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.     

财政支出分权如何影响政府支出预算偏离*

政府支出决算与预算的差异可称之为支出预算偏离，其大小直接关系到现代预算制度的建设和积极财政政策提质增效的效果。预算最大化理论指出地方政府追求自由裁量预算的最大化，这会导致预算支出大于决算支出，而财政支出分权则便利了地方政府追求自由裁量预算最大化的条件，因此，财政支出分权是导致支出预算偏离的一个重要因素。利用1994—2017年全省层面和市县加总层面的财政预决算数据，本文发现，财政支出分权程度越高，政府支出预算偏离的程度也越大。不同形式的稳健性检验较好地支持了上述结论。此外，经济发展水平和财政透明度能够降低财政支出分权对预算偏离影响的程度。合理调整不同层级政府之间的事权，建立事权与支出责任相匹配的财政体制，适度加强中央事权和支出责任，将有效降低政府支出预算偏离的程度。     

财政支出分权如何影响政府支出预算偏离*

政府支出决算与预算的差异可称之为支出预算偏离，其大小直接关系到现代预算制度的建设和积极财政政策提质增效的效果。预算最大化理论指出地方政府追求自由裁量预算的最大化，这会导致预算支出大于决算支出，而财政支出分权则便利了地方政府追求自由裁量预算最大化的条件，因此，财政支出分权是导致支出预算偏离的一个重要因素。利用1994—2017年全省层面和市县加总层面的财政预决算数据，本文发现，财政支出分权程度越高，政府支出预算偏离的程度也越大。不同形式的稳健性检验较好地支持了上述结论。此外，经济发展水平和财政透明度能够降低财政支出分权对预算偏离影响的程度。合理调整不同层级政府之间的事权，建立事权与支出责任相匹配的财政体制，适度加强中央事权和支出责任，将有效降低政府支出预算偏离的程度。     

How best to measure discretionary fiscal policy? Assessing its impact on private spending

We develop a novel empirical approach to assess the effect of discretionary fiscal policy on private spending consisting of three stages: 1) extract the discretionary component of fiscal policy by estimating a fiscal policy rule; 2) use the residuals of the first-stage regression to investigate the existence of crowding-in and/or crowding-out effects both in the short and the medium term; and 3) condition the response of private spending on a set of country characteristics. We find that an expansion in discretionary fiscal policy boosts growth in the short term, but is detrimental in the medium term. In addition, the empirical findings suggest that the effect of discretionary fiscal policy on private spending varies across regions and income groups, and depends on countries' economic characteristics such as the level of economic development, trade openness, government and country size.     

中国改革开放以来财政政策平滑经济波动的能力——基于传统IS-LM模型的实证分析

文章通过借助传统IS-LM模型和比较静态分析方法对中国改革开放以来财政政策平滑经济波动的能力进行了实证分析,得出:(1)财政政策对经济波动的整体平滑能力较低,平均只有6.35%,财政政策的平滑能力在经济波动的不同状态之间存在明显差异;(2)财政政策工具之间的平滑能力存在较大差异,其中财政购买性支出能平滑掉经济初始冲击的11.48%,而财政转移性支出和收入政策整体上反而使经济波动上升近3%;(3)内生性检验表明,中国只有相机性支出政策与经济波动之间存在显著的双向因果关系,不仅如此,相机性支出政策的内外时滞都较短。文章结论的政策含义是,提高中国财政政策稳定效果的关键在于提高政策工具的有效性与相互之间的协同效应,不仅如此,对经济高涨时期政府财政行为进行有效约束也至关重要。     

EU fiscal stance vulnerability: Are the old members the gold members?

