THE RELATIONSHIP BETWEEN DEBT LEVEL AND FISCAL SUSTAINABILITY IN ORGANIZATION FOR ECONOMIC COOPERATION AND DEVELOPMENT COUNTRIES

In this article we unify the traditional approaches to testing for fiscal sustainability considering the stock‐flow system that fiscal variables configure. Our approach encompasses previous ways of testing for sustainability. The results obtained for a group of 17 Organization for Economic Cooperation and Development (OECD) countries point to weak fiscal sustainability, as well as to the existence of cointegration between deficit and debt, confirming the relevance of the stock‐flow approach. Allowing for structural breaks and multicointegration turns out to be of critical importance to assess whether the fiscal authorities apply their policies looking for sustainability and whether, simultaneously, they try to stabilize real debt target levels. (JEL H62, E62, C22)     

Fiscal Pressure of Migration and Horizontal Fiscal Inequality: Evidence from Indian Experience

This article examines the patterns and trends in inter‐State migration across the Indian States and observes that along with the demographic factors, migration is also affected by the fiscal profile of States. Controlling for the economic prosperity of States as reflected in their per capita Net State Domestic Product and the nature of fiscal policy stance, econometric estimation using the gravity model suggests that level of vertical federal transfers and its horizontal distribution is an important determinant of the pattern of inter State migration. To correct for the extant horizontal fiscal inequality across the Indian States, the article suggests a relatively more progressive transfer system and a developmental fiscal policy stance at the State level to reduce the pressure of out‐migration to prosperous regions of the country.     

Fiscal Consequences of the Refugee Crisis

The European Union faced an unprecedented influx of asylum seekers during the 2014–2016 refugee and migration crisis. The admitted refugees pose a critical challenge, but at the same time represent an opportunity for the host countries’ public finances. If the fiscal balance of immigration is positive, then migrants become net contributors to public budgets, helping to alleviate the aging related fiscal burden. However, we argue that this is highly unlikely to happen with refugees entering extensive European welfare states, at least in the short and medium term. By reviewing the existing empirical literature, we demonstrate that the research on the fiscal effects of refugee (or non‐Western) immigration almost uniformly supports the conclusion that the fiscal balance is going to be negative. The noble aims of humanitarian obligation to accept refugees seem to be in conflict with the pragmatic economic interest – a fiscally beneficial immigration – this time.     

Effects of Macroeconomic Uncertainty on Investment and Economic Growth: Evidence from Pakistan

The relationship between macroeconomic uncertainty, investment and economic growth is an empirical issue in developing countries. This paper investigates the effects of macroeconomic uncertainty on investment and economic growth in Pakistan for the period 1975–2008 by using the accelerator model of investment and endogenous growth model. The conditional variances, directly estimated through the Generalized Autoregressive Conditional Heteroscedasticity (GARCH) model is utilized for erecting the uncertainty variables related to fiscal policy, openness and foreign capital inflows. The results clearly indicate that the macroeconomic uncertainty have significant negative effects on investment and per capita income of Pakistan. We conclude that a reduction in macroeconomic uncertainty through appropriate fiscal and monetary policy, stability in capital inflows and improved trade performance could result in high investment and sustainable economic growth in the country.     

Plebiscites,Fiscal Policy and the Poor: Learning from US Experience with Direct Democracy

Many countries are contemplating direct political participation as a way of giving marginalised people more say in national fiscal policies. The United States is a natural laboratory for studying how large‐scale direct democracy actually works in this regard. Every state allows voters to decide certain ballot questions about how to raise and spend public revenue. The 100‐year record shows, however, that state‐wide plebiscites fail to produce uniformly equitable or financially sustainable government budgets, or to mobilise low‐income groups to defend their economic interests. When called upon to make decisions about state government spending, the electorate is apt to disregard any hardship for poor people. Traditional political parties and advocacy organisations are usually a more promising avenue for promoting anti‐poverty budgets.     

The Macro Content of PRSPs: Assessing the Need for a More Flexible Macroeconomic Policy Framework

This article analyses the content of 15 Poverty Reduction Strategy Papers from a growth and poverty reduction perspective. Contrary to new trends in developed and middle‐income countries, their policy frameworks lack the necessary flexibility to deal with external shocks and address macroeconomic volatility appropriately. Their fiscal and monetary policies are too narrowly focused on fiscal balance and price stability and consequently pay too little attention to economic fluctuations arising from external shocks, which have major effects on poverty and growth. To address these issues, the article proposes a set of policy measures, including avoidance of excessively tight inflation and fiscal targets (with provisions for fluctuations in commodity prices), more room for countercyclical policy and the adoption of permanent safety nets.     

Public Debt Sustainability in Africa: Building Resilience and Challenges Ahead

The increased access of African countries to international capital markets has put public debt sustainability at the forefront of the continent's policy agenda. Utilising the ‘stabilising primary‐balance’ approach, this article finds that the actual primary balances exceeded those required to keep public debt at the 2007 level in about half the countries studied, and in several cases, those needed to reduce public debt‐to‐GDP to sustainable thresholds. The interest rate‐growth differential (IRGD) drove sustainability, underscoring the importance of growth and borrowing for growth‐enhancing outlays. As the IRGDs are likely to narrow over the longer term, fiscal policies will need to play a greater role.     

