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Documents evidence supporting fiscal and monetary models of exchange rates for the Canadian dollar, deutschemark, yen and pound in the 1974-1993 period. Productivity and government spending; Behavior of exchange rates; Behavior of key relative price in open economy; Power of competing fiscal and monetary approaches to exchange rate determination.

The Asian Financial Crisis during the late 1990 s revealed the fault lines of foreign currency loans of corporates. It starkly demonstrated that a combination of semi-pegged exchange rates and unregulated foreign currency borrowing could expose corporates and, subsequently, the entire economy to heightened vulnerability. To mitigate these risks, implementing certain capital account restrictions emerged as a potential remedy. Against this backdrop, this paper investigates the changing contours of vulnerability arising from the rising foreign currency leverage of 818 non-financial corporates in India during 2004–2022. In particular, this paper examines the impact of exchange rate shocks and changes in certain key macroeconomic policy variables on the financial vulnerabilities of these firms. Our findings unequivocally indicate that during exchange rate depreciation, unhedged exposures significantly amplified the vulnerability of Indian firms. While our study centres on India, the overarching conclusions and insights derived from our analysis possess broader ramifications for emerging economies grappling with capital account restrictions. The policy implications of our research underscore the need to proactively strengthen the macroprudential toolkit to address the risks associated with foreign currency borrowing and ensure more robust risk management practices to prevent the buildup of systemic vulnerabilities. [ABSTRACT FROM AUTHOR]

US international trade policy under both the Trump and Biden administrations has been increasingly protectionist. This paper considers two policy scenarios under active discussion: (1) an across-the-board increase in all US tariffs by 10 percentage points, and (2) a severe escalation of the US trade war with China. The scenarios are analyzed using a multi-country computable general equilibrium (CGE) simulation model of the global economy. Trade wars or policy regimes of widespread protection will increase tariffs in many sectors simultaneously and include both final goods and intermediate inputs. The impacts are complex, with a web of direct and indirect forces coming into play across domestic and international markets. The global CGE model captures these mechanisms, including both short and long-run effects, with and without retaliation by partner countries. In a world economy where the US accounts for only 10 % of global trade and potentially rival trade bloc have emerged in Europe and E&SE Asia, the US is no longer hegemonic in global markets. We find that across-the-board tariffs do not protect manufacturing jobs because the cost of imported intermediate goods increases, raising costs in manufacturing production. The US trade war with China leads to a dramatic fall in bilateral trade. Other countries expand their trade to China and the US with the exception of closely linked partners (e.g. Canada and Mexico and all countries in E&SE Asia). We find that the world economy can adjust to US trade wars, diverting trade around the US. [ABSTRACT FROM AUTHOR]

This paper examines the effects of exchange and capital restrictions on trade and compares them with those associated with trade restrictions. Our main result is that capital account restrictions have large and statistically significant effects on trade flows. Such effects are smaller than those from trade restrictions, however. The effects of exchange and capital restrictions are larger for trade in goods, especially for agriculture and manufacturing, and smaller for trade in services. [ABSTRACT FROM AUTHOR]

Abstract: Unification between two countries is not a purely economic phenomenon but a multidimensional phenomenon. We evaluate the prospects of unification between South Korea and North Korea from a multidimensional perspective encompassing the political, social, economic and technological dimensions. To do so, we use the Global Dimension of Regional Integration model developed by [Ruiz, M. A. (2004). The Global Dimension of Regional Integration Model (GDRI-Model), FEA 2004–7. Faculty of Economics and Administration (FEA) Working Papers. Kuala Lumpur, Malaysia: University of Malaya]. Our main finding is a wide and growing gap between the two Koreas in terms of political, social, economic and technological development as well as overall development. This suggests that inter-Korean unification is likely to be a costly and disruptive process. [Copyright &y& Elsevier]

The main purpose of this paper is to check whether bank profitability benefits from bank diversification by considering the moderating role of the economic freedom (EF) and financial freedom (FF). This paper uses a sample of 83 conventional banks operating in the MENA countries over the period 2005–2020 and, performs an empirical approach based on the System Generalized Method of Moments (SGMM). To get a better understanding and reliable results on the impact of NII on bank profitability, we split the MENA region in two sub-regions. The first block contains the Gulf Cooperation Council (GCC) countries with a sample of 40 banks and, the second covers the non-GCC countries with a sample of 43 banks. Empirical findings of the aggregate analysis reveal that bank profitability is more sensitive to bank diversification and, benefits from more EF and FF. Furthermore, we found that the interaction between bank diversification, EF and FF negatively affects the level of profitability. The results of the disaggregated analysis confirm the same findings concerning the positive effect of EF and FF and the negative effect of the interactional relationship. However, the effect of bank diversification differs across the two sub-samples. [ABSTRACT FROM AUTHOR]

