Spending Reversals and Fiscal Multipliers under an Interest Rate Peg

This paper examines whether fiscal stimuli are more effective when the monetary policy is less responsive to inflation. First, we provide empirical evidence suggesting that, in the period of U.S. passive monetary policy, a positive government spending shock was followed over time by a spending cut. Second, our theoretical analysis reveals that the pegged nominal interest rate is not a sufficient condition to generate a large fiscal multiplier. An increase in government spending could increase the long‐run real interest rate, if it is associated with a government spending reversal and a less responsive monetary policy. Consequently, the response of private consumption can be negative and the government spending multiplier is not necessarily greater than 1.     

The Government Spending Multiplier in Turkey

This study aims to measure the size of the government spending multiplier in Turkey for post-2001 financial crisis period within a structural VAR framework. The analysis demonstrates that a positive shock to government spending tends to increase output, tax, and real interest rate on impact and the size of the fiscal multiplier is relatively large at first few quarters. The fiscal multiplier reaches a peak value of 1.5 at second quarter and then starts to diminish. Furthermore, investigating the effects of the components of government spending reveals the fact that government investment expenditures, rather than consumption expenditures, have a profound impact on output at first few quarters.     

How big (small?) are fiscal multipliers?

Contributing to the debate on the macroeconomic effects of fiscal stimuli, we show that the impact of government expenditure shocks depends crucially on key country characteristics, such as the level of development, exchange rate regime, openness to trade, and public indebtedness. Based on a novel quarterly dataset of government expenditure in 44 countries, we find that (i) the output effect of an increase in government consumption is larger in industrial than in developing countries; (ii) the fiscal multiplier is relatively large in economies operating under predetermined exchange rates but is zero in economies operating under flexible exchange rates; (iii) fiscal multipliers in open economies are smaller than in closed economies; (iv) fiscal multipliers in high-debt countries are negative.     

Tax morale and public spending inefficiency

Tax evasion is a widespread phenomenon and encouraging tax compliance is an important and debated policy issue. Many studies have shown that tax cheating has to be attributed to a considerable extent to the tax morale of taxpayers. The aim of the present paper is to shed light on the relationship between the taxpayer and the public sector; specifically, we investigate whether public spending inefficiency shapes individual tax morale. Combining data from Italian municipalities’ balance sheets with individual data from a properly designed survey on tax morale, we find that the attitude towards paying taxes is better when resources are spent more efficiently. This evidence seems not to be driven by some confounding factor at the municipality level or by spatial sorting of citizens and proves robust to accounting for alternative measures of both inefficiency and tax morale. We also find that the negative effect of inefficiency is larger if the level of public spending is lower and/or the degree of fiscal autonomy is higher.     

Fiscal Stimulus in Times of High Debt: Reconsidering Multipliers and Twin Deficits

We investigate the impact of fiscal stimuli at different levels of the government debt‐to‐GDP ratio for a sample of 17 European countries from 1970 to 2010. This is implemented in an interacted panel VAR framework in which all coefficient parameters are allowed to change continuously with the debt‐to‐GDP ratio. We find that responses to government spending shocks exhibit strong nonlinear behavior. While the overall cumulative effect of a spending shock on real GDP is positive and significant at moderate debt‐to‐GDP ratios, this effect turns negative as the ratio increases. The total cumulative effect on the trade balance as a share of GDP is negative at first but switches sign at higher levels of debt. Consequently, depending on the degree of public indebtedness, our results accommodate long‐run fiscal multipliers that are greater and smaller than one or even negative as well as twin deficit and twin divergence behavior within one sample and time period. From a policy perspective, these results lend additional support to increased prudence at high public debt ratios because the effectiveness of fiscal stimuli to boost economic activity or resolve external imbalances may not be guaranteed.     

The Keynesian Multiplier Effect Reconsidered

In the standard Keynesian framework, government spending on useless public works has a larger multiplier effect than spending on government transfer payments does. In other words, spending on useless public works increases national income by more than an equivalent increase in government transfer payments would. Nevertheless, their effects on national benefit are identical. For both, the national benefit equals the direct benefit created by the spending. If there are two income classes, some transfers reduce both the national income and the national benefit. Some government purchases completely crowd out private consumption and reduce the national benefit.     

Government investment and fiscal stimulus

Effects of government investment are studied in an estimated neoclassical growth model. The analysis focuses on two dimensions that are critical for understanding government investment as a fiscal stimulus: implementation delays for building public capital and expected fiscal adjustments to deficit-financed spending. Implementation delays can produce small or even negative labor and output responses to increases in government investment in the short run. Anticipated fiscal adjustments matter both quantitatively and qualitatively for long-run growth effects. When public capital is insufficiently productive, distorting financing can make government investment contractionary at longer horizons.     

