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Suparjito, Suparjito, Julianus Johnny Sarungu, Albertus Magnus Soesilo, Bhimo Rizky Samudro, and Erni Ummi Hasanah. "The Effect of Government Consumption and Government Investment as Intervening Variables to Growth in Indonesia." Jurnal Ekonomi Pembangunan: Kajian Masalah Ekonomi dan Pembangunan 20, no. 2 (January 9, 2020): 193–207. http://dx.doi.org/10.23917/jep.v20i2.6822.
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Fiscal policy and monetary policy are the two macroeconomic policies used by the government and monetary authorities in order to create a stable economy. The budget deficit policy is one form of fiscal policy implemented by the government in order to realize a high level of economic growth, a controlled inflation rate and open up new job opportunities to reduce unemployment. The impact of the implementation of the budget deficit policy on the level of economic growth is a long debate. Neoclassical groups argue that the implementation of budget deficit policies is detrimental to the economy, as it lowers the rate of economic growth. Keynesian groups argue that the implementation of the budget deficit policy is very good for the economy, because it triggers the rate of economic growth by increasing the number of demand for goods and services through increased government spending. While the Richardian people argue that the implementation of budget deficit policy has no effect on the economy. The data used in this study is data from 1981-2014 which consists of budget deficit, government consumption, government investment and economic growth rate. The method of analysis in this research is using Partial Least Square-Path Modeling (PLS-PM) approach with SMART-PLS analysis tool which aims to analyze the direct and indirect influence of the implementation of budget deficit policy toward the level of economic growth through government consumption and government investment. The results show that the implementation of the budget deficit policy can increase economic growth through increased government investment spending. Keywords: budget deficits, government investment, government consumption, growth.
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Wibowo, Muhammad Ghafur. "Twin Deficit Phenomena in the Two Government Eras in Indonesia." Jurnal Analisis Bisnis Ekonomi 18, no. 1 (May 17, 2020): 36–48. http://dx.doi.org/10.31603/bisnisekonomi.v18i1.2994.
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The aim of this study is to analyze the development of the budget deficit and current account deficit in Indonesia in the era of President SBY and President Jokowi and to compare between the two eras. This study also analyzes the relationship of twin deficits to the Gross Domestic Product (GDP) and the interest rate (r). The analytical tool used was independent t-test (for comparison) and Vector Auto-Regressive (VAR). The data used comes from the International Monetary Fund (IMF), 2004:Q1-2018: Q3. The result showed that the budget deficit was the same in the two eras of government, but the trade balance deficit in the era of President Jokowi was far higher than before. The budget deficit has a significant effect on the trade balance deficit but does not apply otherwise (no causality). Variable gross domestic product and interest rates significantly influence both types of deficits.
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Suhartoko, YB, Adji Pratikto Pratikto, and Indira Kirana. "RICARDIAN EQUIVALENCE IN INDONESIA." Jurnal Ekonomi Trisakti 2, no. 1 (April 18, 2022): 167–98. http://dx.doi.org/10.25105/jet.v2i1.13565.
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Expansionary Fiscal Policy in the form of Deficit Fiscal is still being debated due to differences in views regarding the effect of budget deficits. The Ricardian Equivalence disciple argues that Deficit Fiscal Policy has a neutral impact on consumption. In contrast, Non-Ricardians (Keynesian and Neoclassical) argue that Budget Deficit Policy affects Private Consumption. Government policies affect private consumption through deficit fiscal policies such as budget deficits, government spending, taxes, and government debt. This study analyzes the effect of the fiscal deficit on consumption and observes the existence of the Ricardian Equivalence View in Indonesia. The estimation model used is the Vector Error Correction Model (VECM) through IRF and VD testing with time series data from 1980-2018. The results showed that the Budget Deficit Policy had a significant positive effect on private consumption, where the Fiscal Deficit shock was responded positively by Private Consumption. So that the Ricardian view does not apply in Indonesia and is more inclined to the Keynesian view. The positive response continues in the long term permanently, where 58.42% of the variation in the formation of the Private Consumption indicator (in period 10), is a Budget Deficit.
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Reed, Michael, Reza Najarzadeh, and Seyedeh Zohreh Sadati. "Analyzing the Relationship between Budget Deficit, Current Account Deficit, and Government Debt Sustainability." Journal of WEI Business and Economics 8, no. 1 (December 28, 2019): 20–31. http://dx.doi.org/10.36739/jweibe.2019.v8.i1.15.
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The main purpose of this study is to determine the dynamic relationships between budget deficit, current account deficit, and government debt sustainability during 1974-2015 in the Iranian economy. We used a VAR model with Impulse Functions and Variance Decomposition in our dynamic analysis. The results show that there is a long-term stable relationship among the variables of the model suggesting that to improve the government debt sustainability it has to reduce the budget deficit and current account deficit. Since Iran's dependence on oil revenues is the underlying cause of the dependence of the variables on each other, the government needs to reduce the dependence of the current account and the state budget on oil revenues to reduce both types of deficits and government debt sustainability.
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Peitchinis, Stephen G. "Government spending and the budget deficit." Journal of Business Ethics 9, no. 7 (July 1990): 591–94. http://dx.doi.org/10.1007/bf00383214.
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Pandit, Jaideep J. "Modern monetary theory for the post-pandemic NHS: why budget deficits do not matter." British Journal of Healthcare Management 28, no. 1 (January 2, 2022): 37–46. http://dx.doi.org/10.12968/bjhc.2021.0087.
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NHS clinical directors are responsible for balancing departmental budgets, which can encompass staffing, equipment and operating theatres. As trust income is generally fixed, expenditure reduction is often attempted via recurrent cost improvement plans. In orthodox monetary theory, a departmental deficit contributes first to the hospital, then to the NHS, then to the national deficit. In the orthodox view, governments in deficit need to increase taxes and/or borrow money by issuing bonds (akin to mortgage loans), the interest on which is paid off for generations. Modern monetary theory offers a different perspective: government deficits do not matter as much as orthodox theory claims, if at all. This is because governments have the monopoly right to create the money in which the deficit is denominated (so do not ever need to borrow something that they can create). Therefore governments cannot default on debt in their own currency. Furthermore, government deficits equate to private surplus. This new perspective should influence microeconomic budget management at the clinical director level: the new emphasis being to deliver value and not just implement local savings to eliminate departmental deficits. This approach will become increasingly important in managing the huge surgical waiting lists that have accumulated during the COVID-19 pandemic.
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Tanaka, Yasuhito. "Necessity of Budget Deficit Under Economic Growth in Monopolistic Competition." Economics and Business 36, no. 1 (January 1, 2022): 1–16. http://dx.doi.org/10.2478/eb-2022-0001.
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Abstract The aim of the paper is to show, using a simple two-period overlapping generations model in which goods are produced solely by labour in a monopolistically competitive industry, that a continuous budget deficit (including the interest payments on government bonds) is necessary to achieve and maintain full employment under economic growth driven by technological progress. Since the budget deficits must be continuous, it might be better if they were financed by seigniorage rather than government debt. Since the budget deficit due to the issuance of government bonds puts pressure on fiscal expenditures in the amount of interest payments, a budget deficit of the same size due to seigniorage is a more effective use of the budget. It will also be shown that to achieve full employment from a recession with involuntary unemployment the extra budget deficit is necessary.
