Fiscal Deficit (fiscal + deficit)

Distribution by Scientific Domains


Selected Abstracts


Aid and Fiscal Deficits: Lessons from Uganda on the Implications for Macroeconomic Management and Fiscal Sustainability

DEVELOPMENT POLICY REVIEW, Issue 2 2007
Martin Brownbridge
This article contributes to the ongoing debate on the macroeconomic management of large aid inflows to low-income countries by analysing lessons drawn from Uganda, where the fiscal deficit before grants, which was largely aid-funded, doubled to over 12% of GDP in the early 2000s. It focuses on the implications of the widening fiscal deficit for monetary policy, the real exchange rate, debt sustainability and the vulnerability of the budget to fiscal shocks, and argues that large fiscal deficits, even when funded predominantly by aid, risk undermining macroeconomic objectives and long-run fiscal sustainability. [source]


Public capital formation and labor productivity growth in Chile

CONTEMPORARY ECONOMIC POLICY, Issue 2 2000
MD. Ramirez
Following the lead of the endogenous growth literature, this article analyzes the impact on labor productivity growth of public and private investment spending in Chile. Using cointegration analysis, the results of the dynamic labor productivity function for the 1960,95 period show that (lagged) public and private investment spending, as well as the rate of growth in exports, has a positive and highly significant effect on the rate of labor productivity growth. The estimates also indicate that increases in government consumption spending have a negative effect on the rate of labor productivity growth, thus suggesting that the composition of government spending may also play an important role in determining the rate of labor productivity growth. The findings call into question the politically expedient policy in many Latin American countries of disproportionately reducing public capital expenditures to meet targeted reductions in the fiscal deficit as a proportion of GDP. [source]


Aid and Fiscal Deficits: Lessons from Uganda on the Implications for Macroeconomic Management and Fiscal Sustainability

DEVELOPMENT POLICY REVIEW, Issue 2 2007
Martin Brownbridge
This article contributes to the ongoing debate on the macroeconomic management of large aid inflows to low-income countries by analysing lessons drawn from Uganda, where the fiscal deficit before grants, which was largely aid-funded, doubled to over 12% of GDP in the early 2000s. It focuses on the implications of the widening fiscal deficit for monetary policy, the real exchange rate, debt sustainability and the vulnerability of the budget to fiscal shocks, and argues that large fiscal deficits, even when funded predominantly by aid, risk undermining macroeconomic objectives and long-run fiscal sustainability. [source]


Expansionary Fiscal Shocks and the US Trade Deficit,

INTERNATIONAL FINANCE, Issue 3 2005
Christopher J. Erceg
In this paper, we use a dynamic general equilibrium model of an open economy to assess the quantitative effects of fiscal shocks on the trade balance in the United States. We examine the effects of two alternative fiscal shocks: a rise in government consumption, and a reduction in the labour income tax rate. Our salient finding is that a fiscal deficit has a relatively small effect on the US trade balance, irrespective of whether the source is a spending increase or tax cut. In our benchmark calibration, we find that a rise in the fiscal deficit of 1 percentage point of gross domestic product (GDP) induces the trade balance to deteriorate by 0.2 percentage point of GDP or less. Noticeably larger effects are only likely to be elicited under implausibly high values of the short-run trade price elasticity, or of the share of liquidity-constrained households in the economy. From a policy perspective, our analysis suggests that even reducing the current US fiscal deficit (of 3% of GDP) to zero would be unlikely to narrow the burgeoning US trade deficit significantly. [source]


Lessons from the Russian Meltdown: The Economics of Soft Legal Constraints

INTERNATIONAL FINANCE, Issue 3 2002
Enrico Perotti
On 17 August 1998, Russia abandoned its exchange rate regime, defaulted on its domestic public debt and declared a moratorium on all private foreign liabilities, which was equivalent to an outright default. The depth and speed of the Russian meltdown shocked the international markets, and precipitated a period of serious financial instability. Important lessons on issues of bank supervision and international stability can be learned by understanding the roots of such a crisis. The visible reason of the crisis was an unsustainable fiscal deficit coupled with massive capital flight, but what were their underlying causes? We argue that the structure of individual incentives in a context of capture of state decisions by special interests, compounded by a rouble overvaluation driven by exceptional international support, helps to explain the build,up of non,payment, theft and capital flight that led to the crisis. We offer an explicit model of rational collective non,compliance, cash stripping and rational collective non,payment which led to the fiscal and banking crisis and, ultimately, to a complete meltdown. In our view, the banking sector was already insolvent prior to the crisis, and contributed directly and indirectly to it. We conclude with a radical policy proposal for a stable banking system for Russia, appropriate for its current capacity for legal and supervisory enforcement. It is based on a segmented, narrow banking sector, concentration in commercial banking and a cautious extension of deposit insurance. [source]


MEAN REVERSION OF THE FISCAL CONDUCT IN 24 DEVELOPING COUNTRIES

THE MANCHESTER SCHOOL, Issue 4 2010
AHMAD ZUBAIDI BAHARUMSHAH
In this paper, we examine the mean reverting behaviour of fiscal deficit by analysing the fiscal position of 24 developing countries. Using annual data over the period 1970,2003 and the series-specific panel unit root test developed by Breuer et al. (Oxford Bulletin of Economics and Statistics, Vol. 64 (2002), pp. 527,546), we found the budget process for most developing countries fails to satisfy the strong-form sustainability condition. Further investigation shows the budget process for a majority of the countries is on a sustainable path (weak form) when a one-time, structural break is allowed in the model. Therefore, our empirical results suggest that the budget process in most of the sample countries is in accordance with the intertemporal budget constraint. [source]


Aid and Fiscal Deficits: Lessons from Uganda on the Implications for Macroeconomic Management and Fiscal Sustainability

DEVELOPMENT POLICY REVIEW, Issue 2 2007
Martin Brownbridge
This article contributes to the ongoing debate on the macroeconomic management of large aid inflows to low-income countries by analysing lessons drawn from Uganda, where the fiscal deficit before grants, which was largely aid-funded, doubled to over 12% of GDP in the early 2000s. It focuses on the implications of the widening fiscal deficit for monetary policy, the real exchange rate, debt sustainability and the vulnerability of the budget to fiscal shocks, and argues that large fiscal deficits, even when funded predominantly by aid, risk undermining macroeconomic objectives and long-run fiscal sustainability. [source]


EXCHANGE RATE REGIMES AND MONETARY COOPERATION: LESSONS FROM EAST ASIA AND LATIN AMERICA,

THE JAPANESE ECONOMIC REVIEW, Issue 3 2004
TAKATOSHI ITO
This paper analyses the mechanisms of, and draws lessons from, currency crises in Asian and Latin American countries in the 1990s and 2000s. In Asian countries fiscal deficits were insignificant in size, and were not part of a crisis trigger, while in Latin America they played a major role in the crisis story. Crisis management by international financial institutions has been evolving over the last 10 years, and private-sector involvement (PSI) has occupied centre-stage in efforts to reform the international financial architecture. Sovereign debts, a focus of PSI discussions, were neither a cause nor a propagation of the Asian crises. [source]