Article
Economics
Anthony J. Makin, Allan Layton
Summary: Governments worldwide responded to the COVID19 crisis with varied fiscal policies, with some being overly expansive. The elevated public debt levels caused by the crisis pose macroeconomic risks in the future, requiring fiscal consolidation rather than further stimulus.
ECONOMIC ANALYSIS AND POLICY
(2021)
Article
Multidisciplinary Sciences
Ming Jiang, Jingchao Li
Summary: This paper examines the impact of government spending on default risk in emerging economies. The study finds that government spending shocks lead to increased external debt and sovereign bond spreads. Using panel data from 18 countries, the research also reveals that a 10% increase in government spending results in a 1.0% appreciation of the real effective exchange rate, a deterioration of 0.0025 in the current account to GDP ratio, an average increase of 3.5% in external debt in the year following the shock, and a rise of 25 basis points in the EMBI Global spread within two years, peaking at 132 basis points after 14 quarters, indicating a higher sovereign default risk.
Article
Economics
Piyali Das
Summary: After the Great Recession, many advanced nations saw an unprecedented rise in debt-to-GDP ratios. Age-related spending and a high debt-GDP ratio during peacetime can add to fiscal stress. Understanding the factors affecting debt dynamics is crucial, with previous literature highlighting components like inflation, growth rate, and primary deficit/surplus.
ECONOMIC MODELLING
(2021)
Article
Health Care Sciences & Services
Mingyao Cao, Keyi Duan, Mingyu Cao, Haslindar Ibrahim
Summary: This paper investigates the interrelationships among local government debt, fiscal decentralization, and public health. The investigation begins by constructing a theoretical model to analyze the inherent connections between these variables. Subsequently, an empirical analysis is conducted using data from China between 2015 and 2021. The findings demonstrate a bidirectional relationship between fiscal decentralization, local government debt, and public health. Specifically, it is observed that an increase in local government debt has adverse effects on both fiscal decentralization and public health, while fiscal decentralization has a positive impact on public health. These insights are consistently validated through rigorous regression methodologies, affirming the robustness and significance of these relationships.
Article
Economics
Timo Valila
Summary: Road infrastructure investment is influenced by fiscal policy considerations, which is used by governments to address debt sustainability and smooth out debt volatility. It competes with investment in health and education, and its impact on congestion is limited and uncertain.
Article
Economics
Luis Guirola, Javier J. Perez
Summary: We contribute to the literature by empirically documenting the weakening relationship between public debt fundamentals and sovereign bond spreads in Spain, France, and Italy (versus Germany) after the 2010-2012 episode of significant distress in sovereign debt markets. Our measure of public debt fundamentals is constructed using the Value at Risk approach combined with the estimation of the correlation pattern of macroeconomic determinants of public debt dynamics. We then compare these probabilistic indicators with market-derived sovereign bond spreads.
Article
Economics
Helder Ferreira de Mendonca, Ytallo Brito
Summary: This paper provides empirical evidence on the adverse effect of an increase in public debt/GDP ratio on investment in emerging markets. The study shows that the impact is particularly significant on public sector investment, with a notable increase in adverse effects post-global financial crisis of 2007-2008.
Article
Economics
Paola Subacchi, Paul van den Noord
Summary: The paper examines the ability of the reserve currency issuer to implement expansionary fiscal policies without adverse reactions from foreign lenders. Using the G7 as a case study, the authors find that this 'privilege' is supported by the data and has become stronger over time, aided by the global build-up of currency reserves.
OXFORD REVIEW OF ECONOMIC POLICY
(2023)
Article
Business, Finance
Maciej Wysocki, Cezary Wojcik
Summary: The analysis shows that Poland's fiscal sustainability significantly improved in the post-crisis period, suggesting that post-crisis EU fiscal measures can effectively enhance fiscal sustainability when properly integrated into domestic fiscal frameworks. The study also identifies a series of significant structural break periods.
INTERNATIONAL JOURNAL OF FINANCE & ECONOMICS
(2021)
Article
Green & Sustainable Science & Technology
Thi Anh Nhu Nguyen, Thi Thuy Huong Luong
Summary: This research empirically models the impact of fiscal policy and institutional quality on public debt in 27 transition countries over the period 2000-2018, providing evidence for the crucial implications of both factors in managing public debt. The findings show that institutional quality and corruption play important roles in influencing public debt.
Article
Green & Sustainable Science & Technology
Lamia Bazzaoui, Jun Nagayasu
Summary: The study suggests that budget deficits are less likely to cause inflation when monetary policy is based on inflation targeting. However, in countries with poorly structured monetary policies, budget deficits may lead to inflation.
Article
Business, Finance
Sangwon Lee
Summary: This paper examines the investment behavior of Korean business group (chaebol) affiliated firms and non-chaebol firms during the COVID-19 outbreak. The findings suggest that chaebol firms reduced their investment to a lesser extent, especially those with higher market-to-book ratios. This indicates that chaebol internal capital markets helped mitigate the negative effects of the pandemic on firm investment.
INTERNATIONAL REVIEW OF FINANCIAL ANALYSIS
(2022)
Article
Business, Finance
Pedro R. D. Bom, Inaki Erauskin
Summary: This study examines the impact of government investment on the decline of labor share globally. The research establishes a theoretical link between government investment and labor share using a macroeconomic model, and finds a positive association between the two variables in advanced economies based on empirical analysis.
INTERNATIONAL REVIEW OF ECONOMICS & FINANCE
(2022)
Article
Business, Finance
Shen Guo, Zheng Jiang
Summary: The study finds that the social welfare loss caused by the implicit residential land tax in China is larger than the property tax, mainly due to exacerbated land misallocations and disproportionately increased rents hurting poor renters. It suggests that the current implicit residential land tax should be replaced by the conventional property tax.
INTERNATIONAL REVIEW OF ECONOMICS & FINANCE
(2021)
Article
Economics
Sebastian Hauptmeier, Christophe Kamps
Summary: The post-COVID-19 period is expected to have a trade-off between stabilization and sustainability. This paper examines the design of the Stability and Growth Pact's debt rule in the context of fiscal policy debates and proposes two parameter changes to better balance macroeconomic stability and debt sustainability.
EUROPEAN JOURNAL OF POLITICAL ECONOMY
(2022)
Article
Economics
Roland von Campe
Summary: A key feature of DSGE frameworks designed to model Quantitative Easing (QE) is that they only consider net worth on bank's balance sheets, but in reality, the net worth of borrowers and lenders also plays a relevant role in financing investment projects. The modeling of the equity tandem increases the model's resilience and implies smaller gains from unconventional monetary policy. It also shows that QE redistributes net worth from banks to non-financial firms, and a credibly announced Quantitative Tightening (QT) helps stabilize the spread between capital return and deposit rate.
JOURNAL OF MACROECONOMICS
(2024)
Article
Economics
Svetlana Rujin
Summary: This study investigates the composition of total hours response to a technology shock in countries with different labor market institutions. The findings suggest that adjustments along both the extensive and intensive margins are significant, with the intensive margin playing a more important role. Furthermore, countries with flexible labor market institutions experience a larger drop in employment, while the results for the intensive margin are mixed. The cross-country differences in fluctuations along the two margins can be linked to the strictness of institutions targeting quantity and price adjustments in the labor market.
JOURNAL OF MACROECONOMICS
(2024)