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Rana, Ebney Ayaj, and Abu N. M. Wahid. "Fiscal Deficit and Economic Growth in Bangladesh." American Economist 62, no. 1 (October 6, 2016): 31–42. http://dx.doi.org/10.1177/0569434516672778.
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The economy of Bangladesh is currently going through a period of continuous budget deficit. The present data suggest that the government budget deficit, on average, is nearly 5% of the country’s GDP. This has been true since the early 2000s. To finance this deficit, governments have been borrowing largely from domestic and foreign sources resulting in inflationary pressure on one hand, and crowding out of private investments on the other. During the same period, although the economy has grown steadily at a rate of more than 6%, this growth is less than the potential. This article presents an econometric study of the impact of government budget deficits on the economic growth of Bangladesh. We conduct a time-series analysis using ordinary least squares estimation, vector error correction model, and granger causality test. The findings suggest that the government budget deficit has statistically significant negative impact on economic growth in Bangladesh. Policy implications of our findings include reestablishing the rule of law, political stability in the country, restructuring tax structure, closing tax loopholes, and harmonizing fiscal policy with monetary policy to attract additional domestic and foreign investment.
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Karel, Khom Raj, and Suman Kharel. "Trade Deficit in Nepal: Relationship between Trade Deficit and Budget Deficits." Molung Educational Frontier 10 (December 31, 2020): 95–108. http://dx.doi.org/10.3126/mef.v10i0.34076.
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Nepal has bitter experiences of trade deficit; it has become the tradition of the country. The trade deficit of Nepal has been widening since the decades. The statistical data shows that around 80 percent of imports are from India and China. The growth trend of foreign trade has been increasing in different years after year with a huge amount of trade deficit. As the size of foreign trade increased the trade deficit of Nepal has-been increasing as well. The government of Nepal has been announcing the deficit budget. This study focused to analyze the trends of trade deficit of Nepal and observing the relations of trade deficit and budget deficit. Simple statistical tools are applied to analyze the trend and growth of foreign trade of Nepal and correlation and simple linear regression model has been used to examine the linkages between trade deficit and budget deficit of Nepal. The study has found a strong positive relationship between trade deficit and budget deficit of Nepal. As result, there is a significant impact of budget deficit on trade deficit. The finding of the regression analysis indicates that budget deficit is a significant predictor of trade deficit.
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Sanusi, Gbenga Peter. "Macroeconomic Fundamentals and Budget Deficit Nexus: Evidence from a Developing Economy." Mediterranean Journal of Social Sciences 12, no. 4 (July 8, 2021): 152. http://dx.doi.org/10.36941/mjss-2021-0036.
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The increasing budget deficit of the Nigeria’s government in the past few decades with its attendance impact on the economy is worrisome. This study examines the impacts of macroeconomic fundamentals on Nigeria’s fiscal deficit. An error correction model was specified and estimated. In terms of sign and size, the result showed that, there is an inverse relationship between budget deficit and the external reserve. This implies that an increase in the external reserve, leads to a decrease in budget deficits. A unit increase in external reserves resulted in 12.4 percent fall in budget deficit. In contrast, however, national income and interest rate showed a positive relationship with budget deficit. Increase in income expands the potential and propensity to spend. Lenders are equally more disposed to lend to the government because of the presupposed economic prosperity. The lagged value of the error correction term has the expected inverse sign of -0.42, and highly significant. The negative value of the error correction model further supports the co-integration relationship among the variables. Thus, macroeconomic variables influence budget deficits. Economic policies which minimizes macroeconomic fluctuations is paramount in curbing the negative impacts of increasing government deficit in the economy. Received: 2 May 2021 / Accepted: 15 June 2021 / Published: 8 July 2021
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Mwigeka, Samwel. "Do Budget Deficit Crowds Out Private Investment: A Case of Tanzanian Economy." International Journal of Business and Management 11, no. 6 (May 25, 2016): 183. http://dx.doi.org/10.5539/ijbm.v11n6p183.
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The existing high budget deficit in Tanzanian economy has created an immense concern among economic policy analysts. The study inspects whether budget deficits crowd out or crowd in private investment in Tanzania, using annual data for the period from 1970 to 2012. Using the Johansen cointegration test advocates there is at least one cointegration vector among these variables. Given such condition, the application vector error correction model (VEC) became inevitable as it presents additional and superior information in relation to other data production processes. The results indicate a close long–term connection between private investment, and other variables included in the study. Results suggest that budget deficits considerably crowds out private investment. The study advocates that government should readdress its fiscal policy that would support the private investors. The government should discourage high government expenditures and maintaining a low fiscal deficit also capital market should be used to finance budget deficit.
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Shabbir, Tayyeb, and Ayaz Ahmed. "Are Government Budget Deficits Inflationary? Evidence from Pakistan." Pakistan Development Review 33, no. 4II (December 1, 1994): 955–67. http://dx.doi.org/10.30541/v33i4iipp.955-967.
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In academia as well as policy-making institutions, there has been a long standing interest in analysing the phenomenon of inflation. Amongst the possible determinants of inflation, budget deficits may be one whose importance might have grown since the oil price hikes of 1973-74 and in 1979. For many a developing countries these increases in oil price have been responsible for the massive current account deficits as well as rapidly increasing domestic budget deficits of the last decade or so. During the 1980s, the budget deficit for Pakistan also grew rapidly reaching a record high of 8.6 percent of the G D P in 1987-88. Lately in the backdrop of the recent structural adjustment programmes, there has been much interest in determining the optimal size and the macro economic role of the budget deficits. However, despite its growing importance, the effects of budget deficits are not well understood.
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Tanaka, Yasuhito. "A Game-Theoretic Analysis of Fiscal Policy under Economic Growth from the Perspective of MMT: Toward a Neoclassical Basis of MMT." WSEAS TRANSACTIONS ON BUSINESS AND ECONOMICS 19 (March 3, 2022): 748–59. http://dx.doi.org/10.37394/23207.2022.19.66.
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We present a game-theoretic analysis of fiscal policy under economic growth from the perspective of MMT using a simple two-periods overlapping generations (OLG) model. We show the following results. 1) Sustained budget deficits are necessary to maintain full-employment under economic growth driven by population growth. 2) An excessive budget deficit triggers inflation, and after one period inflation full-employment is maintained by sustained budget deficits with constant price. 3) Insufficient government deficit causes involuntary unemployment, and we need extra budget deficit over its steady state value to recover full-employment. These budget deficits need not be, and must not be redeemed. Therefore, if it is institutionally and legally possible, they should be financed by seigniorage not by public debt.
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Mehdi, Safdari. "Relationship between Government Budget Deficits and Inflation in the Iran's Economy." Information Management and Business Review 2, no. 5 (May 15, 2011): 223–28. http://dx.doi.org/10.22610/imbr.v2i5.901.
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Government in the economy of a country is responsible for various duties and to do these tasks uses the budget and fiscal policy as a planning and control tools. Because the different goals of economic balance in macro level such as fixing prices and unemployment inhibit any economic program is the priority, so can the government is using funds that involve income and expenses of the government to direct economic in reaching their goals in macro level. In developing countries lacked the private sector are strong, the role of government and its dimensions are larger tasks. The basic aim of the paper is to analyze the Relationship between government budget deficits and inflation in the Iran's economy. According to the positive and significant coefficient of government budget deficit, if budget deficit change to one percent, the inflation rate will change to 1.82 percent.