Optimal Fiscal Policy with Consumption Taxation

We characterize optimal fiscal policies in a general equilibrium model with monopolistic competition and endogenous public spending. The government can tax consumption, as alternative to labor income taxes. Consumption taxation acts as indirect taxation of profits (intratemporal gains of taxing consumption) and enables the policymaker to manage the burden of public debt more efficiently (intertemporal gains of taxing consumption). We show analytically that these two gains imply that the optimal share of government spending is higher under consumption taxation than with labor income taxation. Then, we quantify numerically each of these gains by calibrating the model on the U.S. economy.     

财政竞争、地方政府政策选择与经济增长——基于中国省际面板数据的实证研究

分税制背景下财政分权体制使得地方政府之间存在着激烈的财政竞争,其典型特征表现为税负、公共投入支出和公共服务支出三种政策工具之间的策略互动,从而影响各地区的经济增长。基于1997～2009年中国省级面板数据,通过估计交互项系数的符号,结果发现:地方政府的三种政策工具是相辅相成的;交互项的作用也存在着地区的差异;税负、公共服务支出和公共投入支出对经济增长有着不同的边际影响。     

养老保险与教育投资

目前我国地方政府面临着养老保险支出日趋增加的压力,这也给地方经济发展形成了一定阻力。因而地方政府不得不对财政支出进行调节,以满足地方经济发展的需要。教育支出虽然对经济当期的增长贡献不大,但却是经济长期发展的主要推动因素。在养老保险支出比例增加的形势下,地方政府是否会因此而减少教育投资比例是一个值得思考的问题。本文正是基于这种考虑,以2007-2011年我国31个省市自治区的面板数据为样本,从教育的正外部性以及对经济发展影响的角度分析了不同经济水平的地方政府的调控行为。结果显示养老保险支出对教育投资确实存在挤出效应,但对于不同经济水平地区挤出效应力度不同。教育的正外部性并没有较大的阻碍经济落后地区对教育的投资;教育对经济的促进作用是地方政府考虑是否减小教育投资比例的主要因素,这也促成了经济发达地区的减小幅度较大,而经济落后地区的减小幅度较小的结果。     

Fiscal adjustment in EU countries: A balance sheet approach

Several European Union countries have recently implemented or are envisaging fiscal operations which improve budgetary figures but have no structural impact on government finances. We evaluate some of these measures using a balance sheet approach. In particular, we examine the degree to which reductions in government debt in EU countries has been accompanied by a decumulation of government assets. In the runup to Maastricht we find a strong correlation between changes in government liabilities and government assets, and larger declines in government assets in countries starting from higher public debt levels.     

Fiscal Policy Shocks in the Euro Area and the US: An Empirical Assessment*

We analyse the impact of fiscal policy shocks in the euro area as a whole, using a newly‐available quarterly data set of fiscal variables for the period 1981–2007. To allow for comparability with previous results on euro‐area countries and the US, we use a standard structural vector autoregressive (VAR) framework, and study the impact of aggregated and disaggregated government spending and net‐tax shocks. In addition, to frame euro‐area results, we apply the same methodology for the same sample period to US data. We also explore the sensitivity of the results to the inclusion of variables aiming to control for underlying financial and fiscal conditions. The main new findings are that: expansionary fiscal shocks have a short‐term positive impact on GDP and private consumption, with government spending shocks entailing, in general, higher effects on economic activity than (net) tax reductions; output multipliers to government expenditure shocks are of similar size in the euro area and in the US; the persistence of a fiscal spending shock is higher in the US than in the euro area, which appears to be related to military spending in the US; and fiscal multipliers have increased over the recent past in both geographical areas.     

The real impact of a one-off fiscal restriction: empirical evidence of a flypaper effect in Flemish municipalities

This paper analyses the effects of a one-off fiscal restriction on Flemish local government spending. The authors provide evidence of a ‘flypaper effect’: fiscal restriction stimulated the sensitivity of local spending to grants. This means that higher-level governments (regional/national/supranational) need to take a flypaper effect into account when considering one-off fiscal restrictions on lower-level governments.     

Tax competition and tax base equalization in the presence of multiple tax instruments

The literature on tax competition has argued that tax base equalization, which reduces regional disparities in tax bases, can serve as a means of internalizing horizontal and vertical fiscal externalities. This argument assumes that each government relies on a single tax base (a regional tax on mobile capital and a federal tax on savings). This paper considers the case in which a distortionary labor tax is also available. Internalizing fiscal externalities requires that while the regional capital tax base is fully equalized, a region’s equalization entitlement for the labor tax is positive when its tax base is “larger” than the average tax base of all regions. This efficient tax base equalization system is incompatible with the primary objective of fiscal equalization.

