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The twin deficit hypothesis suggests that budget deficits are crucial factors leading to current account deficits, and substantial empirical evidence documents a significant positive statistical correlation between budget and current account deficits. However, such evidence generally suffers from endogeneity problems due to reverse causality, thereby making it difficult to provide solid evidence to support policy implementation. We use extensive cross-national panel data from developed and developing countries and military expenditure as an instrumental variable to reexamine the impact of budget deficits on the current account and test the validity of the twin deficit hypothesis. Our results demonstrate that budget deficits lead to current account deficits in both developed and developing countries, supporting the twin deficit hypothesis. After considering various factors that may affect the exogeneity of military expenditures, approximating the instrumental variable as exogenous, and performing multiple robustness tests, the hypothesis still holds. This study provides solid evidence supporting the use of fiscal policies to deal with current account imbalances. [ABSTRACT FROM AUTHOR]

We revisit the twin deficits hypothesis (budget and trade deficits) for the United States during 1791–2019, using the system-equation ADL test for threshold cointegration proposed by Li (2017). This model can demonstrate the existence of both asymmetric adjustment and asymmetric role in the relationship between trade and budget deficits. Our empirical evidence suggests a nonlinear long-run relationship between the two variables, thus finding the presence of the twin deficits hypothesis. Further, we find time–varying cointegration between the two, and an asymmetric adjustment process. Budget deficits play a vital adjustment role at low regimes (when error-correction terms are below the threshold of 1.11), and trade deficits play an important adjustment role at higher regimes (when error-correction terms are above the threshold of 1.11). [ABSTRACT FROM AUTHOR]

This paper revisits the writings of Michal Kalecki which relate to issues of fiscal policy, budget deficits and securing full employment in capitalist economies. It seeks to relate those writings to the recent fiscal policy debates after the global financial crises. It covers the issues of the financing and funding of public expenditure and private expenditure. The relationship between the scale of budget deficit and the achievement of full employment is considered. Kalecki's approach to the 'burden' of debt is elaborated. The social and political constraints on the achievement of full employment are revisited. [ABSTRACT FROM AUTHOR]

The aim of this study is to examine the relationship between budget deficits and excise taxes revenues in OECD countries for 1999-2016 period. In the study, the bootstrap panel causality technique proposed by Kónya (2006), which considers cross-sectional dependence and heterogeneity across the countries was performed for 32 OECD member countries (Chile, Japan, Lithuania and Mexico are not included due to lack of data) yearly data of the 1999-2016 period. According to the results of the bootstrap panel causality, a significant relationship between excise tax revenue and budget deficit in OECD member countries exists. Governments due to its ease of application and general acceptance prefer excise taxes. Thus, the results can be interpreted that excise taxes are used as a revenue-increasing resource to decrease the budget deficit or to prevent increase in the budget deficit. [ABSTRACT FROM AUTHOR]

Purpose: The present research aims at identifying the latent factors that are driving the rise of the shadow economy in Palestine, assesses its magnitude from 1998 to 2021 and investigates the influence that its size has on the financial sustainability of Palestine's public budget. Design/methodology/approach: The researchers employed the multi-indicator multi-causes (MIMIC) model to estimate the size of the shadow economy and investigate its effect on the financial sustainability of the public budget. Economic factors such as direct taxes, indirect taxes, government welfare, government spending and unemployment were considered causal variables, while indicators of financial sustainability included budget deficit, public debt and gross domestic product (GDP). The shadow economy served as an intermediary variable. Findings: Based on the findings, the researchers recommend regulating and formalizing legitimate activities within the shadow economy. Additionally, they suggest promoting investment projects to reduce unemployment rates, lowering taxes on essential goods and consumer items and providing support to local producers in Palestine. These measures aim at addressing the challenges posed by the shadow economy and fostering economic stability. Originality/value: The study reveals that the average size of the shadow economy in Palestine between 1998 and 2021 was 43.80%, fluctuating within the range of 39.92%–46.30%. It further establishes that an increase in direct and indirect taxes as well as unemployment contributes to the expansion of the shadow economy. Conversely, government welfare and spending exert a diminishing effect. Moreover, the study finds that the rise of the shadow economy correlates with an increase in public debt, budget deficit and GDP, indicating a negative impact on the financial sustainability of the public budget. [ABSTRACT FROM AUTHOR]

The article offers information regarding international trade and federal budget deficits of the U.S. in between the period 2001–2016, using warranted deficit model (WDM). It mentions that global economic growth could occur by increasing the global supply of gold or by adjusting the U.S. dollar price of gold along with all the fixed exchange rates of all the countries in the system. It presents information on the Modern Portfolio Theory.