BETWEEN SCYLLA AND CHARYBDIS: INCOME DISTRIBUTION,CONSUMER CREDIT,AND BUSINESS CYCLES

We introduce a macroeconomic model with heterogeneous households and an aggregate banking sector in order to analyze the impact of rising income inequality under different credit scenarios. Growing inequality produces debt‐led consumption boom dynamics when the banking sector is characterized by a lower capital requirement and a higher willingness to lend. Instead, when inequality rises but the banking sector is highly regulated, aggregate demand and output fall. Our results also yield new insights on the appropriate fiscal policy reaction to stabilize the economy: acting on the progressivity of the tax system seems more effective than a proactive countercyclical fiscal policy. (JEL C63, D31, E62, G01)     

Local Government Fiscal Burden in Nonmetropolitan America1

Rising fiscal pressure on local governments in rural areas of the United States is documented in this study. The level of fiscal burden on taxpayers to support local governments in nonmetropolitan areas is found to be higher than that in metropolitan areas between 1977 and 1987. Using a model from the urban fiscal literature, the level of fiscal burden in nonmetropolitan areas is found to be influenced by a combination of demographic, socioeconomic, intergovernmental, and historical factors. Intergovernmental revenue transfers from the state and federal government play a critical role in determining the level of fiscal burden rural taxpayers bear. These findings have implications for rural economic development and for understanding how rural areas are influenced by the larger society.     

Structural Reforms and Fiscal Discipline in Europe

In this paper we provide an overview on recent contributions on the effectiveness of the institutional framework operating in Europe to fulfil the objectives declared in the Lisbon Agenda under the fiscal constraints established in the Stability and Growth Pact. After a review of the Stability and Growth Pact as well as the Lisbon Strategy and the Sapir Report, we discuss the relations between fiscal policy and structural reform. Finally, we focus on 2D points in the EU debate on institutional reforms: government short-sightedness and the coordination of national fiscal policies at the European level.      

产业结构、公共支出与省际城镇化差异

利用分省的2005-2011年面板数据,对产业结构、公共财政支出与城镇化关系进行实证研究,发现产业结构、公共财政支出以及城镇建设水平都对城镇化进程具有显著影响,其中产业结构是首位的影响因素,产业结构的优化升级是推进新型城镇化的重要支撑,而公共财政支出和城镇建设水平的提高对城镇的人口承载力同样具有正效应。     

Dynamics of Current Account Deficit: A Lesson from Pakistan

This study investigates the determinants of the current account deficit in Pakistan by using the annual time series data for the period from 1976 to 2010. The cointegration results suggest the positive and significant long run relationship of the current account deficit with the exchange rate, trade deficit and fiscal deficit while a significant negative relationship is found with external debt and private saving. The error correction model also confirms the significant positive relationship of the current account deficit with trade deficit and fiscal deficit in the short run. The Granger-causality test shows the bidirectional causal relationship of exchange rate and external debt with current account deficit. While, unidirectional causality is found from current account deficit to trade deficit and private savings. It is recommended that the government needs to be cautious in financing its fiscal deficit. Savings habits should be increased to narrow the investment gap in economy.     

Material Flows Accounting: A Biophysical Approach to Macroeconomic Sustainability

The increasing dimension of socio-environmental problems make sustainability a macroeconomic issue and new methodological instruments are needed. In this paper, Material Flows Accounting is presented as a new statistical approach for an evaluation of macroeconomic sustainability. Based on the pre-analytic vision that economies are an open system embedded in the environment, it provides an overview in tonnes of annual material inputs and outputs of an economy. It quantifies the physical dimension of societies and analyses the “size” of the human economy in the geo-biosphere. As it provides information about efficiency and material requirements, it is a very important method for analysing whether a nation is moving towards sustainability or away from it. Used in many official statistics, it will become one of the most powerful tools in describing sustainability at the macroeconomic level. In this paper, after the presentation of the Material Flows Accounting approach, an Italian case study is considered.     

THE FISCAL FRAMEWORK OF MONETARY POLICY

This paper i11ustrates the importance of the fiscal framework for monetary analysis by discussing three separate issues. I begin by examining how the fiscal framework changes the macroeconomic equilibrium associated with different steady state rates of money growth. This includes a summary of research that I have presented elsewhere and comments on several additional aspects of the way in which the fiscal structure destroys the neutrality of monetary policy.
The second section deals with the short-run impact of changes in monetary policy. Here again the fiscal structure complicates the economy's response to monetary policy.
The final section looks at the effect of the fiscal structure on the central banks choice of monetary policies. Fiscal structures are likely to influence the policies adopted because they affect the costs and benefits of monetary policies.     