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Alt, James E., and Robert C. Lowry. "Divided Government, Fiscal Institutions, and Budget Deficits: Evidence from the States." American Political Science Review 88, no. 4 (December 1994): 811–28. http://dx.doi.org/10.2307/2082709.
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Does partisan control of American state government have systematic effects on state spending and taxing levels? Does divided control affect the government's ability to make hard decisions? Do institutional rules like legal deficit carryover restrictions matter? Using a formal model of fiscal policy to guide empirical analysis of data covering the American states from 1968 to 1987, we conclude that (1) aggregate state budget totals are driven by different factors under Democrats and Republicans, the net result being that Democrats target spending (and taxes) to higher shares of state-level personal income; (2) divided government is less able to react to revenue shocks that lead to budget deficits, particularly where different parties control each chamber of the legislature; and (3) unified party governments with restricted ability to carry deficits into the next fiscal year (outside the South) have sharper reactions to negative revenue shocks than those without restrictions.
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Douglas, James W., and Ringa Raudla. "What Is the Remedy for State and Local Fiscal Squeeze During the COVID-19 Recession? More Debt, and That Is Okay." American Review of Public Administration 50, no. 6-7 (July 15, 2020): 584–89. http://dx.doi.org/10.1177/0275074020941717.
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The COVID-19 crisis is placing a tremendous fiscal squeeze on state and local governments in the United States. We argue that the federal government should increase its deficit to fill in the fiscal gap. In the absence of sufficient federal assistance, we recommend that states suspend their balanced budget rules and norms and run deficits in their operating budgets to maintain services and meet additional obligations due to the pandemic. A comparison with Eurozone countries shows that states have more than enough debt capacity to run short-term deficits to respond to the crisis.
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Shehu, Maimuna M., and Ibrahim M. Adamu. "Determinants of Budget Deficit in Nigeria." Journal of International Business, Economics and Entrepreneurship 6, no. 1 (June 21, 2021): 1. http://dx.doi.org/10.24191/jibe.v6i1.14199.
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This paper investigates the factors governing the determination of budget deficit in Nigeria from 1981q1 through 2016q4. Our methodology is based on Johansen cointegration and Vector Error Correction model (VECM) approach. The result from the Johansen cointegration test suggests one cointegrating vector, which indicates the existence of a long run cointegrating relationship. Evidence from the long run and short run parameters suggest that exchange rate, interest rate and one year lag of budget deficit are the major determinants of budget deficit. Therefore, to achieve a realistic fiscal surplus, the government should determine a high level of accountability in its fiscal operations. In addition, any fiscal surplus should be channeled into productive investments to diversify the economy and reduce the likelihood of potential budget deficits.
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Kaur, Karamjeet. "Measuring the Quality of Union Budgets: Need to Go beyond the Deficit Measures." Indian Journal of Public Administration 63, no. 2 (June 2017): 187–95. http://dx.doi.org/10.1177/0019556117699733.
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In the run-up to Union Budget 2016–2017, a major difference of opinion emerged within the Union Government over adherence to fiscal consolidation vis-à-vis maintaining adequate expenditure allocation for essential services, such as health, education and infrastructure development ( Business Standard, 2016). As the budget document was unveiled, it was clear from the deficit targets met (and sought to be met in the future) that the government did not deviate from its commitments towards fiscal consolidation. These deficit targets, however, provide limited understanding of the overall ‘quality’ of expenditure and receipts of the government. In order to comprehend the overall picture and quantify this qualitative aspect, there is a need to go beyond the conventional measures of deficit. This article discusses the concept, meaning and usage of the various measures of deficits in order to, first, highlight their limitations in understanding the overall quality of budgets and, second, make a case for creation of a ‘composite index’ to reflect the broad quality and composition of budgets. A modest attempt has also been made in this article to evaluate the Union Budgets of the recent years on the basis of one such index developed by Bhide and Panda (2002). Results provide concrete evidence of a discernible improvement in the quality of budgets in the past few years.
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SALEH, ALI SALMAN, and CHARLES HARVIE. "THE BUDGET DEFICIT AND ECONOMIC PERFORMANCE: A SURVEY." Singapore Economic Review 50, no. 02 (October 2005): 211–43. http://dx.doi.org/10.1142/s0217590805001986.
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The relationship between budget deficits and macroeconomic variables (such as growth, interest rates, trade deficit, exchange rate, among others) represents one of the most widely debated topics among economists and policy makers in both developed and developing countries. However, the purpose of this paper is to review the extensive literature to such a relationship, concentrating on theoretical debates and empirical studies, in order to derive substantive conclusions, which can be beneficial in the macroeconomics area; policy analysis; or in terms of constructing or developing a macroeconomic model for analyzing the impact of budget deficits on macroeconomic variables. The majority of these studies regress a macroeconomic variable on the deficit variable. These studies are cross-country and utilize time series data. In general the key outcomes from the studies presented in this paper indicated that both the method of financing and the components of government expenditures could have different effects. Therefore, it is crucial for the government to distinguish between consumption and investment expenditures especially when the government is in the process of evaluating the impact of fiscal policy on private investment and output growth or in the process of cutting expenditures to reduce the fiscal imbalances in the country. Even though the overall results from the empirical literature with respect to the impact of public investment on private investment and growth are ambiguous, the bulk of the empirical studies find a significantly negative effect of public consumption expenditure on growth, while the effects of public investment expenditure (such as on education, healthcare) are found to be positive although less robust. The key findings from these studies is important in particular for developing countries to be aware of the importance of government investment expenditures in the area of education, healthcare, infrastructure to long-term economic growth and the benefits from which are an important contributor to welfare and well-being. The key outcome from all of the studies presented in this paper while investigating the relationship between the budget deficit and current account deficit showed strong evidence in both developed and developing countries towards supporting the Keynesian proposition (conventional view) which suggests that an increase in the budget deficit would induce domestic absorption and, hence import expansion, causing a current account deficit. The key findings from the empirical studies investigating the relationship between the budget deficit and interest rates indicated strong evidence towards supporting the Keynesian model of a significant and positive relationship between budget deficits and interest rates. The major outcomes from the empirical studies examining the relationship between budget deficits and inflation showed strong evidence that the budget deficit financed through monetization and a rising money supply could lead to inflation.
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Piasecki, Ryszard, and Erico Wulf Betancourt. "Chile Fiscal Policy Management." Comparative Economic Research. Central and Eastern Europe 16, no. 2 (August 17, 2013): 45–62. http://dx.doi.org/10.2478/cer-2013-0011.
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A budget surplus arises in a country when the total revenue earnings surpass expenditures in a particular financial year. Having a budget surplus is very important in the sense that it brings about a decrease in the net public debt, while the public debt is increased in the event of a budget deficit. Both budget deficits and budget surpluses also exert indirect influences on taxpayers. Normally, it is not essential on the part of the government to maintain a budget surplus, though it needs to be very careful when running a budget deficit to have the proper buffer.
