Search Results (66)

Economic policy uncertainty is an important macroeconomic risk factor that can have direct effects on investment decisions, growth dynamics, and public finance. In particular, its potential impact on tax revenue is critical in terms of fiscal sustainability. This study investigates the Granger-causal relationship between economic policy uncertainty, total tax revenue, and economic growth in G7 economies over the 1997–2021 period, applying symmetric and asymmetric panel causality tests. The empirical findings revealed evidence of causality between economic policy uncertainty and tax revenue and between economic growth and economic policy uncertainty. In asymmetric analyses where the effects of positive and negative shocks were separated, the direction of causal relationships differed between countries. These results imply that asymmetric effects vary by country. Overall, the empirical findings suggest that enhancing transparency and predictability in tax systems could play a vital role in reducing economic policy uncertainty and thus positively affect tax revenue performance and fiscal resilience. Full article

This paper highlights the importance of accounting for both the maturity structure of government debt and the composition of fiscal instruments when studying the macroeconomic effects of fiscal policy. Using a dynamic stochastic general equilibrium (DSGE) model featuring a debt maturity structure and six exogenous fiscal shocks spanning both the expenditure and revenue sides, we show that long-maturity debt systematically weakens the expansionary effects of fiscal policy under dovish monetary policy, particularly in response to increases in government purchases, government investment, and capital income tax cuts, where long-term financing leads to the significant crowding-out of private activity. In contrast, short-term debt financing yields output multipliers that often exceed unity. The maturity structure also alters the relative efficacy of fiscal instruments: while labor income tax cuts produce the largest multipliers under short-term debt, government purchases become more potent under long-term debt financing. We also show that the stark difference between short- and long-term debt becomes muted under a hawkish monetary regime. Our results have important policy implications, suggesting that the maturity composition of public debt should be carefully considered in the design of fiscal policy, particularly in high-debt economies. Full article

This study examines the evolution of public debt among the 27 EU member states using Graph Theory tools; the Threshold Weighted–Minimum Dominating Set (TW–MDS) and the k-core decomposition method, alongside a standard network quantitative metric, the density. By separating the data into three distinct periods, pre-crisis (2000–2007), European sovereign debt crisis (2008–2015), and post-crisis (2016–2023), we examine the potential synchronization of the debt ratios among EU countries through cross-correlations of the public debts. The findings reveal that public debt correlation was at its highest level during the 2008–2015 period, reflecting the universal impact of the crisis and the subsequent synchronized fiscal and monetary policy measures taken within EU. A significantly lower network density is observed in both the pre- and post-crisis periods. These results contribute to the overall debate on fiscal stability and policy coordination by showing how EU countries tend to align their fiscal behaviors during periods of crisis while behaving more independently during stable times. In addition, we yield a deeper insight into how economic shocks reorganize public debt interconnections within the crisis period. Finally, this analysis highlights to what extent European economic integration strengthens connections between the fiscal positions (through public debt) of the European Union member countries. Full article

The observed increase in demand for transport leads to higher energy consumption, which still predominantly originates from fossil fuels. As a result, the transport sector remains one of the main sources of GHG emissions. At the same time, transport activities bring economic benefits by generating public income and contributing to GDP. This article analyzes the relationship between total final energy consumption in transport, CO₂ emissions from transport, and government revenues, using Poland as a case study. The study applies Johansen’s cointegration method to identify long-term relationships between time series. Unlike many cross-country studies, this research addresses a gap by focusing specifically on Poland—a post-transition economy where the transport sector holds both fiscal and environmental significance. After cointegration test, the Impulse Response Function was used to examine dynamics and identify system shocks. Results indicate that energy consumption in transport significantly affects both CO₂ emissions and government revenues. A rise in energy use leads to higher emissions and also correlates with increased public income. The study contributes to the understanding of how transport-related energy use impacts both fiscal outcomes and emissions in a national context. These findings offer a foundation for shaping future policies that promote economic growth and stable revenue while encouraging more efficient energy use and lower emissions. Full article

Research on the impact of fiscal policy and foreign direct investment (FDI) on environmental quality has yielded conflicting results on their effects on carbon dioxide emissions. To further explore the asymmetric influences of these two critical factors on environmental quality, we employed a nonlinear ARDL approach to examine how fiscal policy (GOEX), FDI inflows, and other drivers of CO₂ emissions, such as trade openness, financial development, and economic growth, have affected environmental quality in Vietnam from 1990 to 2022. Our findings indicate that a positive shock in GOEX results in decreased emissions, whereas a negative shock in GOEX leads to increased emissions, challenging previous research that suggests that higher expenditures typically harm the environment. We also observe that positive changes in FDI result in higher CO₂ emissions, whereas negative FDI shifts have no significant impact. Additionally, our study reveals that trade openness improves environmental conditions, whereas economic growth and financial development contribute to increased CO₂ emissions. The responses of CO₂ emissions to the asymmetric effects of fiscal policy, FDI inflows, and other determinants in the short term last in the long term. These insights are valuable for policymakers in developing environmental sustainability strategies to mitigate climate change by addressing fiscal policies and other determinants of CO₂ emissions. Full article