In this paper, we analyze the impact fiscal policy rules have on budget deficits and forecasting biases in official budget outlooks. Persistent budget deficits and over-optimistic budget forecasts have been observed in many countries in the past, especially in the euro area. To prevent such developments from happening in the future, fiscal rules have been revised or implemented with the aim to strengthen both preventive (ex-ante) and corrective (ex-post) elements of fiscal rules frameworks. Do such ex-ante and ex-post rules differ in their effects? In an attempt to answer this question, we build a two-period model and distinguish between ex-ante rules that apply to budget forecasts and ex-post rules that apply to realized budget deficits. Our model indicates that effectively enforced ex-post rules are more effective than ex-ante rules at reducing budget deficits. Interestingly, ex-ante rules differ from ex-post rules in their effects on forecasting biases. Only ex-post sanctions reduce forecasting biases, while ex-ante rules have no impact on such biases. In addition, we show that political stability and the size of government increase the effectiveness of fiscal rules. If, however, financial markets have a disciplining effect on governments, the effectiveness of fiscal rules is reduced. Our results imply that if fiscal policy rules cannot be effectively enforced, reforming other areas such as electoral rules or financial market regulations might be a more promising approach to ensuring sound public finances than fiscal policy rules. [ABSTRACT FROM PUBLISHER]

In a recent issue of this journal, Tymoigne and Wray, as well as Palley, discussed whether economies can experience stable full-employment equilibria with persistent public budget deficits. This implies continuous growth of a stock-variable: high-powered money and/or government bonds in the hands of the private sector. Their discussion assumed a stationary state. The question is whether such a situation can be regarded as sustainable over time. This paper argues that a satisfactory solution to the problem can be found only by abandoning the hypothesis of stationary state and considering the effects that different compositions of public expenditure have on the rate of growth. To have a stable full-employment equilibrium with budget deficits, the economy must grow. Since the economy is assumed to be in full employment, the growth of aggregate output must be entirely due to the growth of productivity, which can be realized by changing the composition of public spending in favor of productive expenditures. [ABSTRACT FROM PUBLISHER]

The aim of this paper is to study the relationship between military spending and sovereign debt in a panel of 13 European countries. In particular, under the assumption of the interdependence of military spending between US and European countries, we analyse whether US military spending affected European sovereign debt in the period 1988-2013. The empirical estimation is based on different steps: (i) a unit root test; (ii) an Arellano--Bond panel estimation and a linear fixed effect model; and (iii) a FMOLS estimation to highlight the long run relationship between debt and relevant variables. General results highlight that debt burden of European countries is: (1) positively associated with US military burden and (2) negatively associated with average military burden of other European countries. [ABSTRACT FROM AUTHOR]

The paper investigates the causal link among inflation, money and budget deficits in Ethiopia for the period 1964 to 2003 using the bounds test approach to cointegration due to Pesaran et al. (2001) and using a modified version of the Granger causality test due to Toda and Yamamoto (1995). To check the robustness of the bounds test, we also used two additional long run tests: the dynamic ordinary least squares (DOLS) due to Stock and Watson (1993) and the fully modified ordinary least squares (FMOLS) due to Phillips and Hansen (1990). The empirical evidence shows that there was a long run cointegrating relationship among the series with a unidirectional Granger causality running from money supply to inflation and from budget deficits to inflation. In contrast, fiscal policy does not seem to have any impact on the growth of money supply. The implication is that fiscal balance and the control of the money supply are essential policy tools for the long-run macroeconomic stability of Ethiopia. [ABSTRACT FROM AUTHOR]

