The impact of fiscal shocks on real GDP and income inequality: What do Australian data say?

This paper examines the impact of three fiscal policy shocks on per capita real GDP and income inequality in Australia during the period 1965–2014. A small structural vector autoregressive (SVAR) model is constructed for an open economy for contemporaneous identification and estimation purposes. Based on the evidence of one cointegrating vector among the variables, a structural vector error correction (SVEC) model is specified for the long run. Direct taxation, indirect taxation receipts and government spending are identified as permanent fiscal policy shocks. The convergent use of two different models (SVAR & SVEC) strengthens the credibility of the results. The results have three key policy implications. First, a reduction in direct taxation receipts increases per capita real GDP without increasing income inequality. Second, a reduction in government expenditure significantly increases income inequality. Third, the adverse effect of indirect taxation receipts on income inequality is greater than the redistributive effect of government expenditure, which questions the widely held fiscal policy strategy of using indirect taxation to finance redistributive expenditure.     

The Ageing of Australia: Fiscal Sustainability,Intergenerational Equity and Inter‐temporal Fiscal Balance

Australian public policy makers are presently confronted with significant demographic changes that will profoundly affect the formulation of rational economic and social policy over the long term. This paper seeks to outline the potential impact of this demographic change and place it in historical perspective. The challenges posed by an ageing population for fiscal policy are explored and it is stressed that policy inertia will invite severe costs in future. It is argued that an appropriate policy stance should be developed in the context of a framework for inter‐temporal fiscal balance not only to focus on long‐run fiscal sustainability, but also to include considerations of intergenerational equity.     

Measuring the effects of oil price and Euro-area shocks on CEECs business cycles

Assessing the cyclical alignment of national business cycles with the Euro-area one is of great importance in order to guide policy decisions concerning the enlargement of the Euro area. To this end, in this paper we aim to measure the effects of external macroeconomic shocks on business cycles of Central and Eastern European Countries, not yet Euro-area members. Using quarterly data from 1999 to 2015 and the structural near-VAR methodology, we focus on the effects of Euro-area monetary policy and global oil price shocks on prices and output of the analyzed countries. Results show that business cycle fluctuations are mainly explained by domestic shocks in the short run, while monetary policy and oil price shocks play an increasing role in the medium run. Adding domestic fiscal shocks, the overall picture does not change significantly, since fiscal policy turns out to be a minor driver of business cycle fluctuations in CEECs. In the whole, our findings do not support an Euro-area enlargement at short horizons.     

Monetary policy,trade-offs and the transmission of UK Monetary Policy

We provide a new method to model changes in monetary policy of the Bank of England (BoE) as well as the impact of these changes on UK economy. This is important as central bankers have widened the range of instruments in their monetary policy toolbox. Specifically, we estimate a proxy for the monetary policy stance and then analyse a time-varying parameter vector autoregressive with stochastic volatility model to explain the BoE’s trade-offs when making policy decisions and as well as to demonstrate dynamic impacts of monetary policy on inflation and economic growth. The empirical results show that our estimated monetary policy proxy is better at capturing the BoE’s policy when the interest rate lower bound becomes binding.     

韩国应对新冠疫情冲击的社会经济政策及其绩效分析

新冠病毒疫情对韩国社会经济产生了严重的影响,韩国政府采取了多方面的社会经济政策防控疫情,取得了较好的成效,也存在着教训。政府在疫情发生时快速响应,启动公共卫生防疫体系,是使疫情得到有效控制的重要因素。但是在宗教活动中多次发生集体感染,是值得总结的教训。为了应对新冠疫情对社会经济的冲击,韩国政府采取一系列措施较好地控制了疫情在全国范围内的大规模扩散和蔓延;同时,积极采取扩大财政预算、促进对外贸易、扶持受疫情严重影响的产业以及宽松的货币政策等一系列宏观经济政策以及稳定就业、发放灾害补助、支援企业发展等微观经济措施,恢复经济发展。     

End of double taxation: Is the policy better when announced?

This paper examines the effectiveness of the “end of double taxation” (on dividends) policy in stabilizing an economy. Both announced and unannounced policies are considered. A reduction in double taxation stimulates investment and improves welfare, but its impact on output is moderate and it has a negative effect on work hours. A temporary cut creates an investment boom but also generates an investment slump when the tax cut expires. Announcements of future tax cuts are found to have important effect on output dynamics. Agents respond to the tax policy even before it is implemented. If the tax cut is announced to be temporary, its impact on output is greatly reduced. Our study suggests that a temporary dividend tax cut is most effective in stabilizing a recession stricken economy when the policy change comes as “news” to the economy.     

Fiscal and monetary policy rules revisited

Why have automatic procedures designed to limit or eliminate the discretion of policy-makers become popular in recent years? The first part of the paper addresses fiscal policy rules by analyzing their political appeal as restrainers, symbols, partisan weapons, and ideological statements. The second part of the paper considers monetary policy rules and their rationales, and critiques them. We argue that fiscal and monetary policy rules may not be as efficacious as their supporters claim, and they raise new problems stemming from their biases, rigidity, and antidemocratic implications.     