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Sadekin, Md Nazmus, Md Mahbub Alam, Al Amin Al Abbasi, and Subrata Saha. "ANALYSIS OF TREND AND SOURCES OF GOVERNMENT BUDGET DEFICIT FINANCING IN BANGLADESH." Journal International Studies 16 (December 30, 2020): 129–44. http://dx.doi.org/10.32890/jis2020.16.8.
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Budget deficit is one of the most significant macroeconomic issues which have been debated both in the academic and political arena since 1970s. This study aims to explore the current position of government budget deficit, its trends, and sources of budget deficit financing in Bangladesh covering the periods of 1980 to 2018. Secondary data has been used which is collected from Bangladesh Economic Review and World Bank. Data has been analyzed through descriptive methods. The Government financing budget deficit from two sources like domestic and foreign sources. The study finds that Government finances most of its budget deficit from the domestic sources than foreign sources especially from non-banks sources due to the increase in the net sale of national savings certificates while borrowing from bank sources is on the decline. Along with the effective measures of generating more internal resources, the government should also focus on other areas to reduce the budget deficit. The government should be taken proper steps to make progressively investable resources and generate a fund for financing the non-development spending for reducing the reliance on debt that can guarantee more distribution on the development sector.
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Abdullah, Muhammad Latif, and FNU Sunaryati. "THE EFFECT OF MACROECONOMIC VARIABLES ON FISCAL SUSTAINABILITY IN INDONESIA, PERIOD 2004Q1-2018Q4." Airlangga International Journal of Islamic Economics and Finance 1, no. 2 (July 21, 2020): 61. http://dx.doi.org/10.20473/aijief.v1i2.20802.
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Abstract Fiscal sustainability illustrates the condition of a healthy government budget which can finance government spending without increasing debt supply. The purpose of this study is to analyze the impact of macroeconomic variables on fiscal sustainability which in this study fiscal sustainability is proxied as a government budget deficit. The data used in this study is the 2004Q1-2018Q4 time series data using the Vector Error Correction Model (VECM). The results showed that fiscal conditions in Indonesia are sustainable and macroeconomic variables such as domestic debt andinflation has a positive effect on increasing the government budget deficit. Whereas the variable state revenues and foreign debt negatively affect the government budget deficit.Keywords : Fiscal Sustainability, Government Budget Deficit, Domestic Debt, Foreign Debt.
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Eisner, Robert. "Budget Deficits: Rhetoric and Reality." Journal of Economic Perspectives 3, no. 2 (May 1, 1989): 73–93. http://dx.doi.org/10.1257/jep.3.2.73.
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Whatever the real or imagined ills of the economy, the news media, most politicians and a fair proportion of the economics profession are quick to point to the culprit: “the budget deficit.” No matter that few appear to know or care precisely what deficit they are talking about or how it is measured. No matter that few bother to explain in terms of a relevant model just how government deficits may be expected to impact the economy. No matter that few offer any empirical data to sustain their judgments. I believe there are serious problems with our fiscal policy. These relate to fundamental national priorities and the provision of public goods, now and for the future. But the current size of the federal deficit is not “our number one economic problem,” if indeed it is a problem at all.
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Mwigeka, Samwel. "Do Budget Deficit Crowds out Private Investment: A Case of Tanzanian Economy." American Journal of Trade and Policy 2, no. 1 (April 30, 2015): 11–18. http://dx.doi.org/10.18034/ajtp.v2i1.378.
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The existing high budget deficit in Tanzanian economy has created an immense concern among economic policy analysts. The study investigates whether budget deficits crowd out or crowd in private investment in Tanzania, using annual data covering the period from 1970 to 2012. Using the Johansen cointegration test suggests there is at least one cointegration vector among these variables. Under such circumstances, we employed a vector error correction model (VEC), since it offers more and better information compared to other data generation processes. The results point to a close long–term relationship between private investment, and other variables included in the study. Results suggest that budget deficits significantly crowds out private investment. These results substantiate the theoretical predictions and are also supported by previous studies. The paper recommends that government should redirect it fiscal policy that would favor the private investor by discouraging high government expenditure and maintaining a low fiscal deficit. Also, to avoid crowding out effect, capital market should be used to finance budget deficit.
JEL Classifications Code: H6
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Zharku, Lutfi. "Irregular Receipts Leading to Budget Deficits in Kosovo." Baltic Journal of Real Estate Economics and Construction Management 6, no. 1 (August 25, 2018): 100–115. http://dx.doi.org/10.2478/bjreecm-2018-0008.
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Abstract The aim of the paper is to analyse the irregular budget receipts, their behaviour and impact on budget deficits in Kosovo. Since its independence, Kosovo has been engaging in large infrastructure projects based mainly on initially high cash balances and overestimation of revenue capacity, in particular of irregular receipts. This led to the creation of future liabilities and budget deficits, which had to be financed by public debt. Further, the politically motivated increase of wage and salary bill and social transfers increased the burden on budget deficit already caused by infrastructure projects. Thus, budget deficits became the lasting feature of Kosovo economy. All this was supported by a lack of legal infrastructure or fiscal rules for several years. There is extensive literature on the causes of budget deficit, its definition and measurement. The literature review method is adopted in the present study, and research is refined by including selected papers that contain empirical and theoretical studies on budget deficit. Therefore, special-purpose deficit, the so-called “regular” budget deficit, which considers only regular receipts and outlays, has been defined and measured in the present study. This analysis leads to the conclusion that irregular receipts used by the government to engage in large infrastructure projects and/or the politically motivated increase of wage and salary bill and social transfers lead to a budget deficit that has to be financed through public debt. This is a case study of Kosovo and research has been carried out using primary data drawn from Kosovo budget annual financial reports. The implications of the paper may be of high importance for policymakers as well as for academic issues. This is a unique approach to the issues of Kosovo budget deficit and irregular receipts.
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Tanaka, Yasuhito. "On Accumulation of the Budget Deficit: Spirit of MMT Through Mathematical Analysis." Issues in Economics and Business 8, no. 1 (April 15, 2022): 19. http://dx.doi.org/10.5296/ieb.v8i1.19762.
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It is said that public finance must be balanced at least in the long run. According to the so-called MMT (Modern Money Theory or Modern Monetary Theory) approach, however, this is not true. It is often pointed out that MMT lacks the mathematical analysis used in ordinary economic discussions. The purpose of this paper is to present a brief theoretical and mathematical basis to the backbone of the MMT argument, while maintaining the basics of the neoclassical microeconomic framework, such as maximizing consumer utility through utility functions and budget constraints, and equilibrium between demand and supply of goods under perfect competition with constant returns to scale technology. Using a simple overlapping generations (OLG) model that includes economic growth due to technological progress, we present the following results. The budget deficit equals the increase in people's savings, and the accumulated budget deficit equals people's savings. The budget deficit is a cause and the savings is a consequence, not the other way around. Deficits are created by the government, which determines income, which determines savings. Deficits create savings, not savings finance deficits. Reducing the budget deficit will reduce savings, income, and consumption.
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Martins, Apinran, Ogiji Patrick, Laniyan Chioma, and Usman Nuruddeen. "Inflationary Impact of Funding Options for Budget Deficits in Nigeria." Sumerianz Journal of Economics and Finance, no. 41 (March 20, 2021): 41–51. http://dx.doi.org/10.47752/sjef.41.41.51.