Immunization programs globally have played a pivotal role in reducing mortality rates. However, the effectiveness of these programs often falls short of the intended coverage targets, primarily due to challenges within the supply chain, storage facilities, and distribution processes. Notably, a substantial percentage of vaccine wastage has been observed in numerous countries, thereby imposing a significant financial burden on immunization initiatives, and presenting a formidable challenge to policymakers. This paper undertakes a comprehensive study of the financial dynamics inherent in an immunization program within the context of India. Employing a systems perspective, we scrutinize the intricate interactions among various cost factors. Through a five-year system dynamics simulation, we derive insights into the amplified financial constraints resulting from vaccine wastage and the inefficiencies associated with shared personnel. Furthermore, our analysis extends to evaluate the impact of an additional investment aimed at enhancing the quality of the cold chain infrastructure and health worker proficiency on the overall funds of the immunization program. This research contributes to a nuanced understanding of the financial intricacies of immunization programs, offering valuable insights for policymakers and stakeholders seeking to optimize program efficiency and resource allocation. [ABSTRACT FROM AUTHOR]

The paper investigates the effect of a (semi-) deposit run during a debt crisis on crime rates. The study focuses on Greece's protracted debt crisis (2009–2018) and analyzes the response of crime to deposit outflows. It shows that deposit outflows corresponded to a significant increase in property crimes (thefts and burglaries), but not other types of offenses. The study provides useful policy insights for regulatory authorities tasked with monitoring and decreasing the criminogenic effects of financial destabilization [ABSTRACT FROM AUTHOR]

This paper aims to analyze the individual's socioeconomic and demographic determinants of financial inclusion and its barriers among for South Asian countries in the lens of existing financial inclusion policy, using World Bank Global Findex database for the period 2011, 2014, 2017, and 2021. We use the Probit regression model to explore the main objective of this study. In addition, we also analyze the trend, pattern, and barriers of financial inclusion for the period 2011- 2021 to identify differences among south Asian countries. Our results reveal that Sri Lanka is the best performer in the inclusivity of financial products as well as removing barriers to financial inclusion in all four periods. While Pakistan and Afghanistan are the least financially included countries, also they failed to remove barriers to financial inclusion. Moreover, our empirical results suggest that individuals who are male, older, wealthier, and more educated are more likely to access financial services, with income and education exerting a higher influence. Further, age shows a non-linear (inverted U-shaped) relationship with financial inclusion indicators. Additionally, we found that individuals having a formal account are the most important indicators of financial inclusion. And the reasons for financial exclusion (i.e., not having an account) are mainly voluntary among South Asian individuals. In fact, it is found that policies like Pradhan Mantri Jan Dhan Yojana for India and National Financial Inclusion Strategy across all South Asian countries play a significant role in accelerating financial inclusion and helping in removing its barriers with different magnitudes. Therefore, our finding stresses the importance of heterogeneous integrated policy measures for the targeted groups of the population, particularly the most vulnerable group among South Asian countries. [ABSTRACT FROM AUTHOR]

The recent financial crisis caused by corruption and opacity has led us to examine how the informal economy and other factors affect tax revenues using a three-pillar theoretical analysis. Empirical research has not thoroughly explored the shadow economy's impact on direct and indirect taxes, tax revenues, and the central bank's independence from the shadow economy and tax collection. This paper used 2010–2018 data from 129 countries. The shadow economy and tax revenues had a substantial negative relationship. The shadow economy also changed the fiscal authorities' policy mix by reducing direct taxes and increasing indirect taxes. Finally, the central bank's independence mitigated the shadow economy's negative effects on tax revenues. [ABSTRACT FROM AUTHOR]