Macroeconomic stabilization of primary commodities price cycles in developing economies

This paper proposes a strategy for stabilizing macroeconomic policy to address jointly the effects of changes in the prices of food, minerals and energy (oil). Our approach differs from the general literature, which analyzes the effects of a commodity boom or bust and therefore the solutions in terms of economic policy separately, that is, by type of commodity. The stabilization strategy that we propose considers a key fact affecting many open economies, namely, that they not only are affected by increases or decreases in commodity prices, but also benefit from them. Consequently, we use a structural model for an open economy with restricted households to show that welfare could be improved with a fiscal rule incorporating transfers to stabilize household consumption. This strategy noticeably dominates an aggressive monetary policy focused only on stabilizing inflation and a fiscal policy that has an excessive bias toward saving income from exports.     

Stabilization policies in the Greek economy: Will they work?

This paper develops and estimates a short-run model for the interaction between money, output, prices, international reserves, and the exchange rate in a managed floating system in Greece. The framework presented, which is in the spirit of the monetary approach modified to allow for adjustment lags in output and prices incorporates a policy reaction function for domestic credit. The role of inflationary expectations is taken into account. The policy question addressed in the paper by means of the model is whether current economic policies are sustainable and whether stabilization measures leading to lower inflation and smaller fiscal deficits should be pursued.     

Tax collection efficiency in OECD countries improves via decentralization,simplification, digitalization and education

This paper offers an assessment of tax administration performance and provides evidence of the relationship between fiscal decentralization (and tax structure) and the technical efficiency of tax collection. The initial stage of the investigation consists of a data envelopment analysis (DEA) to obtain technical efficiency estimates for a sample of 28 OECD countries over the period 2004–2017. In a second stage, we explore how technical efficiency is affected by fiscal decentralization and tax structure variables. The results show how the degree of fiscal decentralization has a positive and significant impact on the technical efficiency of tax collection. They also reveal a relevant role of tax structure choices and the ratio of indirect to direct taxes, which can significantly affect tax collection efficiency. Finally, we extract some policy implications.     

经济刺激计划的负面效应分析——以美国为样本

在经济萧条时,经济刺激计划对于避免震荡、稳定市场、恢复信心、促进增长有重要作用。但当经济止跌企稳时,经济刺激计划要适时退出,否则会带来政府财政负担加大,赤字增加,潜在通货膨胀压力加大,财政政策的挤出效应,助长道德风险和逆市场化改革等一系列负外部效应。以美国为例,分析美国经济救援和经济刺激计划的负外部效应,从而提出对中国四万亿经济刺激计划实施的反思与启示。     

Social capital and the impact of the recent economic crisis: Comparing the effects of economic and fiscal policy developments

In this contribution, we offer an analysis that evaluates the impact of the recent financial and economic crisis on social capital. An economic crisis offers a unique chance to study people's associational lives, volunteering, network-making, and trust-building under duress. Theoretical perspectives on the relationship between social capital and economic development emphasize a reciprocal relationship between the two. Therefore, we hypothesize that if economic performance is compromised, this might lead to an erosion of social capital. More importantly, however, we also argue that states can actively intervene by means of fiscal policy measures. We will illustrate our approach by comparing 29 Organisation for Economic Co-operation and Development countries before and after the crisis. Using qualitative comparative analysis, we demonstrate that imperatives related to fiscal policy stimuli provide leverage on social capital development.     

When can fiscal consolidation be expansionary? Evidence from a small open economy

The paper focuses on the implications of stabilisation policies in a small open economy that were introduced to reverse burgeoning public sector deficit. In particular, I examine the hypothesis that such stabilisation policies can actually have expansionary effects on business investment. While this goes against the standard Keynesian view that the institution of more conservative fiscal and monetary programmes will, at least initially, lead to deflationary outcomes, there are important reasons for believing that such policies will in fact be expansionary. Such predictions are made in a dynamic setting, which weighs the short-term consequences of curtailed government expenditures against their long run implications for future increases in government spending, a reduction in debt burdens and greater stability. With the introduction of expectations, the positive implications of such policies can be immediate. This paper tries to clarify the ‘expectational crowding-in’ process and investigates whether the effects of stabilisation on business investment were due to that process or to other features of the stabilisation programmes. The policy message from my analysis is that budget consolidations producing expansionary effects are more than a theoretical construction. The experience of small open economies mentioned above should be taken into account also in policy making. Empirical findings indicate that EMU countries may need to carry out budgetary consolidations to dispose of room for manoeuvre against first the fiscal constraints in smoothing the business cycle imposed by the Stability Pact, and second, the looming budgetary implications of ageing populations.     

