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This paper warns of an emerging post-pandemic fiscal austerity shock—one that is far more premature and severe than the one that followed the global financial crisis—and presents alternative options to ensure that populations do not yet again have to suffer from austerity cuts. It does so by: (i) examining IMF government expenditure projections until 2025; (ii) summarizing the most common austerity measures to be avoided given their negative social impacts; (iii) presenting financing alternatives and (iv) calling on governments to urgently create fiscal space to finance an equitable socio-economic recovery and progress toward human rights and the Sustainable Development Goals (SDGs).

In this paper, we present a Dynamic General Equilibrium (DGE) model to address the macro-fiscal vulnerabilities and the effects of fiscal policy on growth and employment in Algeria. We first discuss a baseline scenario throughout the projection period, 2021-2040 and then conduct several experiments; an increase in the efficiency of public spending on infrastructure investment, a gradual reduction in the share of non-interest government spending in GDP, the same gradual reduction in spending with a permanent increase in the share of investment in infrastructure in total noninterest government expenditure, and a composite fiscal reform program, respectively. The results show that with a well-designed fiscal program, there may be no trade-off between fiscal consolidation and economic growth.

All governments spend money. The classic “guns vs butter” debate illustrates the subject matter of this essay well: to what end do governments in developed nations spend their funds? Trends in public expenditure is a topic of particular interest in the aftermath of the year 2020, when many governments – especially developed ones – have spent tremendous amounts of money in Covid-19 stimulus packages. Research indicates that there is no immediate link between the extent of a country’s development and the share of government spending vis-a-vis its gross domestic product. In given research, we looked at the top-10 most developed countries as defined by UNDP’s Human Development Index, and at the trends in the government expenditure along three major lines – education, pensions, and health.

This paper examined the existence of non-linearities between economic institutions and growth and particularly, the presence of threshold effects for advanced and emerging economies. The dynamic panel threshold strategy adopted deals with non-linear asymmetric dynamics, unobserved heterogeneity, and treats economic institutions as endogenous by using political institutions as an instrument. In general, the results revealed the existence of institutional–threshold effects. Specifically, for economic institutions to affect growth, it must on average develop to about 6.33 and 7.84 (out of a score of 10) for emerging and advanced economies respectively. The long-run effect of economic institutions on growth is positive and only significant for emerging countries estimated to be 0.12%. To understand the results better, I further investigated the sub-dimensions of economic institutions. The results showed the primacy of sub-indices such as freedom to trade internationally, legal structures, and property rights to economic growth. There is also the need to look at policy measures such as government expenditure and taxes as well as strict regulations to credit, labor, and businesses since they are found to negatively affect economic growth after the threshold.

Contributing to the controversial issue on the impact of government spending on economic growth, this paper shows that government spending has long-run impact in stimulating aggregate output in Thailand during the floating exchange rate regime. The results reveal that the long-run relationship between aggregate output, government expenditures and private consumption is stable. Based on quarterly dataset during 1997Q3 to 2019Q4, the results suggest that expansionary fiscal policy is effective under the floating exchange rate regime. Furthermore, the traditional version of the Wagner’s law is supported since an expansion in aggregate output causes government expenditure to increase. Therefore, the findings in this paper support both Keynesian hypothesis and the Wagner’s law.

Marketing in general and trade promotion strategy, particularly, have to play an important role in promoting development of countries, especially of developing countries that seek to make exports as an engine for economic growth. This paper reviews the roles of marketing by investigating the impacts of trade promotion on development which is proxied by the growth rate of GDP. The authors test the hypothesis that the more spending of government on trade promotion activities leads to higher rate of economic growth. The study is applied for a sample of 30 countries including 15 developed and 15 developing countries in the period of 1970-2015. The results of a fixed effect regression model show that an increase in government expenditure of trade promotion leads to higher rate of economic growth in whole sample. Government expenditure of trade promotion also plays an important role on international trade. The estimation results also suggest that countries with higher levels of government expenditure on trade promotion activities will have higher degrees of its trade openness.

