The structural budget deficit as an instrument of fiscal policy

De Economist ◽  
1984 ◽  
Vol 132 (2) ◽  
pp. 183-203 ◽  
Author(s):  
C. G. M. Sterks
Keyword(s):  
Fiscal Policy ◽  
Budget Deficit ◽  
Structural Budget

scholarly journals Budget Deficits: Rhetoric and Reality

1989 ◽  
Vol 3 (2) ◽  
pp. 73-93 ◽  
Author(s):  
Robert Eisner
Keyword(s):  
Fiscal Policy ◽  
Public Goods ◽  
News Media ◽  
Empirical Data ◽  
Budget Deficit ◽  
Economic Problem ◽  
Budget Deficits ◽  
Relevant Model ◽  
Government Deficits ◽  
Economics Profession

Whatever the real or imagined ills of the economy, the news media, most politicians and a fair proportion of the economics profession are quick to point to the culprit: “the budget deficit.” No matter that few appear to know or care precisely what deficit they are talking about or how it is measured. No matter that few bother to explain in terms of a relevant model just how government deficits may be expected to impact the economy. No matter that few offer any empirical data to sustain their judgments. I believe there are serious problems with our fiscal policy. These relate to fundamental national priorities and the provision of public goods, now and for the future. But the current size of the federal deficit is not “our number one economic problem,” if indeed it is a problem at all.

scholarly journals The Impact of Government Debt Issuance on Short-Term interest rates in Indonesia

2009 ◽  
Vol 11 (3) ◽  
pp. 301
Author(s):  
Sri Adiningsih
Keyword(s):  
Fiscal Policy ◽  
Private Sector ◽  
Financial Markets ◽  
Interest Rates ◽  
Budget Deficit ◽  
Negative Impact ◽  
Government Debt ◽  
Crowding Out ◽  
Short Term ◽  
The Impact

This paper analyzes whether the expansionary fiscal policy funded by issuing debt instruments in financial markets will increase short-term interest rates. If  the expansionary fiscal policy increases interest rates, which decrease private spending especially investment, crowding out occurs. This is interesting because global economic crisis has encouraged many countries to run large budget deficits to stimulate the economy. Indonesia has also run budget deficit during this crisis and even in years before. The impact of such a policy can be significant because Indonesia’s debt market is still narrow and shallow. Therefore, its capability of absorbing the government debt instruments without influencing the private sector funding is limited. This study tests whether the crowding out occurs in Indonesia using a time series econometric model inspired by Cebula and Cuellar’s model. The Cointegration Regression and Error Correction Model (ECM) are used in this study. Monthly data from April 2000 to December 2008 are used for overnight real interbank call money interest rates, real net government bond issues in trading, real narrow money supply, real rate of one-month Certificate of Bank Indonesia, growth of Gross Domestic Product, and real net international capital flows. This empirical study shows that the crowding out problem occurred in Indonesia during the period. This indicates that financing budget deficit in Indonesia by issuing debt instruments in the financial markets has a negative impact on the private sector.

scholarly journals Enhanced Fiscal Governance in the European Union: The Fiscal Compact

2015 ◽  
Vol 5 (1) ◽  
pp. 73-92 ◽  
Author(s):  
Merike Kukk ◽  
Karsten Staehr
Keyword(s):  
European Union ◽  
Budget Deficit ◽  
Debt Crisis ◽  
The European Union ◽  
Upper Limit ◽  
Fiscal Compact ◽  
Domestic Legislation ◽  
European Debt Crisis ◽  
Fiscal Prudence ◽  
Structural Budget

AbstractSeveral reforms aiming to strengthen budgetary discipline in the European Union have been implemented since the outbreak of the European debt crisis. Arguably the most important one is the Fiscal Compact, which stipulates that each signatory country must enshrine in domestic legislation an upper limit on the structural budget deficit, that is, the deficit after cyclical and other temporary factors have been excluded. This paper analyses the contents of the Fiscal Compact and discusses challenges for its implementation and efficacy. The conclusion is that the Fiscal Compact may be challenging to implement and enforce because the rules are very complex and require complicated calculations that are subject to very large forecasting uncertainty. The Fiscal Compact could, however, lead to a stronger national commitment to fiscal prudence.

scholarly journals THE MECHANISM OF FISCAL POLICY

2020 ◽  
Vol 1 (1) ◽  
pp. 28-32
Author(s):  
Lidiia Fedoryshyna
Keyword(s):  
Fiscal Policy ◽  
Public Debt ◽  
Budget Deficit ◽  
Absolute Magnitude ◽  
The State ◽  
National Debt ◽  
Agricultural Insurance ◽  
Theoretical Approaches ◽  
Definition Of ◽  
Finance Theory