This paper investigates the effect of aggregate shocks on the fiscal stance of the EU, and of its old (OMS) and new (NMS) member states over a business cycle. The fiscal stance is measured by the government deficit. To study the impact of aggregate shocks, we use impulse responses derived from a pooled structural vector autoregression model estimated on annual panel data. We find that the fiscal deficits of OMS could be vulnerable to discretionary changes in government expenditures and revenues. In contrast, the fiscal stance of NMS shows vulnerability to GDP shocks, because the increase in revenues after a positive GDP shock is often outpaced by greater expenditure increases in NMS. The estimated fiscal vulnerabilities stem from disproportionate policy responses concerning government expenditures and a lacking discipline to control pro-cyclical fiscal spending. Our findings for the EU thus support application of fiscal rules focused on government expenditure rather than other fiscal variables.     

Governments under influence: Country interactions in discretionary fiscal policy

We investigate the interactions between countries, and their effect on the discretionary (i.e. the cyclically-adjusted and interest-adjusted) components of national fiscal policies, observing and investigating the parts of public spending and tax receipts over which governments retain full discretion. Our sample includes 18 OECD countries for the period 1974–2008. First, we construct a measure of a discretionary fiscal policy from the residual component in a VAR model. We then compute this measure for the full sample. Using these data, we next run estimations of the discretionary fiscal policy interactions among the countries in the sample. Our results show that public decisions are affected by interactions between neighbor countries, neighborhood being defined by economic leadership as well as geography. We found evidence of opportunistic behavior by OECD country governments in relation to discretionary public spending. Finally, our estimation results reveal the crucial leadership role played by the USA in relation to discretionary fiscal policy decisions in Europe.     

相机抉择政策、经济增长与地区产出波动

本文旨在研究地方政府的相机抉择政策对经济增长和产出波动的实际影响。本文首先从预算软约束和晋升激励的角度分析这一政策的作用方式，然后用模型测度出相机抉择政策，并以2000—2013年的省际面板数据进行实证检验。研究表明，相机抉择的确刺激了地方经济增长，但却带来了明显的产出波动。不过相机抉择政策具有明显的时滞，其真实效果集中凸显在政策实施的两年后。因此，我国应加强公共财政制度的建设，使相机抉择政策在规则的框架下更为合理地使用。     

Fiscal institutions and public spending volatility in Europe

This work provides empirical evidence for a sizeable, statistically significant negative impact of the quality of fiscal institutions on public spending volatility for a panel of 23 EU countries over the 1980–2007 period. The dependent variable is the volatility of discretionary fiscal policy, which does not represent reactions to changes in economic conditions. Our baseline results thus give support to the strengthening of institutions to deal with excessive levels of discretion volatility, as more checks and balances make it harder for governments to change fiscal policy for reasons unrelated to the current state of the economy. Our results also show that bigger countries and bigger governments have less public spending volatility. In contrast to previous studies, the political factors do not seem to play a role, with the exception of the Herfindahl index, which suggests that a high concentration of parliamentary seats in a few parties would increase public spending volatility.     

日本政府财政支出的经济增长效应及启示

政府财政支出与经济增长存在一定的相关关系,但孰为因果莫衷一是。通过对1956-2008年日本政府财政支出与经济增长的协整分析和格兰杰因果关系检验,发现日本政府财政投资性支出与财政消费性支出均与经济增长长期内存在稳定的正向协整关系及单向因果关系,经济增长是财政支出增长的格兰杰因,而财政支出无论是投资性还是消费性支出都不是经济增长的格兰杰因。从这一结论出发,我国应吸取日本的经验教训,在实施积极的财政政策时,要控制规模、优化结构、确保质量、提高效益。     

