Cointegration and Causal Relationship between Taxes and Spending for Kenya,Nigeria and South Africa

Causal relationships between taxes and spending are examined for three African countries using the GDP as a control variable, and dummy variables to address structural changes in Nigeria and South Africa. There is one cointegration equation between nominal fiscal variables in all three countries, one cointegration equation for Kenya and two cointegration equations for Nigeria and South Africa for the real fiscal variables and their respective dummy variables. Short-term results of the nominal variables show fiscal independence for all three countries. In real terms, taxes cause spending for Kenya and Nigeria and a weak fiscal synchronization for South Africa. There is long run fiscal synchronization in nominal terms for all three countries, and in real terms for both Nigeria and South Africa, while real taxes cause spending in Kenya. Long-run estimates show a unit increase in nominal (real) taxes translating into a less than proportionate increase in nominal (real) spending for Kenya and South Africa, and a more than proportionate increase in nominal (real) spending for Nigeria. Fiscal imbalance is not a threat in the budgetary process in Kenya and South Africa, but an issue of concern in Nigeria, where oil revenues are a major source of support for budget short falls.     

Macroeconomic effects of fiscal policy changes: A case of South Africa

This study develops comprehensive full-sector macro-econometric models for the South African economy with the aim of explaining and providing the macroeconomic effects of fiscal policy changes in the country. The models are applied to test the effectiveness of fiscal policy actions in an economic environment with existing structural supply constraints versus demand-side constraints and also to detect which components of the fiscal would be more effective in stabilising the economy. Based on the structure of the South African economy and the framework presented, the study concludes that the South African economy can be characterised as one which is embedded with structural supply constraints. Thus, a model which is suitable for policy analyses of the South African economy needs to capture the long-run supply-side characteristics of the economy. A price block is incorporated to specify the price adjustment between the supply-side sector and real aggregate demand sector. The models are estimated with time-series data from 1970 to 2011, capturing both the long-run and short-run dynamic properties of the economy. The results from the series of fiscal policy scenarios suggest that fiscal policy actions are more effective in an economic environment with limited or no supply constraints. Fiscal expansion or consolidation that comes more from government spending changes will be more effective in an economic environment where structural supply constraints are absent while tax revenue changes will be more effective in an economic environment where there exist major structural supply constraints.     

Algeria: A three-sector macrofiscal model for debt sustainability and growth policy analysis

In this paper, we present a dynamic general equilibrium (DGE) model to address the macrofiscal vulnerabilities and the effects of fiscal policy on growth and employment in Algeria. We first discuss the baseline scenario over the period 2021–2040. According to our baseline results, without fundamental changes in fiscal policies, even relatively high growth will not be sufficient to put public debt on a sustainable path. We then conduct four experiments and assess their impact on fiscal accounts, growth, and unemployment: an increase in the efficiency of public spending on infrastructure investment, a gradual reduction in the share of noninterest government spending in GDP, the same gradual reduction in spending combined with a permanent increase in the share of investment in infrastructure in total noninterest government expenditure, and a composite fiscal reform program that combines these individual policies, respectively. The results suggest that public debt sustainability can be achieved, and growth and employment can be promoted, as long as an ambitious fiscal reform program involving tax, spending, and governance reforms is implemented. Importantly, our quantitative analysis shows that, with a well-designed fiscal program, there may be no trade-off between fiscal consolidation and economic growth.     

The macroeconomic effects of fiscal policy in Portugal: a Bayesian SVAR analysis

With a new quarterly dataset we estimate a Bayesian Structural Autoregression model and a Fully Simultaneous System approach to analyze the macroeconomic effects of fiscal policy. Results show that positive government spending shocks, in general, have a negative effect on real GDP; lead to “crowding-out” effects of private consumption and investment; have a persistent and positive effect on the price level and a mixed impact on the average financing cost of government debt. Explicitly considering the government debt dynamics in the model is also important. A VAR counter-factual exercise confirms that unexpected positive spending shocks create relevant “crowding-out” effects.     