The purpose of this article is to study fiscal policy, which is one of the methods of regulating the country's macroeconomic policy. Theoretical approaches of scientists to the definition of the term "fiscal policy" are investigated. The contents and principles of the functioning of the mechanism of fiscal policy are disclosed. Method. Theoretical approaches to the definition of mechanisms and discrete components of the fiscal policy of the state and its criteria characteristics have been developed. The research has been based on the use of a systematic approach to the consideration of fiscal phenomena, on the fundamental principles of economic theory, systems theory, theory of finance, theory of taxes, etc. Results. It is observed that the budget deficit and the national debt are closely linked: the increase in the budget deficit leads to an increase in the national debt. But the absolute magnitude of the budget deficit, and therefore of the public debt, does not provide enough information for economic analysis. It is necessary to know what processes the budget deficit is serving, what changes in the reproduction cycle it reflects. It is also very important to measure changes in public debt in relation to changes in GDP. In addition, the tax burden is increasing as a result of these changes. Value/originality. It is determined that along with the expected changes in the methodology of calculation and procedure of tax payment, taxpayers are also concerned about the question of changing the tariff grid by the total amount of taxes due in absolute terms and in relation to the volume and resultant indicators of production activity (revenue, profit). An innovative tariff policy has been proposed and opportunities for using non-traditional agricultural insurance products have been revealed. Recommendations to improve the fiscal policy of the state have been made. The conceptual platform for harmonizing the mechanism of fiscal policy regarding economic entities is substantiated.

scholarly journals The scourge of green monetarism

2015 ◽  
Vol 1 (2) ◽  
pp. 166-176 ◽  
Author(s):  
Malcolm Sawyer
Keyword(s):  
Fiscal Policy ◽  
Money Supply ◽  
Budget Deficit ◽  
Green Party ◽  
England And Wales ◽  
Reserve Banking ◽  
Automatic Stabiliser

The idea of full reserve banking (under various names) has been adopted by parts of the green and ecological movements (e.g. Green Party of England and Wales). The paper argues that full reserve banking (FRB) would represent a ‘green monetarism’. As with monetarism, FRB would focus on inflation and its control through the money supply. FRB would face problems with the control of the effective money supply as other means of payment developed. Its major problem would though come from the connection which would be established between the budget deficit and changes in the money supply. Fiscal policy would become completely subordinated to the control of the money supply. There is no reason to think that it would enable fiscal policy to be set in a manner conducive to high levels of employment, and at times would lead to substantial unemployment, and at others to ‘overheating’ of the economy. Through denying fiscal policy’s role as an ‘automatic stabiliser’, full reserve banking would be a force for instabilities.

scholarly journals The European Union as a Trigger of Discursive Change: The Impact of the Structural Deficit Rule in Estonia and Latvia

2018 ◽  
Vol 12 (2) ◽  
pp. 1-15 ◽  
Author(s):  
Ringa Raudla ◽  
Aleksandrs Cepilovs ◽  
Rainer Kattel ◽  
Linda Sutt
Keyword(s):  
European Union ◽  
Member State ◽  
Policy Making ◽  
Budget Deficit ◽  
Policy Discourse ◽  
The European Union ◽  
Policy Actors ◽  
Fiscal Compact ◽  
The Impact ◽  
Structural Budget

Abstract Our paper explores how a rule prescribed by the European Union can bring about changes in the policy discourse of a member state. Drawing on the literatures of discursive institutionalism and Europeanization, the theoretical part discusses the factors that influence discursive shifts. The empirical part examines the discursive impacts of the introduction of the structural budget deficit rule, required by the Fiscal Compact, in Estonia and Latvia. It demonstrates how the discursive shifts have been shaped by the localized translations offered by civil servants, the entrance of additional actors to the policy-making arena, crisis experience, and the strategic interests of policy actors.

scholarly journals Banque Centrale Et Politique Budgetaire : Une Évidence Empirique Pour La Zone CEMAC

2018 ◽  
Vol 14 (10) ◽  
pp. 190
Author(s):  
Tadadjeu Wemba Dessy-Karl ◽  
Kamajou François ◽  
Noula Armand Gilbert
Keyword(s):  
Fiscal Policy ◽  
Panel Data ◽  
Central Bank ◽  
Budget Deficit ◽  
Budgetary Policy ◽  
Average Orientation ◽  
The Government

