korea's of global coordination of fiscal stimulus.

Download or read book The Macroeconomics of Fiscal Policy written by Richard W. Kopcke and published by . This book was released on 2006 with total page 408 pages. Available in PDF, EPUB and Kindle. Book excerpt: Leading academics and former policy makers assess the effectiveness of postwar American fiscal policy as questions about the role of fiscal policy once again come to the forefront of economic research and debate. The United States's post-World War II emphasis on activist fiscal policy for short-term economic stabilization was called into question in the 1960s, and by the late 1980s was superseded by the view that fiscal policy should focus on long-run structural concerns. For the past two decades both public policy and economic research emphasized monetary policy as a stabilization tool. But there remain issues in American macroeconomic policy having to do with budget deficits, present and projected, as well as a recent revival of interest in fiscal policy as a stabilization tool. Overall, the academic pendulum is swinging back towards a renewed consideration of fiscal policy. This volume brings together leading researchers and policy makers to assess the effectiveness and consequences of fiscal policy. Drawing on postwar policy experience and recent economic research, this book offers a state-of-the-art consideration of where fiscal policy stands today. Contributors address both the appropriateness of fiscal policy as a tool for short-run macroeconomic stabilization and the longer-term impact of fiscal decisions and economic policy. Topics covered include the legacy of the Reagan administration's tax cuts; whether public policy has encouraged such behavior as "overconsumption," which may foster persistent budget and trade deficits; and, in light of recent experience, how and when fiscal policy might be appropriate as a short-term stabilization tool. Contributors Alan J. Auerbach, Susanto Basu, Olivier J. Blanchard, Alan S. Blinder, Barry P. Bosworth, W. Elliott Brownlee, William H. Buiter, Jonathan Coppel, Jean-Philippe Cotis, Luiz de Mello, James S. Duesenberry, Douglas W. Elmendorf, Eric Engen, Jeffrey A. Frankel, Benjamin M. Friedman, Richard W. Kopcke, Catherine L. Mann, Van Doorn Ooms, Rudolph G. Penner, Alice M. Rivlin, Christopher A. Sims, C. Eugene Steuerle, Geoffrey M.B. Tootell, Robert K. Triest, Edwin M. Truman

Download or read book The Effectiveness of Fiscal Policy in Stimulating Economic Activity written by Richard Hemming and published by International Monetary Fund. This book was released on 2002-12 with total page 60 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper reviews the theoretical and empirical literature on the effectiveness of fiscal policy. The focus is on the size of fiscal multipliers, and on the possibility that multipliers can turn negative (i.e., that fiscal contractions can be expansionary). The paper concludes that fiscal multipliers are overwhelmingly positive but small. However, there is some evidence of negative fiscal multipliers.

Download or read book Procyclical Fiscal Policy Shocks Rules and Institutions A View From MARS written by Paolo Manasse and published by INTERNATIONAL MONETARY FUND. This book was released on 2006-01-01 with total page 41 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper assesses the roles of shocks, rules, and institutions as possible sources of procyclicality in fiscal policy. By employing parametric and nonparametric techniques, I reach the following four main conclusions. First, policymakers' reactions to the business cycle is different depending on the state of the economy-fiscal policy is "acyclical" during economic bad times, while it is largely procyclical during good times. Second, fiscal rules and fiscal responsibility laws tend to reduce the deficit bias on average, and seem to enhance, rather than to weaken, countercyclical policy. However, the evidence also suggests that fiscal frameworks do not exert independent effects when the quality of institutions is accounted for. Third, strong institutions are associated to a lower deficit bias, but their effect on procyclicality is different in good and bad times, and it is subject to decreasing returns. Fourth, unlike developed countries, fiscal policy in developing countries is procyclical even during (moderate) recessions; in "good times," however, fiscal policy is actually more procyclical in developed economies.

Download or read book Applied Macroeconomics for Public Policy written by Rafael Yanushevsky and published by Academic Press. This book was released on 2018-06-29 with total page 230 pages. Available in PDF, EPUB and Kindle. Book excerpt: Applied Macroeconomics for Public Policy applies system and control theory approaches to macroeconomic problems. The book shows how to build simple and efficient macroeconomic models for policy analysis. By using these models, instead of complex multi-criteria models with uncertain parameters, readers will gain new certainty in macroeconomic decision-making. As high debt to GDP ratios cause problems in societies, this book provides insights on improving economies during and after economic downturns. Provides a detailed analysis of existing macroeconomic models Addresses the dynamics of debt to GDP ratio and the effects of fiscal and monetary policy on this ratio Shows how to use models to evaluate the dynamics of the debt to GDP ratio in cases of government spending and tax cuts and to decide whether such economic measures are efficient Uses optimal theory to obtain optimal yearly debt levels to reach the established goals (decrease debt or balance budget) Provides many examples and software exercises to promote learning by doing

Download or read book Fiscal Policy and Long Term Growth written by International Monetary Fund and published by International Monetary Fund. This book was released on 2015-04-20 with total page 257 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper explores how fiscal policy can affect medium- to long-term growth. It identifies the main channels through which fiscal policy can influence growth and distills practical lessons for policymakers. The particular mix of policy measures, however, will depend on country-specific conditions, capacities, and preferences. The paper draws on the Fund’s extensive technical assistance on fiscal reforms as well as several analytical studies, including a novel approach for country studies, a statistical analysis of growth accelerations following fiscal reforms, and simulations of an endogenous growth model.