Download or read book The Distributional Effects of Government Spending Shocks in Developing Economies written by Davide Furceri and published by International Monetary Fund. This book was released on 2018-03-14 with total page 39 pages. Available in PDF, EPUB and Kindle. Book excerpt: We construct unanticipated government spending shocks for 103 developing countries from 1990 to 2015 and study their effects on income distribution. We find that unanticipated fiscal consolidations lead to a long-lasting increase in income inequality, while fiscal expansions lower inequality. The results are robust to several measures of income distribution and size of the fiscal shocks, to an alternative identification strategy, across expansions and recessions and across country groups (low-income countries versus emerging markets). An additional contribution of the paper is the computation of the medium-term inequality multiplier. This is on average about 1 in our sample, meaning that a cumulative decrease in government spending of 1 percent of GDP over 5 years is associated with a cumulative increase in the Gini coefficient over the same period of about 1 percentage point. The multiplier is larger for total government expenditure than for public investment and consumption (with the former having larger effect), likely due to the redistributive role of transfers. Finally, we find that (unanticipated) fiscal consolidations lead to an increase in poverty.
Download or read book The Macroeconomic Effects of Public Investment written by Mr.Abdul Abiad and published by International Monetary Fund. This book was released on 2015-05-04 with total page 26 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper provides new evidence of the macroeconomic effects of public investment in advanced economies. Using public investment forecast errors to identify the causal effect of government investment in a sample of 17 OECD economies since 1985 and model simulations, the paper finds that increased public investment raises output, both in the short term and in the long term, crowds in private investment, and reduces unemployment. Several factors shape the macroeconomic effects of public investment. When there is economic slack and monetary accommodation, demand effects are stronger, and the public-debt-to-GDP ratio may actually decline. Public investment is also more effective in boosting output in countries with higher public investment efficiency and when it is financed by issuing debt.
Download or read book Causes and Consequences of Income Inequality written by Ms.Era Dabla-Norris and published by International Monetary Fund. This book was released on 2015-06-15 with total page 39 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper analyzes the extent of income inequality from a global perspective, its drivers, and what to do about it. The drivers of inequality vary widely amongst countries, with some common drivers being the skill premium associated with technical change and globalization, weakening protection for labor, and lack of financial inclusion in developing countries. We find that increasing the income share of the poor and the middle class actually increases growth while a rising income share of the top 20 percent results in lower growth—that is, when the rich get richer, benefits do not trickle down. This suggests that policies need to be country specific but should focus on raising the income share of the poor, and ensuring there is no hollowing out of the middle class. To tackle inequality, financial inclusion is imperative in emerging and developing countries while in advanced economies, policies should focus on raising human capital and skills and making tax systems more progressive.
Download or read book The Distributional Implications of the Impact of Fuel Price Increases on Inflation written by Mr. Kangni R Kpodar and published by International Monetary Fund. This book was released on 2021-11-12 with total page 34 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper investigates the response of consumer price inflation to changes in domestic fuel prices, looking at the different categories of the overall consumer price index (CPI). We then combine household survey data with the CPI components to construct a CPI index for the poorest and richest income quintiles with the view to assess the distributional impact of the pass-through. To undertake this analysis, the paper provides an update to the Global Monthly Retail Fuel Price Database, expanding the product coverage to premium and regular fuels, the time dimension to December 2020, and the sample to 190 countries. Three key findings stand out. First, the response of inflation to gasoline price shocks is smaller, but more persistent and broad-based in developing economies than in advanced economies. Second, we show that past studies using crude oil prices instead of retail fuel prices to estimate the pass-through to inflation significantly underestimate it. Third, while the purchasing power of all households declines as fuel prices increase, the distributional impact is progressive. But the progressivity phases out within 6 months after the shock in advanced economies, whereas it persists beyond a year in developing countries.
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 62 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 The Poverty and Distributional Impacts of Carbon Pricing Channels and Policy Implications written by Baoping Shang and published by International Monetary Fund. This book was released on 2021-06-25 with total page 32 pages. Available in PDF, EPUB and Kindle. Book excerpt: Addressing the poverty and distributional impacts of carbon pricing reforms is critical for the success of ambitious actions in the fight against climate change. This paper uses a simple framework to systematically review the channels through which carbon pricing can potentially affect poverty and inequality. It finds that the channels differ in important ways along several dimensions. The paper also identifies several key gaps in the current literature and discusses some considerations on how policy designs could take into account the attributes of the channels in mitigating the impacts of carbon pricing reforms on households.