This study investigates the cost allocation of cooperative autonomous truck (AT) platooning among carriers. Motivated by the fuel consumption saving from truck platooning, carriers can collaborate for creating more platooning opportunities in an alliance. The formation of carrier alliance is associated with two key conditions: (i) efficiency: the total cost is allocated to each carrier without a budget deficit, and (ii) stability: all carriers find it beneficial to stay in the grand alliance and do not form sub-alliance. Since an alliance satisfying these two conditions may not always exist, we aim to find a cost allocation such that the violation of efficiency and stability conditions is minimized. We first propose a cooperative AT platooning problem for a trade-off between fuel consumption savings and schedule deviation cost. Then, we model the problem as a cooperative AT platooning game and formulate cost allocation models. The exact row-generation solution method is developed to computationally calculate the cost allocation. Extensive numerical experiments demonstrate the properties of proposed models and the effectiveness of solution methods. The results show that the developed row-generation solution method can solve the instances of up to 100 requests and 20 carriers within a two-hour time limit, and the schedule deviation coefficients significantly impact the performance of optimal cost allocation. • Propose a cost allocation problem for cooperative autonomous truck (AT) platooning. • Formulate a compact AT platooning model considering schedule deviation cost. • Investigate the trade-off between efficiency and stability in the approximate core. • Develop allocation models and investigate their mathematical properties. [ABSTRACT FROM AUTHOR]

This paper analyzes the relationship between government budget deficits, defence expenditure and income redistribution among different social-income groups in Turkey for the period 1965-2003. The analysis was based on a five-equation vector auto regressive (VAR) model and impulse response functions (IRFs) derived from the VAR model. The study finds that the deficit as a percentage of GNP has a negative and significant impact on transfer payments as a percentage of GNP. The IRFs indicate that shocks to deficit expenditures as a percentage of GNP (DEFGNP) have statistically significant impacts on defence spending as a percentage of GNP (DSGNP), educational expenditures as a percentage of GNP (EDGNP), health expenditures as a percentage of GNP (HEGNP), and transfer payments as a percentage of GNP (TPGNP). The results derived from this study also indicate that there is a positive and significant relationship between defence spending as a percentage of GNP and deficits as a percentage of GNP. Therefore, defence spending is viewed as a tool for transferring income among different social-income groups and across generations in Turkey for the period 1965-2004. As a result of this, the government can use deficit and defence spending as one of the major instruments to transfer income among different social-income groups and across generations in Turkey. [ABSTRACT FROM AUTHOR]

Beginning in 1987, Thailand experienced lower real interest rates, an investment boom, and rapid economic growth. We investigate whether these lower real rates were caused by conservative fiscal policy. Using data from the years 1980–94, we test between the Keynesian theory that smaller budget deficits reduce real interest rates and the Neoclassical theory that lower government spending reduces those rates. We find support for the Neoclassical model. Cuts in both consumption and construction expenditures appear to lower real interest rates. Surprisingly, lower public equipment spending appears to raise real interest rates. We attribute this to three factors. First, equipment spending could significantly boost aggregate supply. Second, public equipment spending is somewhat countercyclical, which could generate a spurious negative correlation with procyclical real interest rates. Third, public equipment spending appears highly correlated with government net foreign borrowing, which would relieve pressure on interest rates to rise. The results imply that controlling public spending is crucial for maintaining low real interest rates, but also that prudent public sector investment partially externally financed need not raise real interest rates and could effectively promote domestic capital formation. [ABSTRACT FROM AUTHOR]

The study investigates the long-run causal relationship amongst budget deficits, money growth and price level for Nigeria between 1971 and 2008 inclusive. The empirical findings predict a long-term cointegrating relationship with unidirectional causality running from budget deficit to money supply growth and then from money supply growth to price level in the Toda and Yamamoto () sense. Thus, the Sargent and Wallace () 'Unpleasant Monetarist Arithmetic' hypothesis holds for Nigeria. [ABSTRACT FROM AUTHOR]

This paper studies the design of efficient mechanisms for repeated bilateral trade in settings where (i) traders' values and costs evolve randomly with time, and (ii) the traders become ready and available to participate in the mechanism at random times. Under a weak condition, analogous to the non-overlapping supports condition of Myerson and Satterthwaite (1983) , efficient trade is only feasible if the mechanism runs an expected budget deficit. The smallest such deficit is attainable by a sequence of static mechanisms. [ABSTRACT FROM AUTHOR]