Should the South African Reserve Bank (SARB) lower the inflation target (IT) band? Does lowering the IT band impact the relationship between GDP growth and inflation? This paper explores these questions considering the SARB Governor, Lesetja Kganyago statements that there is a need to lower the IT band from 3–6% to a point target of 3%. We estimate the VAR model to determine whether the passthrough of positive GDP growth shocks to inflation is nonlinear in South Africa. The inflation effects are delineated into bands (i) above 6% (ii) between 4.5% and 6% (iii) between 3% and 4.5% (iv) between 0% and 3% and (v) when there are no IT bands. Evidence reveals that the passthrough is elevated when inflation exceeds 6% and is lower when inflation is within the (i) 3 to 4.5% and (ii) 0 to 3% IT bands. The passthrough from positive GDP growth shocks is more than halved when inflation is less than 3%. The policy implication is that lowering the IT band from 3 to 6% to 0 to 3% will reduce the passthrough of GDP growth shocks to inflation. It allows expansionary monetary to have more real effects as prices are more rigid in the low inflation environment. [ABSTRACT FROM AUTHOR]

This paper argues that the persistent inflation in the U.S. during the post-COVID economic recovery was mainly the result of the Fed's policy mistake caused by an overestimation of the negative output gap. The paper shows that after a two-quarter contraction, the U.S. economy quickly rebounded and outpaced its potential output, thus remaining in overheating territory. However, policymakers prolonged the monetary expansion beyond the necessary, which contributed to fuel inflation for a more prolonged time. The policy mistake was the result of an inaccurate estimation of potential output. Based on an alternative estimation that uses full employment as a condition, this paper shows that the U.S. economy has been running with a positive output gap since mid-2021. The results illustrate that the Federal Reserve was well-behind the curve in an economy in overexpansion and with a galloping inflation escalating well-above the target. [ABSTRACT FROM AUTHOR]

Amidst economic downturn pressures, major countries emphasized the manufacturing industry and increased research and development (R&D) investments to realize innovation in manufacturing. Manufacturing enterprises are the main performers of R&D investments, so it is imperative for policymakers to accurately evaluate the policy effect of different industrial tendency and policy intensity on growth. The impact of the overall R&D expenditure on macroeconomy or the effectiveness of enterprises' R&D investment on business profit has been reported in a great deal of literature, but so far, the impacts of enterprises' R&D have little been experimented at the macro level and industrial level. This paper improves the knowledge production function and structured a regional dynamic computable general equilibrium model to simulate the multi-dimensional macroeconomic impact of enterprises' R&D investment. The results show that enterprises' R&D investment has a significant role in promoting economic output, residents' welfare, price control, and international trade, and its impact is declining over time. The impacts of enterprises' R&D on different industries are heterogeneous; industries with lower knowledge capital are more sensitive to R&D investment. These findings contribute to the effectiveness of R&D policies. [ABSTRACT FROM AUTHOR]

This study examined the threshold effect of debt on economic growth in Nigeria, with a view to investigating debt sustainability levels in the country. The analysis included yearly data from 1981 to 2021. To achieve its objectives, the study used two-regime threshold ARDL regression approaches. Findings reveal that the optimal thresholds for total debt as a ratio of GDP (TDB/GDP), GNI (TDB/GNI), total revenue (TDB/REV), and exports of goods and services (TDB/EXP) are 46.1%, 54.5%, 355.3%, and 24.9%, respectively. Findings also indicate that debt ratios below the threshold levels have a significant positive impact on economic growth. This is true for all the debt ratios, except debt-to-export ratio. However, debt ratios above the threshold levels have a negative and significant effect on Nigeria's economic growth. Furthermore, findings reveal that only the level of domestic debt is sustainable over the long and short run, whereas external debt and total debt are only sustainable over the long run. When expressed as ratios of GDP and GNI, evidence indicates that Nigeria's debt is not sustainable by all the five measures of debt adopted in the study, both in the short run and in the long run while total debt to revenue ratio is only sustainable only in the long run. The paper adequately explores the implications of these findings and offers relevant policy recommendations. [ABSTRACT FROM AUTHOR]

In a river basin across regions, is environmental improvement in downstream areas based on actions that negatively impact economic development and social welfare in upstream areas? This paper takes the pilot of Transverse Eco-compensation Mechanism (TECM) in Xin'an River of China as a quasi-natural experiment and uses the difference-in-differences strategy to estimate the impact of TECM on environmental inequality. We find that the government's environmental policy may lead to more environmental inequality，which is often overlooked. Our results show that the pilot of TECM depresses the upstream economy, reduces upstream resident income, especially rural residents, and widens the regional income gap between the upstream and downstream. Heterogeneous tests confirm our findings. Our mechanism test shows that the industries' shutting down and relocation are the main driving forces for the regional environmental inequality in the short term. Therefore, in implementing future TECM, the upstream government needs to pay attention to the economic slowdown and the subsequent unemployment and resident welfare loss. The central and downstream governments should help the upstream regions upgrade the industrial structure, rather than just pay compensation funds, thereby reducing the resulting environmental inequality. Our findings have important policy implications for the treatment of trans-regional river pollution. [ABSTRACT FROM AUTHOR]