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This paper investigates the inflationary impact of the various financing options for the federal government budget deficit which has accumulated overtime. Using Auto Regressive Distributed Lag (ARDL) methodology and quarterly data over the period 2000Q1 to 2017Q2, the study found significant relationship between inflation and the current financing options of the Government. Overall, the result of our ARDL model affirm that the impact of fiscal spending in Nigeria on inflation is captured more in the short-run since none of the variables is significant in the long-run. In addition, the use of Banking System Financing to fund government deficits has better potentials as the optimal choice because its impact on inflation is insignificant. Federal Government Bonds as a tool for financing budget deficits is also considered an optimal choice because though it causes inflation to rise by the second quarter, but its impact on inflation is expected to fizzle out in the long-run. Ways and Means Advances on the other hand, was shown to have the highest inflationary impact and as such, its use as a tool for financing government deficit should be discouraged. We, therefore, recommend a couple of appropriate policy options for financing budget deficits in Nigeria namely monetary financing and the issuance of federal government bonds. On the policy side, more efficient public expenditure management. Capital market, co-financing arrangements with pension funds and issuance of project-tied bonds, would be beneficial.
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Jacobsen, Gorm. "Sustainable Government Debt: The Case Of Poland." International Business & Economics Research Journal (IBER) 13, no. 6 (October 31, 2014): 1383. http://dx.doi.org/10.19030/iber.v13i6.8928.
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Due to government budget deficits in many countries for decades, government debt has become a big problem for some of these countries. This problem accelerated further after the financial crises starting at the end of 2008, a crisis that led to a low and even negative economic growth for many countries. The first part of this article gives a standard theoretical discussion of what could be meant by sustainable government debt. At the end, there is an illustration with some figures for Poland where the conclusion seems to prove the need for a reduced government budget deficit to avoid a serious government debt problem in the future.
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Tehupuring, Ronald. "Mapping of budget stress in Indonesia: Consequence on budget implementation." Jurnal Tata Kelola dan Akuntabilitas Keuangan Negara 7, no. 1 (June 28, 2021): 39–57. http://dx.doi.org/10.28986/jtaken.v7i1.542.
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The phenomenon of a budget deficit in local governments at the provincial, regency, and city levels shows that there is budget stress. Budget stress is a regional fiscal condition reflected in the lower revenue budget, while regional expenditure is getting higher. The consequence of budget stress is low budget implementation, and it reduces the quality of services to the public. This study aims to map the regions experiencing budget stress at the local government levels. Furthermore, this study examines and analyzes the consequences of budgetary stress on budget implementation. The research sample used local governments at the provincial, regency, city levels throughout Indonesia during 2016-2020. This study uses Ordinary Least Square (OLS) to test the research hypothesis. This study groups the five regions with the highest budget stress during 2016-2020. The results of this study can contribute to the theory, methodology, and implementation related to the budget. The theory's contribution is that the political budget cycle can maintain government performance through various efforts to reduce budget stress. This study also found that budget stress can reduce budget implementation. Therefore, the government needs to pay attention to indicators of budget stress.
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Okafor, Samuel O., Olisaemeka D. Maduka, Ann N. Ike, Benedict I. Uzoechina, and Celestine I. Ohachosim. "Tax-budget Deficit Relationships: Fiscalists’ Platform for Deficit Financing Policy." Business and Management Studies 1, no. 1 (July 11, 2017): 53. http://dx.doi.org/10.11114/bms.v3i3.2531.
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With heavy debt burden on developing economies accompanied by their low credit worthiness rating, developing economies often resort to taxes for financing development projects. Raising tax rates and expanding tax bases have become frequent government activities in developing economies. Without dynamic deficit financing policy which takes into cognizance the conflicting arithmetic and economic effect of Laffer curve analysis, financing budget deficit through taxation has remained largely unsuccessful. Perhaps, what was required is to constitute latent factors operating along Laffer curve into major theoretical construct of a deficit financing policy. Therefore, study focused on identifying latent factors influencing the inter-relationship among budget deficit finance, taxes, human capital and macroeconomic indicators. Study spanned across 1970-2015. Data were sourced from Central Bank of Nigeria, National Bureau of Statistics and World Development Indicators. Data were analyzed using exploratory factor analysis. Results indicate that: (1) Tax contributed significantly to budget deficit financing (2)Tax spending and disposable personal income were latent factors influencing the effectiveness of deficit financing (3) Tax spending activated government revenue to contribute significantly to budget deficit reduction (4) Disposable personal income boosted GDP to cause reduction in budget deficit . It was concluded that, with the taxonomy of highly significant factor correlates of tax spending and disposable personal income, a viable deficit financing policy was devised with component tax, budgetary, pricing, credit and macroeconomic policies. It was recommended, inter alia, that developing economies should activate their current deficit financing policies by adapting them to their tax spend and macroeconomic policies.
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Huynh, Nguyen The, Thanh-Na Ha Nguyen-Le, and Nghi Quoc Le. "RELATIONSHIP BETWEEN BUDGET DEFICIT AND ECONOMIC GROWTH IN VIETNAM." Science and Technology Development Journal 18, no. 2 (June 30, 2015): 79–90. http://dx.doi.org/10.32508/stdj.v18i2.1125.
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This paper examines the relationship between budget deficit and economic growth in Vietnam, using VAR model. The results indicate that the relationship between budget deficit and economic growth is not clear. However, gross investment has a causal relationship with budget deficit and economic growth. The government should, therefore, implement and control the investment flows as well as effectively manage budget deficit in order to achieve a stable growth in the coming years.
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Wines, Graeme, and Helen Scarborough. "Australian government budget balance numbers." Accounting Research Journal 28, no. 2 (September 7, 2015): 120–42. http://dx.doi.org/10.1108/arj-01-2014-0001.
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Purpose – The purpose of this paper is to analyse the nature and comparability of budget balance (surplus/deficit) numbers headlined by the Australian Commonwealth Government and the governments of the six Australian States and the two Australian Territories. It does this in the context of the transition to Australian accounting standard AASB 1049 Whole of Government and General Government Sector Financial Reporting. Design/methodology/approach – A case study research method is adopted, based on a content/documentary analysis of the headline budget balance numbers in the general government sector budget statements of each of the nine governments for the eight financial years from 2004-2005 to 2011-2012. Findings – Findings indicate some variation in the measurement bases adopted and a number of departures from the measurement bases prescribed in the reporting frameworks, including AASB 1049. Findings also reveal that none of the nine governments have headlined a full accrual based budget balance number since the implementation of AASB 1049 in 2008. Research limitations/implications – While the study focuses on the Australian general government sector environment, it has significant implications in highlighting the ambiguity in the government budget balance numbers presented and the monitoring and information asymmetry problems that can arise. Research findings have wider relevance internationally in highlighting issues arising with the public sector adoption of accrual accounting. Practical implications – The paper highlights the manner in which governments have been selective in the manner in which they present important budget aggregates. This has important practical and social implications, as the budget balance number is one of the most important measures used to evaluate a government’s fiscal management and responsibility. Originality/value – The paper represents the first detailed examination of aspects of the effect of the transition to AASB 1049.