Download or read book The Rise in Inequality After Pandemics Can Fiscal Support Play a Mitigating Role written by Davide Furceri and published by International Monetary Fund. This book was released on 2021-04-30 with total page 26 pages. Available in PDF, EPUB and Kindle. Book excerpt: Major epidemics of the last two decades (SARS, H1N1, MERS, Ebola and Zika) have been followed by increases in inequality (Furceri, Loungani, Ostry and Pizzuto, 2020). In this paper, we show that the extent of fiscal consolidation in the years following the onset of these pandemics has played an important role in determining the extent of the increase in inequality. Episodes marked by extreme austerity—measured using either the government’s fiscal balance, health expenditures or redistribution—have been associated with an increase in the Gini measure of inequality three times as large as in episodes where fiscal policy has been more supportive. We survey the evidence thus far on the distributional impacts of the COVID-19 pandemic, which suggests that inequality is likely to increase in the absence of strong policy actions. We review the case made by many observers (IMF 2020; Stiglitz 2020; Sandbu 2020b) that fiscal support should not be withdrawn prematurely despite understandable concerns about high public debt-to-GDP ratios.
Download or read book The Macroeconomic and Distributional Effects of Public Investment in Developing Economies written by Davide Furceri and published by International Monetary Fund. This book was released on 2017-10-20 with total page 39 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper provides new empirical evidence of the macroeconomic effects of public investment in developing economies. Using public investment forecast errors to identify unanticipated changes in public investment, the paper finds that increased public investment raises output in the short and medium term, with an average short-term fiscal multiplier of about 0.2. We find some evidence that the effects are larger: (i) during periods of slack; (ii) in economies operating with fixed exchange rate regimes; (iii) in more closed economies; (iv) in countries with lower public debt; and (v) in countries with higher investment efficiency. Finally, we show that increases in public investment tend to lower income inequality.
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.
Download or read book On Inflation as a Regressive Consumption Tax written by Andrés Erosa and published by London : Department of Economics, University of Western Ontario. This book was released on 2000 with total page 39 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book The Economic Effects of Fiscal Consolidation with Debt Feedback written by Mr.Marcello M. Estevão and published by International Monetary Fund. This book was released on 2013-05-31 with total page 51 pages. Available in PDF, EPUB and Kindle. Book excerpt: The past several years of recession and slow recovery have raised much interest on the effect of fiscal stimulus on economic activity, even as high public debts in many countries would call for fiscal consolidation. To evaluate the delicate balance between stimulus and consolidation requires measuring the size of fiscal multipliers, which often depends on having quarterly data so that exogenous fiscal policy shocks can be identified. We estimate fiscal multipliers using a novel methodology for identifying fiscal shocks within a structural vector autoregressive approach using annual data while controling for debt feedback effects. The estimation focuses on regions with scarce quarterly data (mostly low-income countries), and uses results for advanced economies, emerging market countries, and other broad groupings for which alternative estimates are available to validate the methodology. Differently from advanced and emerging market economies, fiscal consolidation in low-income countries has only a small temporary negative effect on growth while raising medium-term output. Shifting the composition of public spending toward capital expenditure further supports long-run growth.
Download or read book Redistribution Inequality and Growth written by Mr.Jonathan David Ostry and published by International Monetary Fund. This book was released on 2014-02-17 with total page 30 pages. Available in PDF, EPUB and Kindle. Book excerpt: The Fund has recognized in recent years that one cannot separate issues of economic growth and stability on one hand and equality on the other. Indeed, there is a strong case for considering inequality and an inability to sustain economic growth as two sides of the same coin. Central to the Fund’s mandate is providing advice that will enable members’ economies to grow on a sustained basis. But the Fund has rightly been cautious about recommending the use of redistributive policies given that such policies may themselves undercut economic efficiency and the prospects for sustained growth (the so-called “leaky bucket” hypothesis written about by the famous Yale economist Arthur Okun in the 1970s). This SDN follows up the previous SDN on inequality and growth by focusing on the role of redistribution. It finds that, from the perspective of the best available macroeconomic data, there is not a lot of evidence that redistribution has in fact undercut economic growth (except in extreme cases). One should be careful not to assume therefore—as Okun and others have—that there is a big tradeoff between redistribution and growth. The best available macroeconomic data do not support such a conclusion.