The Scope for Fiscal Policy: A Case Study of Thailand

This article is concerned with the application of fiscal policy instruments in stabilisation policy. Theoretical and practical considerations suggest that the scope for fiscal policy may be limited, but analysis of the actual performance of Thailand shows that an active use has been made of it. Compared with advanced economies, the role of automatic stabilisers is relatively small; discretionary fiscal policy interventions have been more important. Particularly in the years after the Asian financial crisis fiscal policy has been actively used, first, under IMF programmes, to reduce aggregate demand, and later to stimulate the economy. The article focuses on the application of fiscal policy instruments, not on the impact of fiscal policy interventions on the real economy.     

Dichotomy of development aid’s ambition and neoliberal imperatives: A case‐study of private‐sector development in Bangladesh

Development in the twenty‐first century (“neo‐liberalism”) is a tool and its success and sustainability depend on how this tool is applied on a specific grounded reality. This article investigates how this modernization process continually co‐creates globalized Bangladesh through private sector development. While this field report highlights the challenges development aid donors can face in Bangladesh’s post‐colonial culture, it also unveils the dichotomous traction between globalization and inequality as well as the friction poverty reduction, through private sector development, can generate in impoverished countries. Finally, this report attempts to reconsider the ways in which the aid development ambitions of equality and liberty can find a workable balance with the neo‐liberal Imperative for private sector development. This article calls for improving quality control to generate greater impact of development aid resources in developing private sectors.     

Policy Disciplining Effect of Capital Account Openness in India

In this paper, the policy disciplining effect of capital account openness in India is examined by examining the impact of capital account openness on inflation and fiscal deficit. Multivariate modeling, which includes other relevant variables identified in the literature, is used for the analysis. Our results show capital account openness has a strong disciplining effect on inflation whereas it has no significant effect on fiscal deficit. In the case of fiscal deficit, trade openness and number of government changes only are the significant determinants. The moves of the RBI tend to reaffirm the disciplinary effect of capital account openness. In the meantime, since the mid 1990s, RBI kept a strict vigil over inflation and inflation expectations in the context of a more open capital account. One major reason for the problem concerning inflation expectation by RBI is the threat of capital outflow in the face of loose monetary policy and high inflation.     

Dispensing Charity: The Deficiencies of an All-or-Nothing Fiscal Concept

In deciding the means, levels, and targets of taxation and spending across third-sector organizations, governments seeking to increase social welfare should use fiscal concepts and indicators that can detect and grade the welfare consequences of their decisions. On these terms, charity, as its meaning has originated and evolved in common law, is a deficient fiscal concept: it is neither teleological nor gradational, and therefore can offer no guidance on how to design and differentiate the fiscal treatment of third-sector organizations in ways that could increase social welfare. In general, the national governments of Australia, Canada, England and Wales, India, and Singapore treat uniformly the third-sector organizations whose purposes comply with the legal meaning of charity. In order to reform and differentiate that treatment with the prospect of increasing social welfare thereby, governments should start by dispensing with charity as a fiscal concept.     

THE GROWTH OF THE FEDERAL DEFICIT AND THE ROLE OF PUBLIC ATTITUDES

How can the recent explosion in the fiscal deficit of the UnitedStates be reconciled with the well-known support of the Americanpublic for fiscal conservatism? It is first shown that the reputationfor fiscal conservatism is fully supported by public opinionpolls dating back over a period of four decades. Solid majoritieshave consistently opposed tax reductions that might producean unbalanced budget. Recently, however, the public has alsoshown strong opposition to increases in taxes to close the fiscalgap, which might appear to imply a new acquiescence to the deficit.But this opposition, too, is shown to have persisted for a longtime and to be not logically inconsistent with rejecting taxcuts resulting in deficit. Another fashionable explanation forthe deficit holds that the budget process in a democratic societyis biased toward deficit because the cost of higher taxes isimmediate while the cost of deficit is delayed. But it is inconsistentwith the fiscal history of the United States over the last 100years, which reveals no systematic bias toward deficits, atleast until recent years. The major explanation that emergesis that the administration succeeded in misleading the public(and perhaps even itself) into believing that the tax cut wouldnot result in deficit thanks to "supply" and "Laffer curve"effects.     

Assessing Monetary and Fiscal Policy Interaction in a Small Open Economy: the Case Republic of Macedonia

The aim of this paper is to analyze empirically the interaction between monetary and fiscal policy in a small open transition economies: the case the Republic of Macedonia. This paper employs SVAR methodology to examine jointly the impact monetary and fiscal policy on real GDP and prices. The result reveals that the monetary policy counteracts the effects of fiscal policy and persists until the effects of fiscal policy changes disappear. This causes a crowding out effect. In addition, the result shows that the best fiscal policy for stimulating the economy appears to be one of tax-cuts. The empirical research, in jointly analyzing fiscal and monetary policy also provides an additional, possibly interesting result. The sizes of the responses of real GDP and prices to monetary shock are not significantly reduced when fiscal shock is included into monetary SVAR.