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Tanaka, Yasuhito. "Debt to GDP Ratio from the Perspective of MMT." Business Management and Strategy 13, no. 1 (December 21, 2021): 1. http://dx.doi.org/10.5296/bms.v13i1.19353.
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In this note we examine the debt to GDP ratio from the perspective of MMT (Modern Monetary Theory) by a simple macroeconomic model with savings by government bonds instead of money. Mainly we will show the following results. 1) In order to maintain full employment under economic growth, the budget deficit, including interest payments on government bonds, must be positive; and if the budget deficit is smaller than this value, there will be recession with involuntary unemployment. 2) Under full employment the debt to GDP ratio approaches to a finite value over time. 3) In the underemployment case the national income is determined by the budget deficit. 4) The excessive budget deficit causes inflation. 6) In order to recover full employment from recession we need budget deficit larger than that when full employment is maintained. 5) The budget deficit, including interest payments on government bonds, equals the increase of the savings of consumers between periods (generations); and this result holds whether we have full employment or not, whether we have inflation or not. Then, the ratio of the national debt to GDP in a period is smaller than one, and even if one period constitutes of several years, the debt to GDP ratio in a year is finite.
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Wielechowski, Michał. "General government deficit and public debt in EU member states." Oeconomia Copernicana 2, no. 4 (December 31, 2011): 29–41. http://dx.doi.org/10.12775/oec.2011.016.
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The aim of this article is the presentation and the attempt to analyse such phenomena as: an excessive general government deficit and public debt in EU Member States over the past 3 years. For the European Union the years 2008-2010 were the time when public finances of most member countries worsened dramatically. The average budget deficit in the EU increased during that period to a value of almost 7% compared to gross domestic product and public debt reached almost 80% of GDP. Referring the numbers to the principles of the budgetary policy in the Treaty on the European Union (the deficit should not exceed 3% in relation to GDP and public debt – 60% of GDP), the observance of budgetary discipline has been significantly violated. In consequence, the excessive deficit procedure has been initiated. in relation to almost all the countries of the EU, Its purpose was to force the member countries to take concrete actions to stabilize public finances. The economic crisis that began in the second half of 2007 in the United States of America which resulted in a significant deterioration of the finances of all the EU member countries might be regarded as the major source of violation of their budgetary discipline. The reactions of most governments TO the harmful effects caused by the financial crisis were to stimulate national economies and stem the decline of domestic demand. The higher level of public expenditures was simultaneously the cause of increased budget deficits,. To develop and present the problem of an excessive budget deficit and public debt in the EU countries some statistical methods were used and the data source statistics were mainly carried out by the European Commission and the European Statistical Office.
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Locke, Wade, and Douglas May. "Policy Forum: Newfoundland and Labrador's Debt Strategy—Waiting for a Saviour or Godot?" Canadian Tax Journal/Revue fiscale canadienne 67, no. 4 (December 27, 2019): 983–1010. http://dx.doi.org/10.32721/ctj.2019.67.4.pf.locke.
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When the government of Newfoundland and Labrador assumed office in late 2015, it declared that the expected deficit for the current fiscal year would be almost double that which was budgeted for by the predecessor government. The new government then adopted a very aggressive fiscal-policy stance in its first budget, tabled in April 2016. However, following the finance minister's resignation in July 2017, the government seemed to dramatically change its strategy, adopting a passive policy response to the worsening deficit situation. While in subsequent years Newfoundland and Labrador's annual deficit has fallen, its net and gross debt per capita have ballooned and reached new heights relative to Canada's other provinces. This article presents an in-depth investigation of this expansion and examines the probabilities of success, in the medium and long term, of the government's current fiscal strategy as a response to its deepening debt problem.
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Amaliah, Ima, and Tasya Aspiranti. "State Sukuk Potential in Reducing Indonesia Budget Deficit, 2009-2015." Journal of Economics, Business & Accountancy Ventura 20, no. 1 (July 27, 2017): 21. http://dx.doi.org/10.14414/jebav.v20i1.781.
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The purpose of this study is to identify potential retail state sukuk as part of state bonds that are used to replace foreign debt and lower the government's budget deficit. This study is important because the government's budget deficit continues to rise each year due to the increase of foreign debt. The increase in the debt itself is closely related to exchange rate fluctuations. Therefore, it is important for the government to develop a relatively secure funding in facing exchange rate fluctuations as well as parts of interest rate. The government has developed state securities based on sharia (SBSN) which can be used not only to close finance deficit but also to alternatively finance the infrastructure development. The population consists of budget deficit, retail state sukuk, corporate sukuk, and foreign debt. It uses purposive sampling to get the sample during 2009 -2015. This research uses descriptive quantitative method of secondary data published by Bank Indonesia, ministry Finance and Jakarta Islamic Index. The result shows that the proportion of retail state sukuk against sharia state securities increases over time (over 50%) but the proportion of corporate sukuk numbers is still relatively small (below 25%).
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Cebula, Richard J. "An Empirical Analysis of the Effects of Budget Deficits (Total and Primary) and Personal Income Tax Rates on the Ex Post Real Interest Rate Yield on Long-Term U.S. Treasury Bonds." Review of Economic Analysis 11, no. 2 (December 7, 2019): 203–18. http://dx.doi.org/10.15353/rea.v11i2.1625.
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This empirical study adopts an open-economy loanable funds model to investigate the impact of post-Bretton Woods U.S. federal government budget deficits and personal income tax rates on the ex post real interest rate yield on thirty-year Treasury bonds. In this study, the budget deficit is measured in two different ways, the total (“unified”) budget deficit and the primary deficit (the total/unified deficit minus net interest payments). Two different estimation techniques, autoregressive two stage least squares estimation and the ARCH (Autoregressive Conditional Heteroscedasticity) Method, for the 1973-2016 study period provide evidence that the ex post real interest rate yield on thirty-year Treasury bonds has been an increasing function of both federal budget deficit measures (expressed as a percent of GDP) and the maximum marginal federal personal income tax rate. The estimations all imply that elevating either the total/unified or primary federal budget deficit appears to raise the cost of borrowing in the U.S., whereas reducing the maximum marginal personal income tax rate appears to reduce the cost of borrowing. Given the potential effects of longer-term real interest rates on investment in new plant and equipment and overall economic growth, policy-makers should not overlook these findings.
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Bonello, Frank J. "Government Deficits And The Public Debt: The Endless Controversy." Journal of Applied Business Research (JABR) 1, no. 1 (November 2, 2011): 22. http://dx.doi.org/10.19030/jabr.v1i1.6591.
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No economic topic has attracted more attention during the 1980s than the size of Federal government budget deficits and the corresponding rapid rise in the public debt. Crowding out news regarding Third World debt problems, U.S. foreign trade deficits, and the break up of American Telephone and Telegraph, Federal government budget deficits have been blamed for everything from high interest rates to the deterioration in the moral fiber of the American people. Deficits and debt have also caused political reversal: historically free spending Democrats blaming Reagan deficits for a variety of economic ills while the conservative Republican president treats the deficit with benign neglect.The purpose of this paper is not to answer all of the questions that have been raised regarding the causes and consequences of government deficits and debt. The initial concern is instead with the facts and figures on the absolute and relative size of the Federal governments recent deficits and debt. Next certain measurement issues are addressed for there is a continuing debate regarding appropriate procedures for expressing the governments budgetary outcomes. The third and final section of the paper reviews some of the arguments, theoretical and empirical, on the relation between deficits and debt on the one hand and interest rates on the other. In each section the intent is to survey rather than to present new theoretical arguments or new empirical evidence.