二十一世纪中国经济周期平稳化现象研究(英文)

本文的目的在于回答两个问题：第一，21世纪中国经济周期平稳化的原因何在？第二，21世纪中国经济波动的来源何在？利用统计分析和构造的多方程结构宏观经济模型，我们发现第一个问题的答案几乎完全在于国内因素，包括国内需求冲击的稳定和信贷市场中的自稳定机制；就第二个问题而言，21世纪中国经济波动的最大来源在于国外需求冲击和国内需求冲击——前者对GDP的波动影响较大，而后者则更多地影响CPI。本文的另一个发现是，传统的盯住货币供应量的货币政策对稳定GDP和CPI几乎没有效果。本文的政策建议之一是，在全球危机的背景下，稳定总需求的国内经济刺激政策依然很重要。本文的另一个建议是，为了摆脱全球化的负面影响，我们需要更加依靠城市化而非工业化，并在国内调整各个区域的经济角色。     

Central bank credibility and monetary policy in Indonesia

This paper examines the role of central bank credibility in achieving an inflation target and proposes monetary policy rules for Indonesia. Towards that end, we construct and estimate a forward-looking small scale macroeconomic model (SSMM) of the Indonesian economy by adapting the theoretical underpinnings of the well-known Batini–Haldane model, along with the Taylor policy rule. Our results indicate that it is crucial for the Indonesian central bank to bolster its credibility in order to achieve a lower inflation rate. The inflation–output volatility trade-off frontier we derived from the SSMM shows that a monetary policy rule that targets both inflation and output gaps will result in less macroeconomic volatility. We also found that the inclusion of the exchange rate into the rule as an additional feedback variable warrants consideration in the future course of monetary policy management.     

Fiscal Policy and Urban and Rural Residents＇ Marginal Propensity to Consume

基于代表性家庭最优消费决策及其与财政政策的关系,估计中国财政政策对城乡居民边际消费倾向的影响,结果表明,自1998年至今,城乡居民边际消费倾向的下降幅度超过20％。城乡居民边际消费倾向下降,．除源于收入分配、经济发展程度、预期、消费结构等因素的影响外,与财政政策运用也有很大关系。其中,未预期到的财政政策冲击对居民边际消费倾向产生的综合效应显著为负。以未预期到的税收增加为融资工具的策略选择,大大抑制了结构调整的正面效应。因此,扩大居民消费,不仅要通过财政增收,提高居民消费能力,而且要通过调整财政收支策略,稳定居民消费预期,提升居民边际消费倾向。     

The cyclically-adjusted primary balance: A novel approach for the euro area

This paper presents novel estimates for the cyclically-adjusted primary balance for 18 countries of the Euro area over years 1999–2017. We improve the methodology adopted by the European Commission by using quarterly rather than annual frequency data and providing accurate identification of the budgetary items whose response can be considered automatic to the economic cycle. This disaggregated outcome combined with high frequency data marks a significant improvement with respect to previous studies. The empirical analysis is implemented on two sub-periods to examine the impact of governments’ discretionary fiscal policy before and after the Great Recession. The most striking policy implication is that even though the budgetary policy of most European countries can be qualified in principle as anticyclical, this outcome has been weakened by the impact of discretionary policies of many governments especially after the crisis. The results are robust to the use of different de-trending methods.     

Fiscal rules in a volatile world: A welfare-based approach

It is widely agreed that a fiscal rule should boost discipline and credibility. A rule should also reduce macroeconomic volatility and be easily understood. Toward such ends, a government may run structural surpluses. In so doing, the government accumulates a precautionary cushion of assets on behalf of agents who do not enjoy access to capital markets. As an additional criterion, that level of assets should be bounded. We provide an example of a structural surplus rule that satisfies all such criteria. In our general equilibrium simulations, we show that such a rule benefits credit-constrained consumers but may hurt others.     

Policy simulations with a macroeconometric model of the Indian economy

In this paper, the results of various dynamic policy simulations are analyzed within the context of a macroeconometric model of the Indian economy. The model contains 35 equations and offers a consistent framework for policy analysis. It is considerably expanded on the side of the fiscal sector and usefully incorporates the interdependence between monetary and fiscal sectors and gives due attention to supply side considerations. Magnitudes of effects of sustained policy changes are analyzed for the period 1964–1965 to 1974–1975. Impact multipliers and elasticities are also analyzed. Government expenditures variables and deficit financing are shown to have substantial impact on the system whereas changes in tax-rates, discount-rates, and liquidity ratios for commercial banks are shown to have only a marginal impact. The model is used for exploring the growth potential of the economy in a forecast period of five years under alternative assumptions regarding policy options.     

Spillover effects of taxes on government debt: a spatial panel approach

It is claimed that tax policy is neither time- nor space-independent due to cross-border tax base mobility, which induces spillovers. Specifically, fiscal shocks in one country are supposed to have an impact on fiscal policies in other countries. Different types of taxes influence economies differently. This paper addresses the question of their impact on government debt. Within a framework of spatial econometric modeling, we evaluate the impact of capital, labor and consumption taxes on public debt in 34 European countries in 2002–2011, and find strong spatial spillovers. We show that a consumption tax and, to a lesser degree, a capital tax significantly affect the sovereign debt, and that the global relations play a leading role (i.e. dominate the local ones) in shaping fiscal policy.