Fiscal policy and economic activity in South Asia

This paper analyzes whether fiscal policy in South Asia amplifies or smoothens business cycle fluctuations. It estimates several econometric models to explore the cyclicality of government spending and tax buoyancy. In South Asia, tax revenue increases less than one to one with changes in gross domestic product (GDP), but public spending increases more than proportionally. For each percentage point change in GDP growth, government expenditure changes by 1.3 percentage points. While changes in tax revenue have no significant impact on economic activity, the government spending multiplier is positive and significant: each additional US dollar (USD) of spending leads to an immediate increase in GDP of 0.2 USD and to an increase of 0.4 USD in the medium run. The impact of public spending on economic activity is entirely due to capital expenditure, which is also more procyclical. Procyclical public spending and a positive expenditure multiplier imply that fiscal policy in South Asia amplifies boom‐and‐bust cycles. These results are in line with those of other emerging markets and developing economies and robust to different model specifications and estimation strategies.     

Fiscal implications of AIDS in South Africa

The number of people living with HIV is alarmingly large. In addition to the incomprehensible human suffering of those directly affected, AIDS also has large, negative economic effects. In this paper, I study the fiscal implications of the HIV/AIDS epidemic in South Africa in a standard neo-classical growth model. I find that an antiretroviral program is to a large extent self financing. Improvement in dependency ratios and health care cost savings would pay for Rand 144 billion of a full epidemiological intervention. The indirect effect through the changing demographic structure will be more important than the direct health care cost saving effect. I also explore different taxation policies. The households would be willing to sacrifice an amount equal to 12% of GDP in the first period to be subject to an optimal (Ramsey) fiscal policy rather than an alternative fixed debt to GDP policy. The optimal policy implies an increase in government debt during the peak of the epidemic.     

欧元区主权债务期限结构的实证分析

本文通过对欧元区成员国长期债务占总债务比重与各国整体宏观经济指标相关关系的实证分析表明,欧元区各国以GDP与税收比、债务与GDP之比所描述的当期融资能力与长期债务比例呈显著负相关,由于非对称冲击的作用,各国体现出不同的特征。本文同时构建了一个政府债务效用函数的二期模型,说明主权债务期限结构安排可以通过宏观调控进行跨期平滑,以防止主权债务危机的发生。     

Public capital formation and labor productivity growth in Chile

Following the lead of the endogenous growth literature, this article analyzes the impact on labor productivity growth of public and private investment spending in Chile. Using cointegration analysis, the results of the dynamic labor productivity function for the 1960–95 period show that (lagged) public and private investment spending, as well as the rate of growth in exports, has a positive and highly significant effect on the rate of labor productivity growth. The estimates also indicate that increases in government consumption spending have a negative effect on the rate of labor productivity growth, thus suggesting that the composition of government spending may also play an important role in determining the rate of labor productivity growth. The findings call into question the politically expedient policy in many Latin American countries of disproportionately reducing public capital expenditures to meet targeted reductions in the fiscal deficit as a proportion of GDP.     

The Macroeconomic Management of Increased Aid: Policy Lessons from Recent Experience

The authors investigate the macroeconomic challenges created by a surge in aid inflows. They develop an analytical framework for examining possible policy responses to increased aid, in terms of absorption and spending of aid—where the central bank controls absorption, through monetary policy and the sale of foreign exchange, and where the fiscal authority controls spending. Different combinations of absorption and spending lead to different macroeconomic consequences. Evidence from five countries that recently experienced an aid surge (Ethiopia, Ghana, Tanzania, Mozambique, and Uganda) shows no support for aid-related real exchange rate appreciation in these countries, but it does indicate that the fear of Dutch disease played an important part in the policy reaction to aid surges. Fiscal and monetary authorities should coordinate their responses to an aid surge, because an uncoordinated response—typically when the fiscal authority wants to spend aid while the central bank wants to avoid exchange rate appreciation—can have serious negative macroeconomic consequences.     