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Patty, Jancen Roland. "BUDGET FORECAST ERRORS AND BUDGET DEVIATION: FINANCIAL CAPABILITY INDEX AS MODERATING VARIABLE." Jurnal Tata Kelola & Akuntabilitas Keuangan Negara 5, no. 2 (December 26, 2019): 157. http://dx.doi.org/10.28986/jtaken.v5i2.353.
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The lack of accounting literature that links budget supervision or control with budget realization allows the author to conduct this study. In addition, the main issue of this study is the failure of the local government in planning, implementing and being responsible for the budget resulting in budget surpluses and deficits. Surplus and deficit prove the existence of the budget deviations. The cause of the budget deviation is a mistake in the budget forecast. Some cases of budget deficits in Indonesia prove this. Budget forecast errors have the potential to increase budget deviation due to the role of the financial capability index. The purpose of this study is to examine the role of financial capability index in influencing the relationship of budget forecast errors and budget deviation. The sample used local government in Indonesia between 2016 and 2018 through a purposive sampling technique. Analytical tools use STATA Version 15.1. The results of the study prove that budget forecast errors have a positive and significant effect on budget deviation, and the financial capability index has a positive effect on the relationship between budget forecast errors and budget deviation. Sensitivity testing and additional testing reinforced the initial testing of this study.
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El-Khoury, Gabi. "Arab government budgets: selected indicators." Contemporary Arab Affairs 10, no. 1 (January 1, 2017): 165–70. http://dx.doi.org/10.1080/17550912.2017.1280261.
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This statistical file is concerned with Arab government budgets as it assumes that the sharp drop in oil prices coupled with ongoing regional conflicts have caused significant deficits in the budgets of most Arab countries, especially Arab oil-exporting countries, where governments had to implement a wide range of fiscal reforms aiming at rationalizing public spending and enhancing public revenues. On the other hand, lower oil prices have eased pressures on public finance in Arab oil-importing countries, especially in light of the rising cost of energy subsidies. Yet, many of these countries had also to proceed with structural reforms to reduce fuel subsidies and control the budget. Tables 1 and 2 provide statements on government revenues and grants, including estimates of government revenues as a percentage of gross domestic product (GDP), while Tables 3–5 show hydrocarbon and tax revenues, including estimates of these revenues as a percentage of total public revenues. Tables 6 and 7 provide statements on government expenditures, including estimates of government expenditures as a percentage of GDP, while Tables 8 and 9 deal with the structure of expenditures, showing estimates of current and capital expenditures along with figures on the functional classification of current expenditures. Overall surplus/deficit figures for Arab government budgets along with projections of the general government fiscal balance are shown in Table 10.
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KUDRYASHOV, Vasyl. "BUDGET DEFICIT AND FINANCING OF CRITICAL SERVICES." Economy of Ukraine 2021, no. 6 (June 22, 2021): 59–77. http://dx.doi.org/10.15407/economyukr.2021.06.059.
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Approaches to the use of budget deficit in fiscal policy are clarified. It is concluded that the analysis of the deficit contained in the works of domestic scientists does not sufficiently take into account changes in the volume and structure of expenditures, as well as their effects on economic and financial development of the country. It is noted how as a result of the application of deficit financing mechanisms, it’s not only the expenditures on borrowing services that are growing. No less important are the costs of financing the repayment of accumulated debt. To cover them, it is not the state budget revenues that are used, but the funds received on the basis of placing additional borrowings or attracting resources by conducting operations with state assets. During the challenges of the COVID-19 pandemic, additional budget expenditures are directed mainly to the provision of critical services. The factors influencing the attraction of additional resources (in order to finance the budget deficit) are identified: access to capital markets, the level of profitability of government borrowing, the dynamics of macroeconomic indicators, the possibility of conducting operations with government assets. An important condition for financing the budget deficit is to prevent the destructive effects of such operations on the dynamics of macroeconomic and financial indicators of the country. In developed countries, keeping low interest rates has significantly reduced the negative effects of deficit-summing. It is concluded that maintaining high yields on government debt instruments in Ukraine increases the risks of such transactions. During the period of overcoming the consequences of the pandemic, it is advisable to revise the current fiscal rules and apply special measures to restore them after overcoming its consequences.
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Ann Pettifor, Ann Pettifor. "Deficit Financing’ or ‘Deficit-Reduction Financing?’ Debates in Contemporary Economics: Origins, Confusions and Clarity." journal of king Abdulaziz University Islamic Economics 32, no. 1 (January 5, 2019): 67–78. http://dx.doi.org/10.4197/islec.32-1.4.
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The analysis of government deficits and public debt points to a fundamental error in contemporary economic discussions. It is not possible to assess the stance of fiscal policy from estimates of the public sector deficit. John Maynard Keynes’s macroeconomics and the empirical evidence discussed in this paper indicate that expansionary fiscal policy financed by loan issues will lead to growth in economic activity and employment. In an economy with spare capacity and idle resources, high government expenditure generates income, including tax revenues and thereby reduces the government deficit, and cuts public debt. The main purpose of increased loanfinanced government spending at times of private economic weakness is to increase the nation’s income. Keynes argued that any such government spending was not deficit spending, because he understood the spending as the most sensible means to cut the deficit. Deficit-reduction spending might be a more appropriate definition, because as he argued with Josiah Stamp: “You will never balance the budget through measures which reduce national income” (Keynes, 1978, vol. 21, p. 149).
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Ferizaldi, Ferizaldi, and Muhammad Hasyem. "North Aceh Regional Innovation Policy in the face of reduced Regional Fiscal Capacity after the end operational PT. Arun. LNG." International Journal of Public Administration Studies 1, no. 1 (August 15, 2021): 10. http://dx.doi.org/10.29103/ijpas.v1i1.5000.
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Through Law no. 11 of 2006 concerning the Government of Aceh. Aceh has very broad powers, especially in the area of fiscal decentralization, which allows the Aceh government to have greater discretion in maximizing its fiscal needs. The phenomenon that occurred in North Aceh is very paradoxical with the fact that the North Aceh Government experienced a very large budget deficit after the end of PT. Arun. LNG as a contributor to oil and gas revenue sharing. This study aims to find out what innovation policies are carried out by the North Aceh Regency Government to overcome the budget deficit after the end of PT. Arun LNG. The results of the study show that various policies have been carried out by the North Aceh government but are still short-term in nature. So it can be concluded that the North Aceh Government does not have Social Accountability in implementing Aceh's Special Autonomy. In the Medium-Term Development Plan, a major policy that is substituted for income that will be lost after the end of the operations of PT. Arun.LNG so that the budget deficit can be overcome and the regional fiscal gap does not become negative.Through Law no. 11 of 2006 concerning the Government of Aceh. Aceh has very broad powers, especially in the area of fiscal decentralization, which allows the Aceh government to have greater discretion in maximizing its fiscal needs. The phenomenon that occurred in North Aceh is very paradoxical with the fact that the North Aceh Government experienced a very large budget deficit after the end of PT. Arun. LNG as a contributor to oil and gas revenue sharing. This study aims to find out what innovation policies are carried out by the North Aceh Regency Government to overcome the budget deficit after the end of PT. Arun LNG. The results of the study show that various policies have been carried out by the North Aceh government but are still short-term in nature. So it can be concluded that the North Aceh Government does not have Social Accountability in implementing Aceh's Special Autonomy. In the Medium-Term Development Plan, a major policy that is substituted for income that will be lost after the end of the operations of PT. Arun.LNG so that the budget deficit can be overcome and the regional fiscal gap does not become negative.