The purpose of this article is to analyze how the degree of independence of the Bank of Central African States (BEAC) influences the level of budget deficit for the countries of the Economic and Monetary Community of Africa Centrale (CEMAC) over the period 1994-2016. To do this, we rely on the statutory and rotational indicators of central bank governors developed by the literature, as well as on the econometrics of panel data. The results of the estimates indicate a mixed relationship between degree of independence and level of budget deficit. This result can be interpreted as an absence of constraint on fiscal policy, or as the partial assumption of cyclical stabilization by the central bank even when it is independent. It can also be interpreted as an absence of obligation for the budgetary policy to take charge of the cyclical adjustment. These results nevertheless confirm that the average orientation of fiscal policy is determined more by the budget procedure itself than by the statutes and the government of BEAC.

scholarly journals The Twin Deficits Phenomenon: Evidence from Pakistan

2000 ◽  
Vol 39 (4II) ◽  
pp. 535-550 ◽  
Author(s):  
Anjum Aqeel ◽  
Mohammed Nishat
Keyword(s):  
Fiscal Policy ◽  
Current Account ◽  
Budget Deficit ◽  
Current Account Deficit ◽  
Theoretical Work ◽  
Current Account Balance ◽  
Improved Performance ◽  
Necessary And Sufficient ◽  
The Relationship ◽  
The Current Account

Like most developing countries a steady budget deficit in Pakistan is the primary cause of all major ills of the economy. It has varied between 5.4 to 8.7 percent during last two decades. On the other hand the current account deficit varied between 2.7 to 7.2 percent during the same period. The variations in fiscal policy can lead to predictable developments in an open economy’s performance on current account, remains a controversial issue. An important aspect of this issue concerns what is termed as twin deficit analysis, according to which fiscal deficits and current account balances are very closely related so that reductions in the former are both necessary and sufficient to obtain improved performance in the later. Theoretical work on the relationship that exist between variations in fiscal policy and the current account balance has been based upon two types of models. These models are constructed from postulated behavioural relationships that purport to describe how the economy works in aggregate without explaining the behaviour of agents who make up the economy [Mundel (1963); Branson (1976); Dornbusch (1976); Kawai (1985) and Marston (1985)]. The second type of model, derives the important macroeconomic relationships from the microfoundations of individual optimising behaviour [Dixit (1978); Neary (1980); Obstfeld (1981); Persson (1982); Kimbrough (1985); Frenkel and Razin (1986); Cuddington and Vinals (1985, 1986a) and Moore (1989)]. However, both of these approaches have yielded divergent results.

scholarly journals Fiscal policy and economic development

2020 ◽  
pp. 153-164
Author(s):  
Mykola Pasichnyi
Keyword(s):  
Economic Growth ◽  
Economic Development ◽  
Fiscal Policy ◽  
Budget Deficit ◽  
Weight Ratio ◽  
Policy Formation ◽  
Gdp Growth ◽  
Fiscal Consolidation ◽  
Real Gdp ◽  
The Impact

The research subject includes the theoretical basis and mechanisms of fiscal policy formation and realization as an instrument of economic development regulation. The aim of the study is to improve the theoretical and methodological basis of fiscal policy formation and determine the peculiarities of its impact on economic development. Methods. In order to achieve the appropriate tasks, we used a set of methods and approaches, that helped to ensure the conceptual unity of our investigation. The dialectical, systemic and structural approaches, methods of analysis and synthesis, comparison, generalization,economic and mathematical modeling, scientific abstraction are applied. Results. In this paper, we explored the main instruments of fiscal policy, which affect economic development. The experience of advanced counties in fiscal consolidation and stimulus measures during the Great Recession was systemized. Also, the author investigated the budget deficit impact on real GDP growth in OECD countries over the 1981-2017 period. Practical implications. Fiscal policy and instruments of its implementation. Conclusions. The regulation of the tax burden on labor and capital influences the conjuncture of these factors in the market. Fiscal regulation is one of the determining reasons for the migration of labor and financial capital between different regions and countries. Given the multiplicity of combinations of tax bases and rates, the government has significant potential to impact on investment and consumer demand, and real GDP growth. The impact of budget expenditures on aggregate demand should be examined considering the level (ratio to GDP) and different composition structures. It is vital to raise the weight ratio of productive expenditures in the overall structure, which leads to foster economic growth. Particularly important are the special productive expenditures that are directed towards the development of human capital; which include expenditures on education, health care, physical development, R&D. It is crucial to establish a consistent relationship between public spending and the obtained results to form an effective fiscal policy. The budget should be balanced, which requires the implementation of systematic fiscal consolidation measures, and it has been found that the growth of the budget deficit slows down economic growth. The priority of fiscal policy is to reduce the debt burden.

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