The twin deficit hypothesis suggests that there is a relationship between the budget deficit and the current account deficit. The traditional Keynesian Approach emphasizes that budget deficits resulted in the current account deficit. On the other hand, the Ricardian Equivalence Approach argues that there is no relationship between budget deficits and current account deficit. In this study, the validity of the twin deficit hypothesis and Feldstein Horioka (1980) hypothesis is analyzed using both the Breaking Periods of the Westerlund-Edgerton Breaking Cointegration Test (2008) and the Dumitrescu & Hurlin (2012) Panel Causality Test. According to the cointegration and causality analyzes, it is concluded that there is a long-term relationship between budget deficits and current account deficits. This result supports the Traditional Keynesian Approach. Furthermore, it is seen that there is a two-way relationship between budget deficits and current account deficits. Long term coefficients were obtained by using the AMG test. When the panel coefficient results are considered, it is seen that the twin deficit hypothesis is valid, but the results are obtained contrary to the analysis found by Feldstein Horioka (1980). However, when the individual countries are examined, it is seen that the twin deficit hypothesis applies to some countries, and the twin divergence hypothesis applies to some other countries. Besides, it is understood that the study results do not support the Feldstein-Horioka (1980) hypothesis. [ABSTRACT FROM AUTHOR]

Abstract: This paper reinterprets the mixed evidence of the relationship between budget deficits and inflation in high inflation economies. The main finding is that recurrent outbursts of extreme inflation in these economies can be explained by a certain hysteresis effect associated with public finance. This interpretation meets the evidence that dramatic shifts between regimes of moderately high and extremely high (hyper-) inflation often occur without visible deterioration in public finance or abrupt shifts in fiscal or monetary policies. The existence of this hysteresis effect is explicitly explained by the action of two mechanisms: the arithmetic associated with the wrong side of the inflation tax Laffer curve and the Patinkin effect (the reverse of the much oftener cited Olivera–Tanzi effect). It is also shown that the division of the operational budget deficit into the part that is subject to negative inflation feedback and the part that is inflation-proof has implications for both the discussion of the inflationary consequences of budget deficits and the design of stabilization policy. [Copyright &y& Elsevier]

Is there a relationship between government budget deficits and inflation? The data show that some countries--usually less developed nations--with high inflation also have large budget deficits. Developed countries, however, show little evidence of a tie between deficit spending and inflation. In "Do Budget Deficits Cause Inflation?," Keith Sill states that the extent to which monetary policy is used to help balance the government's budget is the key to determining the effect of budget deficits on inflation. He examines the theory and evidence on the link between fiscal and monetary policy and, thus, between deficits and inflation. [ABSTRACT FROM AUTHOR]

In this research, the effect of uncertainty and the government budget deficit on economic growth has been investigated in 12 OPEC member countries from 1997 to 2013. Given the structure of OPEC member countries, production uncertainty and oil revenue uncertainty were introduced as the proxy for the uncertainty variable, and the PP-GARCH method was used to estimate the two mentioned uncertainties. To investigate the relationship between research variables, the panel ARDL model was used based on two methods of PMG and MG for without and with uncertainty situations. The results of the research showed that under without uncertainty conditions, the government deficit and tax revenue had a significant negative effect on the economic growth of OPEC member countries. Also, in the uncertainty scenarios, both variables of production uncertainty and oil revenue uncertainty had a significant negative effect on the economic growth of countries in both short and long run. [ABSTRACT FROM AUTHOR]

Peer-to-Peer (P2P) energy trading between Interconnected Micro-Grids (IMGs) presents a promising approach for enhancing the economic advantages for prosumers while mitigating supply–demand imbalances within individual Micro-Grids (MGs). This paper proposes a trustful double auction mechanism for P2P energy trading among prosumers in IMGs, structured into two distinct stages. Initially, concurrent auctions are conducted within each MG to facilitate intra-grid trading, followed by subsequent auctions facilitating inter-grid trading across IMGs. We figure out the allocation and pricing rules that satisfy the required properties in mechanism design even when the auction consists of two stages. Given that energy transactions across IMGs entail non-negligible power losses, equitable allocation of these losses among prosumers is paramount. To address this, we integrate a fair cost distribution methodology into our auction mechanism, implemented by an iterative algorithm. Rigorous analysis substantiates our proposed auction mechanism's incentive compatibility, individual rationality, and budget balance, thereby fostering truthful and voluntary prosumer participation while averting potential market deficits. Numerical analysis underscores the efficacy of our approach, showcasing a significant improvement in P2P transactions and supply–demand balance enhancement compared to trading solely within individual MGs. • A double auction is designed for Peer-to-Peer energy trading between interconnected micro-grids. • A two-stage auction is developed to increase the engagement of prosumers. • A fair and feasible cost distribution method is developed to fully recover the budget deficit. • The proposed model mitigates supply–demand imbalance and improves economic benefits. [ABSTRACT FROM AUTHOR]

Introduces a series of articles on budget deficits in the U.S. Changes within the U.S. Congress about deficit reduction politics; Solution to the deficit to increases in revenues during the early administration of former U.S. President Bill Clinton; Importance of debt management.