The impact of the 2008 German corporate tax reform: A dynamic CGE analysis

In this paper we develop the dynamic CGE model, ifoMod, which is designed to analyse the impact of fundamental tax reforms and in particular capital income tax reforms for Germany. The model is in line with neoclassical growth theory and features all important behavioural interactions between the four major building blocks of an economy including the firm and household sector, the government and the rest of the world. We consider firms of different legal forms which all face an intertemporal investment problem, a financing problem w.r.t. the optimal choice of debt and equity financing as well as a factor input problem when deciding on the optimal amount of different skill types of labour employed. We show the impact of different types of taxes on the behavioural margins of firms and households. The conducted simulation shows the impact of the latest German corporate tax reform of 2008 on the German macroeconomic variables such as investments, GDP, consumption and household's welfare.     

Regime changes and the sustainability of fiscal imbalance in East Asian countries

The main purpose of this paper is to assess empirically the fiscal policy regimes in five Asian countries using a formal framework based on the government's intertemporal budget constraints (GIBC). To this end, we relied on an array of time-series methods and quarterly data of nearly three decades. Our conclusions are; first, the evidence indicates that the fiscal stance in Thailand and South Korea are on their sustainable path while the Philippines and Malaysia demonstrate only ‘weak sustainability’. Second, revenues are growing at a rate faster than government spending for Singapore, a country that has recorded large surpluses for most of the sample period. Third, the results show a one-way causation from expenditure to revenue for Korea, Singapore and Thailand. This finding indicates that reducing the size of government spending may improve fiscal budget deficits without having to undergo changes in the overall strategy. Fourth, we observed a long-run feedback causality in the revenue–expenditure nexus for the case of Malaysia and the Philippines, which may require fiscal synchronization instrument policies to moderate the post-crisis fiscal imbalances. Together, the results demonstrate diverse fiscal patterns but they should be useful to understand the complexities of economic integration in the region.     

ON FISCAL MULTIPLIERS: ESTIMATES FROM A MEDIUM SCALE DSGE MODEL

This article contributes to the debate on fiscal multipliers, in the context of an estimated dynamic stochastic general equilibrium model, featuring a rich fiscal policy block and a transmission mechanism for government spending shocks. I find the multiplier for government spending to be 1.07, which is largest on impact. The multipliers for labor and capital tax on impact are 0.13 and 0.34, respectively. The effects of tax cuts take time to build and exceed stimulative effects of spending by 12–20 quarters. I carry out counterfactual exercises to show how alternative financing methods and expected monetary policy have consequences for the size of fiscal multipliers.     

RE-EXAMINING THE EFFECTIVENESS OF STABILISATION POLICY

This paper develops an alternative international macroeconomic model for evaluating the effectiveness of fiscal and monetary policy in stabilising national income under fixed and floating exchange rates. It encompasses national output and income, saving, investment, money and capital flows and linkages between the exchange rate, price levels and real interest rates consistent with international parity conditions. It demonstrates that the nature of government spending is pivotal to the effectiveness of fiscal policy, revealing that, ceteris paribus , higher public consumption expenditure contracts national income and depreciates the exchange rate, whereas higher productive public investment spending has opposite effects. The framework also shows that the effectiveness of fiscal and monetary policy as macroeconomic policy instruments is not ultimately dependent on the exchange rate regime.     

Natural Resource Exports,Fiscal Policy Volatility and Growth

The combination of poor institutions and erratic macroeconomic policy, as measured by the volatility of fiscal policy, is associated with slower growth. We show that macroeconomic policy is more erratic in countries that are rich in natural resources, especially minerals and fuels, and in those that receive large aid inflows. Poor institutions also play a role. Although Africa is a major receiver of aid and exporter of natural resources, this is not purely an African phenomenon. Output volatility is not associated with slower growth after controlling for institutions and the volatility of fiscal policy.     