财政支出与经济发展关系*——对瓦格纳法则的新解释

财政支出规模和结构反映了一个政府为实现其职能所进行的活动范围和公共政策的倾向。研究财政支出最重要的理论之一就是瓦格纳法则。本文使用2011年GFS和WDI数据库的截面数据,从政府财政支出总额及其构成验证了瓦格纳法则的成立,并通过国际比较,为优化我国财政支出结构提供建议。根据以往文献对瓦格纳法则的定义,笔者把政府财政支出占GDP比重对人均GDP（对数值）回归得到估计系数,称为瓦格纳法则系数,据此考察瓦格纳法则。回归结果显示,财政总支出的瓦格纳法则系数为371。这表明经济发展与财政总支出规模之间存在显著的正相关关系。换言之,财政总支出占GDP比重随着经济发展有上升的趋势。分项财政支出占GDP比重对人均GDP对数值的回归结果显示,人均GDP与医疗保健支出、教育支出和社会保护支出之间成正比关系,但与公共秩序和安全、住房和社区设施支出之间成反比。在此基础上,笔者计算了各分项财政支出对瓦格纳法则系数的贡献度,其中以社会保护支出的贡献度最大（7166%）,经济事务支出贡献度最低（-738%）。研究表明,瓦格纳法则成立的主要原因是社会保护支出与经济发展之间的正向关系。     

On the Cyclicality of Public Finances in Europe

Under EMU, monetary policy is oriented toward the euro area as a whole and fiscal policy is an important instrument remaining in the hands of national governments to cushion economic shocks to individual countries. The current paper analyses the cyclical pattern of public finances in Europe and addresses the question of whether fiscal policies have been geared towards this stabilising role. Although taxes fluctuate countercyclically in a conventional manner, we find that discretionary measures have tended to undermine automatic stabilisers. On the expenditure side, we find that public investment also displays a consistent procyclical pattern. Dynamic analysis reveals that a permanent shock to output induces asynchronous fluctuations in taxes and expenditures in the year of the shock and in periods thereafter. Finally, we examine political and institutional factors. The political fragmentation of the government as well as the partisan hue of the government do not interfere with the cyclical response of public finances, but we do find evidence of a pronounced electoral cycle.     

Cyclicality of Fiscal Policy in Latin America over the period 1990 ‐ 2015

Latin American countries experienced important changes in the 2000s. The implementation of fiscal reforms, public debt reduction and the high level of accumulated reserves gave them more policy space than in the past. As a result, Latin American countries were able to implement countercyclical policies to face the negative economic and social consequences associated with the recent macroeconomic shock. Some countries performed better than others. In particular, Social Democratic and Centrist governments enjoyed more fiscal space; they had realized larger budget surpluses over the good years and were able to cope with the crisis without impairing their fiscal conditions. Yet, Latin America has experienced a public finance deterioration in the most recent years. While governments are showing an increasing ability on taxation they are still facing some problems on the expenditure side. As a result, fiscal policy returned acyclical after the period of the crisis. The sustainability of public accounts may be strengthened increasing tax pressure on the richest, reducing tax evasion and improving current spending efficiency. However, the increasing political problems are putting many questions about future trends of public finance in the region.     

Do Changes in Democracy Affect the Political Budget Cycle? Evidence from Mexico

The previous empirical literature in opportunistic election cycles attempts to identify whether there is a significant impact of the election calendar on economic policy. The econometric analysis implemented in this paper goes a step further, seeking to test whether a country's time-varying degree of democracy affects the way in which economic policy is chosen as elections approach. A simple econometric model is estimated for the case of Mexico's fiscal policy between 1957 and 1997. The estimation reveals the government's strong systematic use of public spending in infrastructure and current transfers as a means to earn votes. Most importantly, we show that the magnitude of the election cycle has been exacerbated during the country's most democratic episodes.     

Variation in the fiscal multiplier with the method of financing: evidence across industrial countries

Government spending has often varied with the business cycle to stimulate the economy and to revive economic conditions. However, the state of public finances has often necessitated higher borrowing to finance widening fiscal deficits. Indeed, recent austerity packages around the globe have crystalized the importance of fiscal consolidation against the backdrop of rising public debt. To shed light on recent debates regarding fiscal multipliers, the article estimates variation in these multipliers with the method of financing, using annual data for a sample of industrial countries. There is a large variation in the effects of expansionary and contractinary government spending shocks on economic variables within and across countries. The significant effects of negative government spending shocks (fiscal contraction) appear more prevalent than those of expansionary shocks on real output growth, price inflation and nominal wage inflation. Consistent with theory’s predictions, the fiscal multiplier is more likely to be negative when government spending is financed by issuing debt and less likely in the case of monetization. The evidence confirms concerns about the negative effect of higher debt and more expensive financing on private activity, countering the effectiveness of fiscal policy.     