This paper aims to examine the effects of fiscal policy on economic growth in Brazil between 1999 and 2017. For this purpose, a novel methodology is applied, using a Vector Autoregressive with Mixed Frequency (MIDAS-VAR) model, proposed by Ghysels (2016), which allows for the estimation of the spending multiplier by measuring the impact of high-frequency data at low-frequency and vice versa. The impact of various types of spending on the gross domestic product (GDP) is analyzed, including primary expenditure, personnel, social benefits, subsidies, investment, and costing, while the central government's primary revenue is used as the revenue variable. The expenditure and tax revenue are the high-frequency variables (monthly observations), whereas GDP is a low-frequency series (quarterly). The estimated fiscal multipliers for primary spending are less than one, suggesting no significant Keynesian effect on output, with particular attention given to the investment multiplier, which is estimated to be close to zero. Our results suggest that the frequency of data matters, and government expenditure has no significant impact on real GDP growth in Brazil. Therefore, the ability of Brazilian fiscal policy to influence economic growth may be limited. [ABSTRACT FROM AUTHOR]

In this paper, we study whether adoption of inflation targeting monetary policy framework has spillover effects on financial stability in emerging market economies. Working with data for 64 emerging market economies, we develop financial stability and sector specific stability indices and identify the effect using dynamic panel data models in difference-in-difference framework. We find significant positive spillover effects of inflation targeting adoption on banking system resilience and external capital inflows arising from improved transparency and accountability of the central banks. Based on the results, the paper recommends to emerging market economies which are currently under inflation targeting lite regime, to adopt full-fledged inflation targeting monetary policy. [ABSTRACT FROM AUTHOR]

The paper argues that the achievement of sustainability of public debt requiring the fulfillment of solvency and liquidity conditions in countries for which real interest rates are above the real growth rates is challenging and difficult. Since solvency is a rather complex concept and its governance is difficult and delicate, the paper maintains that such countries could try to achieve the sustainability of public debt by delegating the tasks of securing the observance of solvency and liquidity conditions to fiscal councils (FC) that need to be formed as autonomous public institutions with sufficient financial and technical resources. In Turkey FC needs to be assigned the further task of improving policymakers' incentives to opt for sound government procurement and taxation policies that would lead to the achievement of efficient allocation of resources and elimination of corruption and nepotism in the economy. [ABSTRACT FROM AUTHOR]

This paper uses a recursive dynamic general equilibrium model to study the impact of the 2015 terrorist attacks in Tunisia. It examines the government's fiscal responses: increased security spending and the reduction of the tourism sector's value-added tax (VAT) rate. It finds that these responses accounted for a significant share of the attacks' total cost. The results also underscore the need for a comprehensive approach to addressing the economic consequences of terrorism. Increased security spending mitigates future risks but does not directly help the affected sector. Direct support to the sector by reducing VAT has an immediate and positive impact. [ABSTRACT FROM AUTHOR]

Agriculture is under transformation in sub-Saharan Africa where millions still do not have access to a healthy diet. Policy makers in this region should find ways to accelerate agricultural transformation while increasing access to healthy diets. Optimizing agriculture's public budget stands out as a handy option. By combining a dynamic computable general equilibrium model and a multi-criteria decision-making technique, and applying them in the context of Ethiopia, this paper points to an important trade-off that policy makers should keep in mind. An optimal allocation of agriculture's public budget aimed at increasing agri-food output, creating off-farm jobs and reducing rural poverty, which are agricultural transformation objectives, will help to reduce the cost of a healthy diet, allowing around 2 million more Ethiopians to afford it. This number could even be higher should policy makers allocate the budget optimally aiming at only lowering the cost of a healthy diet, but at the cost of reducing household income and slowing down transformation. [ABSTRACT FROM AUTHOR]