In this empirical research, thepurpose was to investigate the impact of trade openness and budget deficits on public debt in Pakistan. In this regard, data was examined spanning from 1975 to 2020. To map both long-run and short-run interactions, we used the autoregressive distributed lag (ARDL) method of co-integration along with ECM approaches. The results show that variables such as public debt, budget deficit, trade openness, and inflation have long-and short-term co-integration. Also, trade openness's coefficient's negative sign with value of-0.759 confirms negative relationship between public debt, trade openness and shows that a 1% upsurge in trade openness will bring a 75.9% decrease in public debt's growth in Pakistan. While budget deficit and inflation both possess a positivesign of coefficients and a positive link with public debt, the coefficient of budget deficit is 0.498, which depicts that a 1% escalation in budget deficit will lead to a rise in public debt of 49.8 percent. In conclusion, Pakistan's national debt is rising due to budget deficit andinflation, but it is falling due to trade openness. To reduce budget deficit, government should balance domestic andexternal debtso as to sustain desired position. So, it issuggestedthe government actively trade internationally to minimize the public debt. [ABSTRACT FROM AUTHOR]

This article investigates the relationship between budget deficit and current account deficit using ARDL bound testing approach for the developing country South Africa over the period of 1990–2018 featured with liquidity constraints and decreasing consumption. The results of the study confirm the long‐run and short‐run cointegrating relationship between the two deficits and accept Keynesian preposition and do not find any evidence in favor of Ricardian equivalence hypothesis based on these data. The other control variables used in this model found to have both long‐run and short‐run relationship with BD. The results of Granger causality reveal bidirectional causality between budget deficit and current account deficit and unidirectional causality from INT, REER, and INF to budget deficit and current account deficit. From the policy point of view, economic integration and macroeconomic stability are viewed as supportive in accomplishing an ideal growth with both external and internal stability. [ABSTRACT FROM AUTHOR]

Abstract: When governments are in a parliamentary minority they have to negotiate with opposition parties over the annual budget. We argue that, as a consequence, the preferences of the opposition concerning fiscal outcomes should be reflected in the yearly budget balances. We present a theoretical argument in which the opposition faces a trade-off. It has a short-term interest in deficits since they can signal a weak government, but a long-term aversion to them because, if they reach office, they will have to deal with the burden of increased debt. Empirically, we find that opposition parties affect deficit outcomes depending on their probability of governing in the next term and the weakness of the incumbent government. When the opposition is mainly concentrated in one party, it is likely that it will take over the government and this will make the opposition deficit-averse in the current period. However, if the minority government is a coalition, then a concentrated opposition might see deficits as an opportunity to reach office earlier and might be willing to pass budgets with deficit. [Copyright &y& Elsevier]

The right to receive social assistance for sickness is considered a right of every low-income citizen. Social security must ensure that people without access to health insurance have the option of this type of compensation. However, to access the monetary contribution for illness, a rigorous process is required to validate and approve it. In some cases, some people have been affected by the budget deficit that the locality presents, due to the non-payment of taxpayers. Therefore, the present study focuses on determining the causes of non-compliance with the monetary contribution for the illness that affect the violation of the right to receive a subsidy. For the modeling of the study, neutrosophic statistics are used to detect the existing uncertainties. Among the neutrosophic results, the implementation of mechanisms and ways to control the collections for the monetary contribution for illness is proposed, in addition to informing society and giving attention to those workers who are disabled. [ABSTRACT FROM AUTHOR]

The literature on the common pool resource problem in budgeting has thus far not explored the likely interaction between size fragmentation (the number of decision makers) and procedural fragmentation (the structure of the process in which they interact). The argument put forward in this article is that the effects of these two types of fragmentation should not be additive, but multiplicative, because theory suggests that the impact of size fragmentation on fiscal policy is conditional on the extent of procedural fragmentation. Using panel data for 57 countries over the period of 1975 to 1998, the author empirically investigates this interaction in the legislative context and finds strong evidence that partisan fragmentation is associated with higher deficits only when it is not moderated by limits on parliamentary amendment authority. [ABSTRACT FROM AUTHOR]

Evaluates the hypothesis correlating federal government budget deficits and defense rent spending. Evidence from a Parks regression technique suggesting that total rent-seeking is positively related to the amount of federal spending; Increase of rent seeking efforts when federal budget deficits are reduced.