This study examines the impact of the COVID-19 pandemic on global stock markets by comparing developed and developing economies, while highlighting regional differences. Using dynamic panel regression models, this study explores the role of pandemic-related variables, fiscal policies, and investor sentiment in shaping market performance. Developed markets, although highly sensitive to infections, benefited from robust fiscal interventions and institutional resilience. Developing markets face greater volatility owing to stringent measures, structural vulnerabilities, and limited fiscal capacities. Regionally, Europe demonstrated resilience through coordinated policies, whereas the Americas experienced significant volatility from fragmented responses. Africa and parts of Asia encountered fewer initial shocks but struggled with prolonged recovery due to limited financial and institutional resources. The findings underscore the importance of economic integration, coordinated fiscal and monetary policies, and investor sentiment management to stabilize markets during crises. These insights guide policymakers in enhancing resilience and fostering sustainable economic growth amid future global disruptions. Full article

This paper presents a novel approach to prognosing European economic crises through the development of an economic–financial risk sensitivity model. The model integrates key macroeconomic indicators such as government deficit (NETGDP), GINI coefficient, social protection expenditure (ExSocP), unemployment rate (UNE), research and development spending (RDGDP), and tax structures (TXSwoSC), assessing their role in predicting economic vulnerability across European countries. By applying the Kruskal–Wallis non-parametric test on data from 324 observations across multiple countries, significant differences were identified in the distribution of these variables. The results show that government policies related to social protection, R&D, and taxation play an important role in a country’s resilience to economic shocks. On the other hand, indicators such as income inequality and unemployment exhibit less variation, reflecting global economic conditions. The model provides a comprehensive risk assessment framework, allowing for the early detection of potential economic crises and guiding policy adjustments to mitigate risks. This methodology offers valuable insights into the sensitivity of European economies to financial disruptions, emphasizing the importance of fiscal policies and social expenditure in maintaining economic stability. Full article

This study investigates the dual dynamics of investment shocks and policy responses in stabilizing South Korea’s macroeconomy during the COVID-19 pandemic, utilizing a Bayesian DSGE framework. The model integrates sophisticated mathematical components, including stochastic differential equations, Bayesian inference, and impulse response functions, to analyze the transmission mechanisms of investment shocks and the relative efficacy of fiscal and monetary interventions. The estimation is conducted through Markov Chain Monte Carlo simulations. Using data from the first quarter of 2020 to the first quarter of 2023, the analysis quantifies the pandemic-induced shocks’ impact on critical macroeconomic indicators, including enterprise output, household consumption, employment, and investment. The findings reveal that heightened investment costs significantly constrained economic performance, with fiscal measures, such as increased government spending and targeted stimulus packages, demonstrating superior stabilization effects compared to monetary interventions. These results emphasize the importance of well-coordinated policy responses in mitigating economic disruptions and enhancing resilience during crises. This study not only provides novel insights into the mathematical modeling of economic stabilization strategies but also offers actionable recommendations for policymakers navigating pandemic-induced challenges. Full article

The elimination of poverty in all its forms is the first global goal of the United Nations’ 2030 Agenda for Sustainable Development. Achieving this goal is recognized as a long-term process that is complicated by persistent vulnerabilities stemming from factors such as natural disasters, food insecurity, health challenges, educational disparities, and social inequality. This systematic bibliometric review provides a comprehensive survey of the impact of social protection-based policies in mitigating poverty vulnerability, focusing on selected countries and regions, including America, Europe, Oceania, and part of Asia and Africa. Our analysis reveals that 81% of the studies examine poverty vulnerability from a single dimension, predominantly focusing on food security and nutrition (23%), climate change shocks (18%), and health-related vulnerabilities (14%). The geographic distribution indicates that the United Kingdom and the United States lead research in this field, contributing 36 and 32 papers, respectively, followed by China (16 papers), South Africa (15 papers), and Canada (10 papers). The results indicate that these fiscal redistribution policies significantly contribute to reducing poverty and inequality and have positive impacts on other Sustainable Development Goals (SDGs), particularly SDG 1 (No Poverty), SDG 2 (Zero Hunger), SDG 3 (Good Health and Well-being), and SDG 10 (Reduced Inequalities). However, notable gaps remain, especially regarding the integration of these policies with environmental sustainability goals like SDG 13 (Climate Action), which are addressed in only a minority of studies. This study concludes by recommending the adoption of more holistic and integrated policy frameworks that bridge the gap between social protection and environmental sustainability, thereby advancing the entire 2030 Agenda for Sustainable Development. Full article