Analysing the effects of fiscal policy shocks in the South African economy

This paper is the first one to analyse the effect of aggregate government spending and taxes on output for South Africa using three types of a calibrated DSGE model and more data driven models such as a structural vector error correction model (SVECM) and a time-varying parameter VAR (TVP-VAR) to capture possible asymmetries and time variation of fiscal impulses. The impulse responses indicate first, that increases in government expenditure have a positive impact, albeit (at times) less than unity, on GDP in the short run; second, over the long run, the impact of government expenditure on GDP is insignificant; and third, increases in taxes decrease GDP over the short run, while having negligible effects over longer horizons.     

Fiscal policy,business cycles and discretion: evidence from the Western Balkans

While previous research has examined the macroeconomic performance of the New Member States during the boom–bust cycle of the 2000s, very little has been written on the experience of the Western Balkans. In this article we investigate the responsiveness of fiscal policy to business cycles in the Western Balkans, examining whether expenditure moved counter-cyclically and whether a larger proportion of expenditure was ‘discretionary’; that is, related to the political cycle rather than economic conditions. Our results suggest that fiscal policy did not move counter-cyclically in the Western Balkans. Instead, countries overspent in the boom years and then reduced spending as a result of financing constraints during the crisis. Furthermore, the discretionary component of fiscal policy, defined here as spending unexplained by inertia and economic conditions, appears to be somewhat larger in the Western Balkans than in the European Union. This has important policy implications that affect the effectiveness of fiscal policy in dampening economic fluctuations.     

Macroeconomic consequences of state fragility in sub‐Saharan Africa

Are poor macroeconomic outcomes primarily the result of economic policies, or of deeper underlying state fragility problems in sub‐Saharan Africa? We attempt to answer this question by using carefully specified dynamic panel regression techniques to show how state fragility conditions help to explain the differences in the macroeconomic performance of sub‐Saharan African economies, and to identify the most plausible mechanisms of transmission. We find that countries with greater fragility suffer higher macroeconomic volatility and crisis; they also experience weaker growth. When we disaggregate state fragility into its various components, we find that it is the security and social components that have the strongest causal impact on macroeconomic outcomes, while the political component is, at best, weak. Therefore, we conclude that it is state fragility conditions, and not necessarily macroeconomic policies, that are of first‐order importance in explaining the differences in macroeconomic performance for African countries. The knock‐on effects are mostly mediated through the fiscal channel, the aid channel, and the finance channel. Accordingly, we recommend that interventions in fragile states should best focus on exploiting the potential for using fiscal policy, aid, and finance as instruments to improve macroeconomic outcomes in sub‐Saharan Africa.     

The Real Exchange Rate and Growth in Emerging Markets: The Case of Zimbabwe

Zimbabwe has been facing growth and external competitiveness challenges, as shown by declining shares in global exports, high current account deficits, external debt and a widening productivity gap with South Africa. Estimates of the real equilibrium exchange rate reveal periods of sizeable misalignment, both prior to 2008 and under the current multicurrency regime. Misalignment has an asymmetric impact on growth. While overvaluation hampers growth, we have not found robust evidence that undervaluation would raise it. Replacing the multicurrency regime anchored in the US dollar by the South African rand would help reduce overvaluation and stimulate exports and growth. Under any currency regime, Zimbabwe needs to implement sound macroeconomic policies and an environment conducive to investment.     

科技与金融结合对全要素生产率的影响——基于“促进科技和金融结合试点”准自然实验的经验证据

将科技和金融结合试点政策视为一项准自然实验,基于2005—2017年中国283个城市数据,采用双重差分法评估科技和金融结合试点政策对全要素生产率的影响。结果发现：①科技和金融结合试点政策对全要素生产率具有正向影响且通过了显著性水平检验;②科技和金融结合试点政策主要通过提高城市创新水平和融资能力等途径促进全要素生产率增长,创新水平、融资能力在科技和金融结合试点与全要素生产率间起中介作用;③科技和金融结合试点政策对全要素生产率的影响存在异质性,经济发展水平较高、金融发展水平较高的城市,科技和金融结合试点政策对全要素生产率的影响更大。由此建议,加大金融资源支持力度,缓解企业融资约束,加强政府对创新的支持。