Discusses postcommunist government's tendency to incur budget deficits that threaten the capacity of governments in Eastern Europe to perform basic tasks necessary to facilitate the development of democratic institutions. Theories of state building and fiscal reform; Revenue appropriation in the socialist fiscal system; Budget deficits and deficit management; Postcommunist fiscal reforms.

Presents information on a study designed to examine the 1980-1995 budget deficits and exchange rates relationship of Organization for Economic Cooperation and Development (OECD) countries. Methodology used in the study; Findings of the study; Performance of budget deficits in the study.

The article discusses budget deficits in the Surinamese government and how they were financed. Suriname's non-diversified economic structure has contributed to the country's slow development rate. From 1975 to 1982, the country's capital expenditures were financed mostly from Dutch aid. After aid stopped, budget deficits were financed primarily from central bank credit. Suriname has reached some stability since the early 1990s, but are still experiencing high nominal lending interest rates.

Examines the impact of federal budget deficits on private investment in the United States. Determinants of real investment; Overview on the Johansen-Juselius cointegration technique; Claims of the Neoclassicals, Keynesians and Ricardian equivalence; Evidence supporting the Keynesian view of macroeconomics.

Focuses on Canada's experience in reducing its budget deficits and debt. Commitment to an interim deficit target; Provisions under the country's federal budgets; Public support as a factor to the success of the country's budget deficit program.

Discusses information about the government budgetary problems. The causes of state budget problems; How do states manage the problems; The impact of economic growth on expenditures and revenues; Limitations on state governments; Cures for budget deficits; How some states are coping; Conclusions.

Examines the correlation of budget deficits, exchange rates and outputs of traded and non-traded goods in the United States. Inclusion of fiscal policy considerations in a stochastic set-up; Use of a cash-in-advance constraint model; Correlation between nominal exchange rates and real exchange rates.

Analyzes the differences in budget deficits of Organization for Economic Cooperation and Development (OECD) countries in terms of the political component of government debt. Discussion of the doctrine of constant taxation rates; Explanation of fiscal illusion framework for intertemporal budget constraint; Description of models of political economy; Effect of debt assumption and service on monetary policy.

With an ever-growing federal deficit, and the increasing partisanship in Congress, it is possible that the federal government could one day default on its debt obligations. Government spending and borrowing has yet to stop ballooning under the governance of both Republicans and Democrats. Furthermore, governmental impasse caused by disagreements in the legacy realms of taxation, spending, and borrowing continues to boil on. Rancor caused by political division and federal budget uncertainty raises numerous questions: (1) What if the partisan divide becomes so unreconcilable to the point that Congress cannot agree on fiscal policy, thus grinding the federal government to a complete halt and placing its debt obligations in question? (2) Will U.S. Treasury bondholders be able to sue the federal government under a contract theory for failure to meet its obligations? (3) Will sovereign immunity be a barrier to suits against the federal government for defaulting on its debt? (4) Does the Constitution provide a remedy through the Fifth Amendment's Takings Clause for the bondholder if there is a viable takings claim? (5) Finally, if the full faith and credit of the federal government are placed into question, would a government-backed fiscal or monetary remedy be sufficient to justly compensate the plaintiff bondholder? This paper seeks to explore the viability of bringing a claim against the federal government under a contract claim theory or, in the alternative, a takings claim, for default on sovereign debt from the position of a private bondholder. [ABSTRACT FROM AUTHOR]

Studies the impact of budget deficit on Taiwan's inflation, output, employment and per capita income. Fiscal deficit as a proportion of gross national product; Launching of the national reconstruction program; Cost.

Examines the reasons why large public deficits and the buildup of public debt might be detrimental to future economic performance with the adoption of a policy of medium-term fiscal consolidation in Sweden. Objections raised against the use of budget deficit to increase domestic demand; Experience with major fiscal contractions; Implications for Sweden.