Given the growing concerns over environmental degradation and the demand for sustainable development, the Chinese government has implemented several fiscal incentive policies to enhance environmental governance. Taking the phased comprehensive demonstration cities of the Energy Saving and Emission Reduction Fiscal Policy (ESERFP) as an exogenous shock, this study uses a staggered difference-in-differences method to evaluate the impact of the fiscal incentive policy on pollution control using panel data from 268 prefecture-level cities in China from 2003 to 2017. The results indicate that the industrial pollutant emissions in the demonstration cities significantly decreased compared with those in the non-demonstration cities under the influence of the ESERFP. Specifically, industrial wastewater discharges in the demonstration cities decreased by 15.5% while industrial sulfur dioxide emissions decreased by 19.5%. Moreover, promoting industrial structure upgrades and green technology innovations are the main mechanisms of the ESERFP in reducing industrial pollution emissions. Furthermore, the emission-reduction effect of the ESERFP is more significant in areas with more fiscal resources, lower promotion incentives based on local economic performance, greater emphasis on environmental protection, and those with no old industrial bases. Further analysis shows that the positive effect of the ESERFP on pollution control in the demonstration cities remains relatively effective after the demonstration period ends, and the policy does not sacrifice economic dividends. Overall, this study explores the impact of fiscal incentive policies designed to achieve environmental improvements via pollution control, offering valuable fiscal policy insights for China and other developing economies seeking solutions to environmental pollution, including fiscal incentive policy formulation and implementation, fiscal incentives to support regional green transformations, improving the differentiation and precision of fiscal incentives and enhancing environmental performance assessment. Full article

In recent years, fiscal policy in the Eurozone (EZ) has faced challenges posed by the strong and rapid increase in inflation as a consequence of the COVID-19 pandemic and other geo-political crises. Due to the fear of “fiscal inflation” present during episodes of fiscal stimulus during the pandemic crisis, this paper assesses the relationship between discretionary fiscal policy and inflation in developed EZ economies, taking into consideration the rise in energy prices as a control variable. This study considers the econometric framework of heterogeneous, non-stationary panels (Pooled Mean Group (PMG) and Common Correlated Effects Mean Group (CCEMG) estimators). Using quarterly panel data for the period 2015q1–2024q1, the results show that, in the long run, the effects of fiscal policy on inflation are insignificant. However, covering only the pandemic and other geo-political crises (2020q1–2024q1), research shows a significant negative long-run relationship between fiscal expenditure and inflation and heterogeneous short-run fiscal adjustments due to the lack of a fiscal union in the EU economies. Hence, accompanied by monetary policy, the discretionary response of fiscal policy to inflationary shock was oriented in the same direction—the reduction in inflationary pressures during a geo-political crisis. Fiscal policy mitigated inflationary pressures in these recent crises, while in the long run, it did not affect nominal variables, indicating that there is no evidence of fiscal inflation in the sample of EZ economies during a stabilization period or under crisis conditions. Full article

This study used the panel data from 15 emerging markets to examine the impact of restrictive macroprudential policies on income inequality from 2000–2019 using Bayesian panel vector autoregression and Bayesian panel dynamics generalised method of moments models. The chosen models are suitable for addressing multiple entity dynamics, accommodating a wide range of variables, handling dense parameterisation, and optimising formativeness and heterogeneous individual-specific factors. The empirical analysis utilised various macroprudential policy proxies and income inequality measures. The results show that when the central banks tighten systems using macroprudential policy instruments to sticker debt-to-income and financial instruments for lower-income borrowers (the bottom 40% of the income distribution), they promote income inequality in these countries while reducing income inequality for high-income borrowers (the high 1 percent of the income distribution). The impact of loan-to-value ratios was found to be insignificant in these countries. Fiscal policy through government expenditure and economic development reduces income inequality, while money supply and oil-price shocks exacerbate it. The study suggests implementing a progressive debt-to-income (DTI) ratio system in emerging markets to address income inequality among lower-income borrowers. This would adjust DTI thresholds based on income brackets, allowing lenient credit access for lower-income borrowers while maintaining stricter limits for higher-income borrowers. This would improve financial stability and reduce income disparities. Additionally, targeted financial literacy programs and a petroleum-linked basic income program could be implemented to distribute oil revenue to lower-income households. A monetary supply stabilisation fund could also be established to maintain financial stability and prevent excessive inflation. Full article

