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Author: João Tovar Jalles
Publisher: International Monetary Fund
ISBN:
Category : Business & Economics
Languages : en
Pages : 31
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Book Description
This paper provides a novel dataset of time-varying measures on the degree of countercyclicality of fiscal policies for advanced and developing economies between 1980 and 2021. The use of time-varying measures of fiscal stabilization, with special attention to potential endogenity issues, overcomes the major limitation of previous studies and alllows the analysis to account for both country-specific as well as global factors. The paper also examines the key determinants of countercyclicality of fiscal policy with a focus on factors as severe crises, informality, financial development, and governance. Empirical results show that (i) fiscal policy tends to be more counter-cyclical during severe crises than typical recessions, especially for advanced economies; (ii) fiscal counter-cyclicality has increased over time for many economies over the last two decades; (iii) discretionary and automatic countercyclicality are both strong in advanced economies but acyclical (at times procyclical) in low-income countries, (iv) fiscal countercyclicality operates primarily through the expenditure channel, particularly for social benefits, (vi) better financial development, larger government size and stronger institutional quality are associated with larger countercyclical effects of fiscal policy. Our results are robust to various specifications and endogeneity checks.
Author: João Tovar Jalles
Publisher: International Monetary Fund
ISBN:
Category : Business & Economics
Languages : en
Pages : 31
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Book Description
This paper provides a novel dataset of time-varying measures on the degree of countercyclicality of fiscal policies for advanced and developing economies between 1980 and 2021. The use of time-varying measures of fiscal stabilization, with special attention to potential endogenity issues, overcomes the major limitation of previous studies and alllows the analysis to account for both country-specific as well as global factors. The paper also examines the key determinants of countercyclicality of fiscal policy with a focus on factors as severe crises, informality, financial development, and governance. Empirical results show that (i) fiscal policy tends to be more counter-cyclical during severe crises than typical recessions, especially for advanced economies; (ii) fiscal counter-cyclicality has increased over time for many economies over the last two decades; (iii) discretionary and automatic countercyclicality are both strong in advanced economies but acyclical (at times procyclical) in low-income countries, (iv) fiscal countercyclicality operates primarily through the expenditure channel, particularly for social benefits, (vi) better financial development, larger government size and stronger institutional quality are associated with larger countercyclical effects of fiscal policy. Our results are robust to various specifications and endogeneity checks.
Author: Mr.Alberto Alesina
Publisher: International Monetary Fund
ISBN: 1451960433
Category : Business & Economics
Languages : en
Pages : 52
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Book Description
This paper studies how the composition of fiscal adjustments influences their likelihood of “success”, defined as a long lasting deficit reduction, and their macroeconomic consequences. We find that fiscal adjustments which rely primarily on spending cuts on transfers and the government wage bill have a better chance of being successful and are expansionary. On the contrary fiscal adjustments which rely primarily on tax increases and cuts in public investment tend not to last and are contractionary. We discuss alterative explanations for these findings by studying both a full sample of OECD countries and by focusing on three case studies: Denmark, Ireland and Italy.
Author: Luc Eyraud
Publisher: International Monetary Fund
ISBN: 1484350685
Category : Business & Economics
Languages : en
Pages : 132
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Book Description
Fiscal rule frameworks have evolved significantly in response to the global financial crisis. Many countries have reformed their fiscal rules or introduced new ones with a view to enhancing the credibility of fiscal policy and providing a medium-term anchor. Enforcement and monitoring mechanisms have also been upgraded. However, these innovations have made the systems of rules more complicated to operate, while compliance has not improved. The SDN takes stock of past experiences, reviews recent reforms, and presents new research on the effectiveness of rules. It also proposes guiding principles for future reforms to strike a better balance between simplicity, flexibility, and enforceability. Read the blog
Author: Jihad Dagher
Publisher: International Monetary Fund
ISBN: 1484337743
Category : Business & Economics
Languages : en
Pages : 89
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Book Description
Financial crises are traditionally analyzed as purely economic phenomena. The political economy of financial booms and busts remains both under-emphasized and limited to isolated episodes. This paper examines the political economy of financial policy during ten of the most infamous financial booms and busts since the 18th century, and presents consistent evidence of pro-cyclical regulatory policies by governments. Financial booms, and risk-taking during these episodes, were often amplified by political regulatory stimuli, credit subsidies, and an increasing light-touch approach to financial supervision. The regulatory backlash that ensues from financial crises can only be understood in the context of the deep political ramifications of these crises. Post-crisis regulations do not always survive the following boom. The interplay between politics and financial policy over these cycles deserves further attention. History suggests that politics can be the undoing of macro-prudential regulations.