     

The Effects of Social Spending on Economic Activity: Empirical Evidence from a Panel of OECD Countries*

The aim of this paper is to assess the short‐term effects of social spending on economic activity. Using a panel of OECD countries from 1980 to 2005, the results show that social spending has expansionary effects on GDP. In particular, we find that an increase of 1 per cent in social spending increases GDP by about 0.1 percentage points, which, given the share of social spending in GDP, corresponds to a multiplier of about 0.6. The effect is similar to that of total government spending, and it is larger in periods of severe downturns. Among spending subcategories, social spending on health and on unemployment benefits have the greatest effects. Social spending also positively affects private consumption, while it has negligible effects on investment. The empirical results are economically and statistically significant, and robust.     

财政自主权、财政支出结构与全要素生产率——来自230个地级市的检验

本文尝试将财政自主权、财政支出结构与经济效率联系,在我国财政分权理论框架下揭示地方财政自主权与技术进步之间的关系。在理论上,提出了"地方财政自主权越高,技术进步水平也越高,但随着经济性财政支出边际效率递减以及社会性财政支出的长期不足,财政自主权对技术进步的影响正在减弱"的命题假说。在实证上,以1999—2013年230个城市数据,采用工具变量法检验了财政自主权对城市全要素生产率的影响。实证结果表明:(1)城市财政自主权对城市全要素生产率影响较弱,主要是对TFP组成中的规模效率(SE)和技术进步(TP)产生了较为明显的正影响;(2)财政自主权越高的城市,越倾向于增加经济性财政支出比重,而对于社会性支出则更有动机展开"逐底竞争";(3)财政自主权对全要素生产率构成中的规模效率(SE)和技术进步(TP)的影响呈现出减弱的趋势;(4)城市财政自主权的提高可以显著改进微观企业层面的全要素生产率水平。     

Fiscal policy and external adjustment: New evidence

Relatively little empirical evidence exists about countries' external adjustment to changes in fiscal policy and, in particular, to changes in taxes. This paper addresses this question by measuring the effects of tax and government spending shocks on the current account and the real exchange rate in a sample of four industrialized countries. Our analysis is based on a structural vector autoregression in which the interaction of fiscal variables and macroeconomic aggregates is left unrestricted. Identification is instead achieved by exploiting the conditional heteroscedasticity of the structural disturbances. Three main findings emerge: (i) the data provide little support for the twin-deficit hypothesis, (ii) the estimated effects of unexpected tax cuts are generally inconsistent with the predictions of standard economic models, except for the US, and (iii) the puzzling real depreciation triggered by an expansionary public spending shock is substantially larger in magnitude than predicted by traditional identification approaches.     

地区竞争、支出责任下移与地方政府债务扩张

地方政府债务过度扩张容易引发系统性经济风险。本文通过一个地方政府举债行为理论模型,分析了政府间共同事权的支出责任下移、竞争性地区的举债行为对地方政府债务规模的影响。在此基础上构建空间面板计量模型,利用279个地级市数据进行回归分析,结果表明:地方政府债务扩张是支出责任下移与标尺竞争机制共同驱动的结果;政府间支出责任下移造成的财政压力是地方政府被动负债的重要原因;地方政府间的标尺竞争使其在举债融资行为上表现为明显的策略模仿;各地区在债务扩张的主因上存在异质性,东部地区政府债务的增加主要是地区间竞争的结果。这意味着化解地方政府债务风险不仅应规范政府间财政支出责任划分,更重要的是完善地方政府的政绩考核体系和违规举债的问责机制。     

外在压力与内在激励：老龄化背景下地方政府的财政选择

在人口老龄化背景下,地方政府的财政支出选择存在外在压力和内在激励。在理论分析人口老龄化影响地方财政支出偏好的作用机制基础上,采用中国省级财政数据检验老龄化背景下地方财政选择偏好。研究结果表明：地方政府财政支出是提高社会福利支出的外在压力和增强地方财政可持续性的内在激励的多路径效应结果,这种影响效应具有财政自给率和老龄化程度的非对称性。为了实现地方财政可持续性和有效应对老龄化社会的公众诉求压力,有必要尽快完善地方政府考核体系,完善地方公共支出的需求表达机制,改善当前财政支出责任地方化的状态。     

分税与地方财政支出结构

本文研究了税收分成对地方财政支出结构的影响。理论分析发现,在地方政府的财政支出结构竞争中,税收分成比例的提高将直接导致地方政府增加生产性公共支出,发挥生产性支出的产出外部性,提高产出水平和自身税收收入水平,实现福利最大化。一系列经验分析显著地验证了上述结论,即当地级市政府的税收分成率提高10%,该地区生产性支出占比将提高1.39%。本文的分析和结论有助于解释中国地方财政支出结构变动的原因,从而为政府间税收分配改革提供有效的政策建议。