Along with the new stage of prevention and control of the COVID-19 pandemic and the vision and goals of combatting climate change, the challenges of the transition to a green economy have become more severe. The need for green recovery of the economy, stability and security of energy production and consumption, and the coordination of low-carbon transformation and socio-economic development has become increasingly urgent. This paper proposes a new theoretical framework to study the effect of carbon emission reduction on the mutual application of the carbon market, fiscal policy and monetary policy under the non-homothetic preference of energy product consumption. By constructing an environmental dynamic stochastic general equilibrium (E-DSGE) model with residents’ non-homothetic preferences, this paper finds that coordinating the carbon market and macroeconomic policies can achieve economic and environmental goals. However, the transmission paths for each are different. The carbon market influences producers’ abatement efforts and costs through carbon prices. Monetary policy controls carbon emissions by adjusting interest rates, while fiscal policy controls carbon emissions by adjusting total social demand. Improving non-homothetic preferences will amplify business cycle fluctuations caused by exogenous shocks, thus assuming the role of a “financial accelerator”. Further research shows that non-homothetic preferences influence the heterogeneity of different policy mixes. Finally, this paper discovers that the welfare effects, the relative size and difference of long-term and short-term effects resulting from the different policy mixes, also depend on the level of non-homothetic preferences. The intertemporal substitution mechanism due to the improvement of non-homothetic preferences endows low-carbon production with “option” characteristics. Our study reveals the role of non-homothetic preferences on the effectiveness of policy implementation. It highlights the importance of matching monetary and fiscal policies with the carbon market based on the consumption and production side. It provides ideas for policy practice to achieve the goal of “dual carbon” and promoting coordinated socio-economic development. Full article

This study investigates the impact of Government Consumption (GC) on Saudi Arabia’s GDP during major economic crises from 1969 to 2022, focusing on periods marked by fluctuations in oil and non-oil revenues. By integrating these revenue streams, the research provides a more comprehensive analysis of fiscal policy effectiveness during economic downturns. Using an Autoregressive Distributed Lag (ARDL) model, the study reveals the complex role of Government Consumption (GC) in stabilizing and stimulating the Saudi economy amidst revenue volatility. Key findings indicate that while GC does not significantly influence GDP in the short term, its long-term effectiveness varies across different crises. Specifically, GC has acted as a buffer against immediate economic shocks during certain crises while providing a stimulus for economic recovery in others. During the 2020 COVID-19 pandemic, timely fiscal measures significantly boosted GDP, underscoring the importance of adaptive and proactive fiscal policies. Conversely, the 2014–2016 oil price collapse demonstrated that GC alone was insufficient to counteract economic downturns, emphasizing the need for diversified revenue strategies. These findings underscore the dual role of GC in economic stabilization and recovery. During the COVID-19 pandemic, GC played a crucial role in both mitigating negative economic impacts and supporting recovery efforts, showcasing its effectiveness in times of global disruptions. This demonstrates GC’s capability as an immediate buffer against economic shocks and a stimulus for economic recovery. In contrast, during the 2014–2016 oil price collapse, GC was less effective, indicating the limitations of relying solely on government spending without broader economic diversification. This highlights the necessity of diversified revenue strategies to complement fiscal measures for long-term economic resilience. The robustness of the findings was ensured through various diagnostic tests, including checks for autocorrelation, heteroskedasticity, and stationarity of residuals. The absence of significant autocorrelation and heteroskedasticity, along with the stationarity of differenced variables, confirms the validity of the econometric models used. The study contributes to the discourse on fiscal policy in oil-dependent economies by illustrating the critical role of diversified revenue strategies and adaptive fiscal measures in enhancing economic resilience. Recommendations are offered for policymakers to optimize fiscal strategies, ensuring robust economic recovery and long-term stability in volatile markets. This research highlights the necessity for Saudi Arabia to refine its fiscal policies towards greater economic diversification and stability. Full article

Public debt is determined by borrowings undertaken by a government to finance its short- or long-term financial needs and to ensure that macroeconomic objectives are met within budgetary constraints. In Romania, public debt has been on an upward trajectory, a trend that has been further exacerbated in recent years by the COVID-19 pandemic. Additionally, a significant non-economic event influencing Romania’s public debt is the war in Ukraine. To analyze this, a stochastic debt sustainability analysis was conducted, incorporating the unique characteristics of Romania’s emerging market into the research methodology. The projections focused on achieving satisfactory results by following two lines of research. The first direction involved developing four scenarios to assess the risks presented by macroeconomic shocks. Particular emphasis was placed on an unusual negative shock, specifically the war in Ukraine, with forecasts indicating that the debt-to-GDP ratio could reach 102% by 2026. However, if policymakers implement discretionary measures, this level could be contained below 88%. The second direction of research aimed to establish the maximum safe limit of public debt for Romania, which was determined to be 70%. This threshold would allow the emerging economy to manage a reasonable level of risk without requiring excessive fiscal efforts to maintain long-term stability. Full article