Transforming public finance under the impact of COVID-19

Devastating effects of the COVID-19 pandemic throughout the world enhance the societal requests for effective healthcare and social protection systems, modern education, and high-quality infrastructure. In Ukraine, education, healthcare, and social services have been chronically deteriorating, and the corona-crisis has further exacerbated their state and increased poverty in the country. The aim of this study is to reveal the main weaknesses of fiscal policy in Ukraine and to outline the prospects of public finance transformations under the impact of the COVID-19. To achieve this aim, the indicators of fiscal policy response to the pandemic in Ukraine are calculated and a comparative analysis of Ukraine’s public finance structure with the international patterns is undertaken. A moderate fiscal impulse and insufficient fiscal rescue package in Ukraine are shown. Moreover, the inconsistencies of anti-crisis fiscal policy instruments with the international best practice are revealed. Summarizing the available theoretical sources and recent applied research allows identifying the prospects of public finances transformations under the impact of the COVID-19 in a global context. Along with the obtained results of Ukraine’s fiscal sector analysis, these form the basis for shaping the fiscal policy response in Ukraine over the medium term. Proposals for public financing of Ukraine’s health care and educational sectors, of the social safety nets and infrastructures under the impact of the pandemic are developed. Offsetting measures from the expenditure and revenue sides of the budget are drawn up for closing the arising fiscal gaps.

Extraordinary Times Require Extraordinary Action: Boosting European Demand by Means of Investment Helicopter Money

This theoretical contribution analyzes remaining monetary policy tools and their ability to reestablish sound macroeconomic conditions in the euro area. Motivated by the observation of a lack of investment in the macroeconomy and subdued inflation, we review current monetary policy challenges and emphasize the major failure of traditional transmission channels. While interest rates and asset prices often respond to central bank tools, the effects on the real economy, specifically on investments, are often not observable. We suggest Investment Helicopter Money as a tool to directly strengthen investment and boost aggregate demand. This monetary impulse is found to offer a direct real effect without crowding-out investment or rising debt levels. Most importantly, we discuss necessary institutional arrangements and contrast the suggested tool with a simple monetary or fiscal impulse.

POLÍTICA FISCAL DISCRECIONAL EN BRASIL, 1995-2017: DESCOMPOSICIÓN Y EVOLUCIÓN

<p>Este artículo tiene como objetivo evaluar la orientación general (expansionista o contraccionista) del componente discrecional de la política fiscal brasileña en el periodo 1995-2017, así como verificar su posición respecto al ciclo económico (procíclica o anticíclica). Con este fin, proponemos y aplicamos una nueva metodología para separar el impulso fiscal discrecional de la parte del resultado fiscal que se obtiene de la activación de los estabilizadores fiscales automáticos. Concluimos que la política fiscal: 1) generó una posición mayormente procíclica (desestabilizadora) de su componente discrecional, lo que la llevó a amplificar en lugar de amortiguar los ciclos económicos; 2) no pudo evitar que la relación deuda pública/PIB entrase en una trayectoria insostenible al final del periodo. Se hacen algunas sugerencias para mejorar su rendimiento.</p><p><strong> </strong></p><p align="center">DISCRETIONARY FISCAL POLICY IN BRAZIL, 1995-2017: DECOMPOSITION AND EVOLUTION</p><p align="center"><strong>ABSTRACT</strong><strong></strong></p>This article aims to evaluate the general (expansionist or contractionist) orientation of the discretionary component of Brazilian fiscal policy in the period 1995-2017, as well as to verify its position in relation to the economic cycle (procyclical or anticyclical). To this end, it proposes and applies a new methodology to separate the discretionary fiscal impulse from the part of the fiscal result arising from the operation of automatic fiscal stabilizers. It concludes that fiscal policy: 1) generated a mostly procyclical (destabilizing) position of its discretionary component, leading it to amplify rather than dampen economic cycles; 2) failed to prevent the public debt/GDP ratio from entering the unsustainable path at the end of the period. Suggestions are made to improve its performance.

New Zealand

New Zealand’s expansion lost momentum in 2017-18, as some key drivers started to weaken. Despite the long expansion, inflation remains weak, reflecting imported disinflation as well as strong net inward migration, which has boosted labor supply. Macrofinancial vulnerabilities have increased with a housing boom but have been contained through macroprudential policy intervention. After recent declines, growth picked up in early 2019 and is expected to remain close to trend in 2019-20 on the back of increased policy support, despite external headwinds. Inflation should pick up gradually. Downside risks to the growth outlook have increased, reflecting: higher global risks; prospects for a weaker fiscal impulse given recent implementation lags; and the housing market cooling morphing into an actual downturn.

Estimating the Fiscal Impulse in Ukraine

This paper estimates the fiscal impulse for Ukraine following the methodology of the OECD, which disaggregates budget revenues and expenditures into categories that are driven by economic cycles. To estimate the fiscal impulse the author calculates both long-term and short-term elasticities of various budget items with respect to GDP. This approach allows the author (i) to identify the fiscal policy response to economic crises in Ukraine in 2008–2009 and in 2014, and (ii) to reveal those budget items that remain sensitive to the fluctuations in the business cycle. The fiscal policy response to the 2014 crisis is found to be significantly tighter than the response to the crisis of 2008–2009. In addition, corporate income tax shows the strongest response to economic cycles among budget revenue categories, while VAT has the greatest contribution to the cyclical component of Ukraine’s budget balance.

Bank rescues and fiscal policy in the European Union during the great recession

The outbreak of the economic and financial crisis in 2008, the socalled Great Recession, has made that many European Union countries have made massive interventions in their banking and financial systems. These interventions have had a considerable impact in the public finances of these countries. The aim of the paper is to analyze the impact on the national public budgets of the measures of public support to problem financial institutions carried out between the years 2008 and 2013, and to study how this budgetary impact has affected to the fiscal imbalances and to the strategies of fiscal impulse and consolidation implemented along these years.

Indikator Fiscal Impulse untuk Pengukuran Stance Kebijakan Fiskal

Kajian terhadap operasi keuangan pemerintah atau saldo (surplus/defisit) anggaran sering digunakan untuk melihat arah kebijakan fiskal, apakah bersifat ekspansif atau kontraktif terhadap perekonomian pada suatu periode tertentu. Lebih jauh, kajian tersebut dimaksudkan untuk melihat apakah ada upaya dari pemerintah untuk mempengaruhi permintaan agregat agar bergerak menuju tingkat output yang diinginkan. Namun, berbagai penelitian membuktikan bahwa angka operasi keuangan atau saldo anggaran saja ternyata tidak cukup untuk menjelaskan arah kebijakan fiskal.