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Omar Zuhair Hafiz, Omar Zuhair Hafiz. "Ṣukūk: A Sharīʿah Compliant Tool for Financing Budget Deficits." journal of king Abdulaziz University Islamic Economics 32, no. 1 (January 10, 2019): 119–24. http://dx.doi.org/10.4197/islec.32-1.9.
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The lead paper (Pettifor, 2019) discusses an important issue at the macroeconomic level, especially the impact of financing government’s expansionary budget deficit through borrowing. The paper reiterates that claiming that the use of loans to finance the deficit will lead to a decline in the economic activity and will in turn increase the deficit, is a common misconception. In fact, the data on the British economy over a period of a hundred years, as shown in the lead paper, proves that there is a positive relationship between the volume of the budget deficit (and public debt) and economic activity. This, in turn, lead to a decrease in unemployment and thus, eventually contributed to a reduction in the budget deficit. These results have been proven by other researches as well as I have mentioned in this paper. I have also pointed to other researches which indicate that there is a negative relationship between the size of the debt (or the budget deficit), and economic activity, which contradicts the hypothesis of the lead paper. In this brief comment on the lead paper, I also discuss the fact that the global debt phenomenon has become a burning issue. I present a summary of the state of international debt around the world and discuss its impact on the economies of many countries that repay their debts in hard currencies. I argue that this situation must be taken into consideration when discussing the impact of borrowing to finance the government budget deficit to stimulate economic growth. I also propose that these effects on the borrowing economies should also be analyzed in the event that these international loans are in the form of Islamic instruments (ṣukūk) which are increasingly being used by some governments as a tool to finance their budget deficits, especially among the OIC countries. However, because it is a modern financing tool, several years need to pass before we can viably test the relationship between them and economic growth and the extent of their impact on key variables at the macro level of the economy.
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LIN, Shuanglin. "China to Curtail Local Government Debt." East Asian Policy 08, no. 04 (October 2016): 69–81. http://dx.doi.org/10.1142/s1793930516000416.
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In 2014, China’s total government debt was an estimated 60% of gross domestic product (GDP), close to the upper limit set by the European Union. The Xi administration has set budget deficit at 3% of GDP for 2016 and announced that government budget revenue will grow only 3.2% in 2016! It has also recently abolished local government financing vehicles, legalised local government bond issuing in 2014 and started "the debt swap" reform.
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Poljašević, Jelena, Josipa Grbavac, and Dragan Mikerević. "Budgetary responses to a global pandemic in Bosnia and Herzegovina." Journal of Public Budgeting, Accounting & Financial Management 32, no. 5 (October 2, 2020): 949–56. http://dx.doi.org/10.1108/jpbafm-07-2020-0114.
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PurposeThe purpose of this research is to show the impact of the pandemic on the budget of Bosnia and Herzegovina (BiH) as a developing country. It also aims to give an answer as to how BiH politicians used budgetary measures to respond to the pandemic and what key economic factors influenced the design of those measures.Design/methodology/approachThe study conducted detailed analyses of budgets at level of central government, as well as other publicly available documents of relevant governments bodies, international statistics and media reports up to the end of June 2020.FindingsDecline of economic activity and a number of budgetary measures adopted by central BiH authorities under the influence of characteristics of BiH economy, characteristics of public finance and available source of funding, resulted in less government revenues and sizable government expenditures to assist the economy and public health system. The fiscal stability achieved over the past years and low level of debt allowed BiH authorities to build a deficit into the rebalanced budget. Most of the deficit was covered with the International Monetary Fund (IMF) assistance and in part also through internal borrowing and with surpluses/ deferral revenues from the previous year.Research limitations/implicationsAt this point, it is impossible to predict what kind of impact the pandemic-related crisis will have on BiH public finances and whether further economic interventions will be needed.Originality/valueThis paper shows the measures that developing country governments dependent on external funding sources can take in times of crisis and what their impact is on the budget.
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Strausssman, Jeffrey D. "Government overload revisited: The case of the federal budget deficit." International Journal of Public Administration 8, no. 1 (January 1986): 79–102. http://dx.doi.org/10.1080/01900698608524507.
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Thomas, Lloyd B., and Ali Abderrezak. "Long-Term Interest Rates: The Role of Expected Budget Deficits." Public Finance Quarterly 16, no. 3 (July 1988): 341–56. http://dx.doi.org/10.1177/109114218801600306.
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A relatively simple loanable funds model is utilized to explain the 10-year government bond yield during 1970–86. In the reduced form equation, expected inflation, expected structural deficits as a percentage of GNP, output growth, and liquidity growth appear as exogenous variables. Using alternative measures of expected inflation and expected deficits, the regression results indicate a powerful effect of expected deficits on the 10-year government bond yield. The increase in expected deficits raised bond yields by some 180 basis points by early 1984, and the anticipation of deficit-reduction legislation accounts for about one-third of the decline in yields during 1985–86, according to the model. In alternative experiments, tests are conducted to see whether bond yields “Granger-cause” forthcoming deficits. Our findings are consistent with the view that agents are forward-looking and foresee the direction of major changes in structural deficits.
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Zahid, Khan H. "Government Budget Deficits and Interest Rates: The Evidence since 1971, Using Alternative Deficit Measures." Southern Economic Journal 54, no. 3 (January 1988): 725. http://dx.doi.org/10.2307/1059015.
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Emana, Desalegn. "Relationship between Budget Deficit and Economic Growth: Evidence from Ethiopia." Applied Journal of Economics, Management and Social Sciences 2, no. 2 (November 8, 2021): 10–15. http://dx.doi.org/10.53790/ajmss.v2i2.12.
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This study examined the relationship between budget deficit and economic growth in Ethiopia using time series data for the period 1991 to 2019 by applying the ARDL bounds testing approach. The empirical results indicate that budget deficit and economic growth in Ethiopia have a negative relationship in the long run, and have a weak positive association in the short run. In line with this, in the long run, a one percent increase in the budget deficit causes a 1.43 percent decline in the economic growth of the country. This result is consistent with the neoclassical view which says budget deficits are bad for economic growth during stimulating periods. Moreover, in the long run, the variables trade openness and inflation have a positive impact on Ethiopian economic growth, and on the other hand, the economic growth of Ethiopia is negatively affected by the nominal exchange rate in the long run. Apart from this, in the long run, gross capital formation and lending interest rates have no significant impact on the economic growth of the country. Therefore, the study recommends the government should manage its expenditure and mobilize the resources to generate more revenue to address the negative impact of the budget deficit on economic growth.