Author: International Monetary Fund
Publisher: International Monetary Fund
ISBN: 1451844239
Category : Business & Economics
Languages : en
Pages : 33
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Book Description
Recently, monetary authorities have increasingly focused on implementing policies to ensure price stability and strengthen central bank independence. Simultaneously, in the fiscal area, market development has allowed public debt managers to focus more on cost minimization. This “divorce” of monetary and debt management functions in no way lessens the need for effective coordination of monetary and fiscal policy if overall economic performance is to be optimized and maintained in the long term. This paper analyzes these issues based on a review of the relevant literature and of country experiences from an institutional and operational perspective.
Author: Guillermo Perry
Publisher: World Bank Publications
ISBN:
Category : Business & Economics
Languages : en
Pages : 360
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Book Description
This volume explores the conduct of fiscal policy in Latin America and its consequences for macroeconomic stability and long-term growth. In particular, the book examines the extent of the procyclical and anti-investment biases embedded in the regions fiscal policies and their causes, macroeconomic consequences, and possible solutions.
Author: Mr.Jaromir Benes
Publisher: International Monetary Fund
ISBN: 1475505523
Category : Business & Economics
Languages : en
Pages : 71
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Book Description
At the height of the Great Depression a number of leading U.S. economists advanced a proposal for monetary reform that became known as the Chicago Plan. It envisaged the separation of the monetary and credit functions of the banking system, by requiring 100% reserve backing for deposits. Irving Fisher (1936) claimed the following advantages for this plan: (1) Much better control of a major source of business cycle fluctuations, sudden increases and contractions of bank credit and of the supply of bank-created money. (2) Complete elimination of bank runs. (3) Dramatic reduction of the (net) public debt. (4) Dramatic reduction of private debt, as money creation no longer requires simultaneous debt creation. We study these claims by embedding a comprehensive and carefully calibrated model of the banking system in a DSGE model of the U.S. economy. We find support for all four of Fisher's claims. Furthermore, output gains approach 10 percent, and steady state inflation can drop to zero without posing problems for the conduct of monetary policy.
Author: Mr.James Daniel
Publisher: International Monetary Fund
ISBN: 9781589065130
Category : Business & Economics
Languages : en
Pages : 80
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Book Description
The pamphlet (which updates the 1995 Guidelines for Fiscal Adjustment) presents the IMF’s approach to fiscal adjustment, and focuses on the role that sound government finances play in promoting macroeconomic stability and growth. Structured around five practical questions—when to adjust, how to assess the fiscal position, what makes for successful adjustment, how to carry out adjustment, and which institutions can help—it covers topics such as tax policies, debt sustainability, fiscal responsibility laws, and transparency.
Author: Mr.Youssouf Kiendrebeogo
Publisher: International Monetary Fund
ISBN: 1475576277
Category : Business & Economics
Languages : en
Pages : 41
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Book Description
This paper investigates whether banking crises are associated with declines in bilateral exports. We first develop a simple open economy model in which banking crises translate into negative liquidity shocks, leading to collapses in exports through supply-side and demand-side shocks. We then estimate a gravity model using a sample of developed and developing countries over the period 1988-2010. The results suggest that crisis-hit countries experience lower levels of bilateral exports, particularly in developing countries where supply-side shocks are found to be relatively more important than demand shocks. In developing countries, exports of manufactured goods are disproportionately hurt by banking crises and this negative effect is stronger in industries relying more on external finance. These findings are robust to correcting for potential endogeneity, to changes in the sample, and to alternative estimation methods.
Author: Allan Dizioli
Publisher: International Monetary Fund
ISBN: 1484335384
Category : Business & Economics
Languages : en
Pages : 40
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Book Description
This paper revisits options for fiscal anchors in Australia against the backdrop of a medium-term budget balance anchor that has led to larger than expected upward drift in the net debt to GDP ratio since the end of the mining investment boom. The IMF’s G20MOD model is used to compare the budget balance anchor with a long-term debt anchor. Using model simulations evaluated against objective macro stabilization-debt control criteria under three likely scenarios for the Australian economy, the latter is found to perform at least as well as the former. The paper also considers the operationalization of a long-term debt anchor utilizing a combination of fiscal rules which includes expenditure restrictions and a flexible time horizon for convergence, aiming at encouraging countercyclical fiscal policy and minimizing the cost in terms of real GDP foregone in the medium term under fiscal consolidation.