Download or read book Government Expenditure and Economic Growth written by International Monetary Fund and published by International Monetary Fund. This book was released on 1989-05-15 with total page 30 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper examines the empirical evidence on the contribution that government and, in particular, capital expenditure make to the growth performance of a sample of developing countries. Using the Denison growth accounting approach, this study finds that social expenditures may have a significant impact on growth in the short run, but infrastructure expenditures may have little influence. While current expenditures for directly productive purposes may exert a positive influence, capital expenditure in these sectors appears to exert a negative influence. Experiments with other explanatory variables confirm the importance of the growth of exports to the overall growth rate.
Download or read book Revenue Mobilization in Developing Countries written by International Monetary Fund. Fiscal Affairs Dept. and published by International Monetary Fund. This book was released on 2011-08-03 with total page 86 pages. Available in PDF, EPUB and Kindle. Book excerpt: The Fund has long played a lead role in supporting developing countries’ efforts to improve their revenue mobilization. This paper draws on that experience to review issues and good practice, and to assess prospects in this key area.
Download or read book Public Debt and Real GDP Revisiting the Impact written by Constance de Soyres and published by International Monetary Fund. This book was released on 2022-04-29 with total page 55 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper provides new empirical evidence of the impact of an unanticipated change in public debt on real GDP. Using public debt forecast errors, we identify exogenous changes in public debt to assess the impact of a change in the debt to GDP ratio on real GDP. By analyzing data on gross public debt for 178 countries over 1995-2020, we find that the impact of an unanticipated increase in public debt on the real GDP level is generally negative and varies depending on other fundamental characteristics. Specifically, an unanticipated increase in the public debt to GDP ratio hurts real GDP level for countries that have (i) a high initial debt level or (ii) a rising debt trajectory over the five preceding years. On the contrary, an unanticipated increase in public debt boosts real GDP for countries that have (iii) a low-income level or (iv) completed the HIPC debt relief initiative.
Download or read book Fiscal Policy Multipliers in Small States written by Ali Alichi and published by International Monetary Fund. This book was released on 2019-03-26 with total page 39 pages. Available in PDF, EPUB and Kindle. Book excerpt: Government debt in many small states has risen beyond sustainable levels and some governments are considering fiscal consolidation. This paper estimates fiscal policy multipliers for small states using two distinct models: an empirical forecast error model with data from 23 small states across the world; and a Dynamic Stochastic General Equilibrium (DSGE) model calibrated to a hypothetical small state’s economy. The results suggest that fiscal policy using government current primary spending is ineffective, but using government investment is very potent in small states in affecting the level of their GDP over the medium term. These results are robust to different model specifications and characteristics of small states. Inability to affect GDP using current primary spending could be frustrating for policymakers when an expansionary policy is needed, but encouraging at the current juncture when many governments are considering fiscal consolidation. For the short term, however, multipliers for government current primary spending are larger and affected by imports as share of GDP, level of government debt, and position of the economy in the business cycle, among other factors.
Download or read book The Distribution of Gains from Globalization written by Valentin F. Lang and published by International Monetary Fund. This book was released on 2018-03-13 with total page 66 pages. Available in PDF, EPUB and Kindle. Book excerpt: We study economic globalization as a multidimensional process and investigate its effect on incomes. In a panel of 147 countries during 1970-2014, we apply a new instrumental variable, exploiting globalization’s geographically diffusive character, and find differential gains from globalization both across and within countries: Income gains are substantial for countries at early and medium stages of the globalization process, but the marginal returns diminish as globalization rises, eventually becoming insignificant. Within countries, these gains are concentrated at the top of national income distributions, resulting in rising inequality. We find that domestic policies can mitigate the adverse distributional effects of globalization.