We identify seven global value chain (GVC)-related challenges faced by the least developed countries (LDCs) of the Association of Southeast Asian Nations (ASEAN) region. The LDCs face some of the most rudimentary challenges related to trade participation and competitiveness. The challenges identified in the paper have been empirically validated using Fuzzy AHP modelling to decipher the priority weights. The findings reveal that 'infrastructural and logistical constraints' is the most imperative challenge followed by 'limited FDI inflows' and 'inadequate development of SME clusters. The remaining challenges include: inadequate aid-for-trade, dismal LDC participation through the RTA/FTA route, lack of robust industrial policy, constraints in value chain upgradation, limited FDI. The study is beneficial for industry and provides useful inputs for policy-making. It helps in ascertaining optimal resource allocation for the purpose of enhancing trade competitiveness and economic development. [ABSTRACT FROM AUTHOR]

This paper provides firm-level empirical evidence of the policy effects of China's anticorruption campaign on SOE (state-owned enterprise) entrepreneur behaviour and corporate governance. While conflicts between corruption monitoring and performance of SOEs do exist, the 2012 anticorruption movement has profoundly changed Chinese political entrepreneurs' power choice and accountability for SOE corporate governance. Specifically, this paper shows that the anticorruption measures have effectively reduced the sum of perks but aroused excessive asset extraction. When perk consumption has been seriously curtailed by the anticorruption rules, SOE executives' reversed expectation precipitates their opportunistic activities in SOE's tangible asset management and undermines SOE's long-term corporate value. [ABSTRACT FROM AUTHOR]

India's Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS) is the largest public-works based rural livelihood programme in the world. One of the important policy objectives of the Scheme is to curb rural out-migration by guaranteeing demand-driven employment opportunities for 100 days in a year in rural areas. This paper uses a large sample survey-based nationally representative data set and different probability models to investigate how MGNREGS influences individuals' seasonal rural out-migration decisions. The results reveal that contrary to the policy objective, participation , the extent of participation and earnings from the Scheme increases an individual's propensity to out-migrate. However, the Scheme serves broader and equally critical socio-economic goals of empowerment through income security and positive network effects. MGNREGS, on the one hand, significantly drives the decisions of aspirational migration of rural individuals, particularly females and the relatively advantaged. On the other, it curbs distress migration of the relatively disadvantaged by providing them with basic livelihood opportunities within the rural areas. Based on the findings, the paper draws several policy implications and discusses key policy imperatives towards expanding the scale and scope of the public-works Scheme. [ABSTRACT FROM AUTHOR]

With countries increasingly adopting the Goods and Services Tax (GST) as their system of commodity taxes replacing the myriad of sales, excise and other form of indirect taxes, there is a move towards the two features that characterize the GST: uniform tax rates across items and identical tax rates across regions. When India introduced the GST in 2017, it followed several other countries in departing from the first feature but in keeping with universal practice embraced the second feature. The chief motivation of this paper is to subject this latter feature to critical scrutiny. The study examines the four GST rates in India by comparing them with counterfactual evidence based on preference based optimal commodity tax rates estimated by taking into account regional diversity in prices and spending. The benchmarking suggests that the current top GST rates (12%, 16% and 28%) are much higher than can be justified by the optimal rates. The Indian evidence is also in favor of departing from the universal practice in GST of adopting a uniform tax across items. The paper makes a methodological contribution by proposing a procedure for calculating spatial prices that can be applied to a wide basket of items. The study provides evidence on the redistributive potential of indirect taxation by showing the progressive nature of the optimal commodity taxes. The latter result is of particular significance in developing countries where indirect taxes raise the greater share of revenue and provide an important policy tool for tackling increasing inequality. The study concludes with a list of policy lessons as the country seeks to make further changes to its GST. While there is a significant literature on harmonization of indirect taxes across countries that belong to a single economic grouping such as the EU, there is no such literature between regions within a large heterogeneous country. The present study on tax harmonization between the states in India attempts to fill this gap. [ABSTRACT FROM AUTHOR]

Public subsidy, a frequently applied tool of economic development is often provided to the business sector assuming that it promotes investments, employment, and income generation. In this paper a micro economic model based empirical analysis is presented that shows the possible impact of public subsidy on economic growth. The outcomes are derived by investigating the investment decision of the enterprise with and without public subsidy. It is demonstrated that public subsidy may increase social welfare, but under certain circumstances it also may decrease it, partly because authorities deciding about them fail to consider the information on the investment projects that determines the outcome. The empirical analysis of corporate subsidies proves that both cases occur. The number of firms that performed well and presumably had not enough own resources to fund the investment was less than 10% of all subsidized firms. The programs had an overall negative impact on economic growth. We provide recommendations on how methods of evaluations, project selection and monitoring should be modified to achieve better results of subsidy programs. [ABSTRACT FROM AUTHOR]