公共资本性支出、经常性支出与内生经济增长

本文基于一个含有两类不同产出能力的公共商品的内生增长模型,通过数理分析得出在市场经济条件下最优公共支出结构的依据是公共商品各自的产出弹性.进而采用面板数据模型对13个发达国家1972～2009年的公共支出实践进行了实证研究.实证结果表明,经常性(资本性)支出对经济增长有正(负)效应.该研究结论为平衡预算下的公共支出结构决策提供了参考依据.     

Ricardian Equivalence and the Efficacy of Fiscal Policy in Australia

Events surrounding the global financial and economic crises of 2008 and 2009 have sparked a renewed interest in discretionary fiscal policy. This article considers whether private saving in Australia behaves in a manner that is consistent with Ricardian equivalence, thus mitigating the effects of fiscal policy, or conversely, if fiscal policy has some ability to influence the real economy. Results indicate that, while there is not a full Ricardian response to changes in the fiscal stance, there is some partial offsetting behaviour—implying that fiscal policy does elicit some (limited) impact on economic activity.     

Oil shocks and fiscal policy procyclicality in Angola: Assessing the role of asymmetries and institutions

The aim of this article is to examine procyclicality in Angola, assess whether it behaves asymmetrically over the oil cycle, and test the hypothesis that institutions and fiscal rules can moderate procyclicality. Received wisdom suggests that in resource‐rich economies, fiscal policy tends to be procyclical albeit improvements in the past decades due to institutional reforms. Similar evidence is available for oil‐rich economies; however, we know little about how procyclicality behaves over the oil cycle; that is, whether spending (and revenue) grows faster during oil‐market booms, than during downturns. Further, evidence on institutions and fiscal rules in oil‐exporting economies is still ambiguous. We bridge both gaps by examining fiscal policy procyclicality in Angola, one of the largest oil‐producers in Africa, and a country that has experienced an intense process of institutional reforms since 2002. Therefore, it is an ideal candidate for our study. We use data for the 2004–2014 period to estimate a threshold vector error correction model that extends vector autoregressive and vector correction methods used up to date. Our results indicate that revenue and spending are generally procyclical to oil shocks, that revenue is more procyclical during booms, and that institutional quality, net inflows, financial openness, and fiscal rules affect procyclicality.     

How does population aging affect the effectiveness of fiscal stimulus over the business cycle?

What is the impact of population aging on the effectiveness of fiscal stimulus over the business cycle? We address this question by estimating state-dependent fiscal multipliers in member countries of the Organisation for Economic Co-operation and Development (OECD). A government spending shock is identified as a forecast error of government spending and its output effect is estimated by using the local projection method. We find that there is no effect of population aging on output effects of fiscal spending shocks in expansionary times, whereas in recessions the output effects of fiscal spending shocks are weakened as population ages. This result points to important policy implications in that population aging would call for a larger fiscal stimulus to support aggregate demand during recession. Thus, this requires a larger fiscal space to allow for a wider swing of the fiscal position without creating concerns for fiscal sustainability.     

“When it rains,it pours”: Fiscal policy,credit constraints and business cycles in emerging and developed economies

Fiscal procyclicality, meaning co-movement between government expenditure and macroeconomic fundamentals, is an important feature of business cycle dynamics for emerging and poor economies. I estimate a panel SVAR to investigate the reasons for fiscal procyclicality. The analysis sheds light on the role of external financial constraints in shaping fiscal policy. My findings suggest that the response of emerging governments to output fluctuations is similar to that of developed governments. However, emerging governments curtail spending in response to increases in the sovereign borrowing rate, which forces their consumption expenditure to act more procyclically. Using counterfactual analysis, I show that the key forces behind fiscal procyclicality are the sensitivity of government spending to international borrowing costs and the procyclical nature of these costs for emerging economies.