Oil prices have dropped sharply in recent years. If for some countries, the decrease represents tremendous benefits, for others, namely the oil-producing countries, it is a huge loss which is susceptible to cause budget deficit. With respect to such deficit, this study investigates the impact of budget deficit and public debt on monetary policy in Sub-Saharan Africa. We apply the panel instrumental variables (IV)- generalized method of moments (GMM) estimator to a pool of 44 countries over the period 1997-2017. The estimator implements IV/GMM estimation of the fixed-effects panel data models with endogenous regressors and is heteroskedastic and autocorrelation consistent. Regardless of the exporting or importing nature of the country, the results indicate no significant relationships between the fiscal variables and interest rates over the period 1997-2017. However, we find significant positive relationships between public debt and the discount rate and, to a lesser extent, between budget deficit and the discount rate, following the fall in oil prices from 2014. Put simply, monetary authorities have increased the discount rate from 2014. In the net oil-exporting countries, the evidence indicates from 2014 that public debt has significant positive impacts on the interest rates, whereas no significant impacts arise between budget deficit and interest rates. Monetary authorities in those countries seem to respond to the stock of debt rather than to its flow. In the net oil-importing countries, the results show a positive relationship between public debt and the discount rate following the fall in prices. Overall, our results suggest that monetary authorities may have been accommodating monetary policy, mainly through the discount rate, to prevent financial instability that may result from the falling oil prices since 2014. That is, tightening monetary policy may mitigate the inflationary pressure the long-standing decrease in oil prices may have created. Finally, while the falling oil prices should be good news for the oil-importing countries in terms of transportation and production costs, the results shed light on the fact that both oil-importing and exporting countries may be equally affected by the fall since the response of monetary authorities in the two sets of countries is very similar. [ABSTRACT FROM AUTHOR]

The sovereign debt crisis in the Eurozone has rekindled the use of the North–South (core-periphery) terminology to refer to the heterogeneity of countries belonging to the Economic and Monetary Union (EMU). In the gold standard literature, this geographical partition had already been employed to oppose the fiscal profligacy and subsequent problems of convertibility of southern countries against the fiscal probity and long convertibility records of their northern counterparts. We provide statistical evidence that the group of countries that, with available data for 1870–1938, exhibited convertibility problems during the classical gold standard, for this reason called the pre-WWI "sometimes-floaters", shared a pattern of fiscal dominance. This finding for the sometimes-floaters (southern European and South American countries plus Japan) differs from the non-fiscal dominance pattern that we obtain for the pre-WWI "never-floaters" (northern Europe and North America countries) when the Great War and its aftermath years are omitted. We also show that the presence of fiscal dominance was partly due to the lower levels of tax efficiency and political stability in the South. [ABSTRACT FROM AUTHOR]

Using a panel of 17 Latin American countries for the period 2002–18, we study the impact of economic variables on government approval. Our empirical analysis shows that the one economic variable that appears consistently in all estimates is economic growth. More specifically, we show that for each point of additional growth, the approval rating increases between 1.1 and 1.9 percentage points. Other variables, such as inflation, government spending, and the composition of spending, are significant in only some of the specifications used, while growth is remarkably robust in all of them. Among non-economic variables, the lack of solid institutions also appears consistently as significant as well as the lagged value of government approval ratings. These results suggest that a program focused on growth has a positive influence on the popularity of the government. This conclusion is particularly relevant in a region where populism has been remarkably persistent over time and where the norm has been to run large budget deficits to gain popular support, with consequences on inflation and the external accounts. [ABSTRACT FROM AUTHOR]

Using a two-step approach GMM, this study examines the short- and long-term effects of fiscal deficit on the economic growth of 42 Sub-Saharan African nations between 2011 and 2021. The World Development Index, the most reliable source, is where the panel data is taken from. Using the Levin-Lin-Chu and Hadri LM tests for unit root, it was determined that there is no risk of a random walk in the data. The study's findings indicate that while the fiscal deficit has short-term, positive, and significant benefits on the economic growth of SSA countries, it has long-term, negative repercussions. According to the system GMM's results, an increase in the fiscal deficit of SSA countries is linked to a short-term increase in economic growth of 0.036 percent, while an increase in the fiscal deficit of one percentage point is linked to a long-term decline in economic growth of SSA countries of 0.013 percent, holding all other factors constant. The study's findings also showed that the budget deficit has a larger positive short-run coefficient than a negative long-run coefficient. The study also revealed that while real effective exchange rates and inflation short-term hinder economic growth, gross fixed capital creation and real interest rates are the primary drivers of economic expansion. Long-term economic growth in the SSA countries is also found to be positively and significantly impacted by gross fixed capital formation. According to the study, SSA nations should manage their fiscal deficits and, in the long run, provide more funds for gross fixed capital development. [ABSTRACT FROM AUTHOR]