This paper investigates how government size influences the responses of government expenditure and economic growth to broad dollar shocks in 155 trade-heavy countries across 6 continents from 1995 to 2019. In most cases, we document that the magnitude of contractions in expenditures and economic growth from broad dollar appreciations depends on the size of government. Countries with large governments experience a more severe negative impact from dollar appreciations than countries with smaller governments and this is true for different expenditure types: total, current and capital government expenditures. Accordingly, government size plays a role in the disparities observed in the responses of expenditure and growth to broad dollar shocks across these countries.

Fiscal procyclicality, meaning co-movement between government expenditure and macroeconomic fundamentals, is an important feature of business cycle dynamics for emerging and poor economies. I estimate a panel SVAR to investigate the reasons for fiscal procyclicality. The analysis sheds light on the role of external financial constraints in shaping fiscal policy. My findings suggest that the response of emerging governments to output fluctuations is similar to that of developed governments. However, emerging governments curtail spending in response to increases in the sovereign borrowing rate, which forces their consumption expenditure to act more procyclically. Using counterfactual analysis, I show that the key forces behind fiscal procyclicality are the sensitivity of government spending to international borrowing costs and the procyclical nature of these costs for emerging economies.

I assemble new cross-country evidence showing that contrary to the standard view, the relationship between the size of the informal sector and tax rates is, at best, ambiguous. Law enforcement and informality also show no clear relation. Motivated by these findings, I augment a standard two-sector (formal and informal) small open economy model with endogenous law enforcement that depends on the size of the informal sector (measured by its assets) and government expenditure. I use a micro-dataset from Colombia to show that both taxes and law enforcement are necessary to match the the size of the informal sector observed in the data. In the absence of law enforcement, tax evasion incentives imply a counterfactually large informal sector. However law enforcement motivates households to reduce the supply of capital to the informal sector, decreasing the probability of detection. The dependence of the latter on government expenditure creates a non-linearity between tax rates and the size of the informal sector through a Laffer curve. The model implies that lowering tax rates would not necessarily reduce the size of the informal sector since there is a trade-off with law enforcement capability.

In response to widespread concern regarding the intensity and duration of economic impacts from the current COVID-19 pandemic, this article aims to inform discussion by (1) identifying the mechanism through which shocks to individual markets are transmitted to the aggregate economy (2) providing plausible upper and lower bounds for impacts drawn from actual economic data for most recent pandemics, and (3) estimating the magnitude of government intervention required to counteract the economic impact of the pandemic. The key finding is that the impact of COVID-19 on Australia’s economy is likely to be deep - a contraction of up to 15 percent of GDP - and require government expenditure of at least $300 billion billion to offset the shocks to the labour market, consumption and investment.

This paper discusses the current situation with government revenue, expenditure, and deficits in the economies of Central Asia and considers the options available to use fiscal policy to support the technological development of these economies. It analyses contemporary issues in the public finances of these countries including the size of their governments, efficiency losses due to uneven taxation of different sectors and entities, ineffective foreign aid, and government expenditure inefficiency. The paper provides recommendations for the modification of fiscal policies to promote economic diversification and productivity growth in Central Asia.

Existing work on electoral returns to public goods provision has investigated changes in government expenditure aggregated at levels that do not have any bearing on geographical access. In this paper, we focus on the political economy of the catchment areas of public services. Rather than investigating the binary relationship between public goods provision and electoral returns within formally drawn borders, we ask whether decreases in walking time to a public service attract votes for the incumbent. Leveraging the Family Medicine Reform in Turkey, which gave rise to an exogenous variation in voter proximity to the free health clinics in Istanbul, we find that communities whose walking distance to the closest clinic decreased voted significantly more for the AKP, the incumbent, between 2011 and 2015. We also show that poorer and healthcare dependent communities were more responsive to improvements in spatial accessibility to the local clinics.

We jointly estimate credit and fiscal multipliers in China. We use the tenure of the provincial party secretary, interacted with the type of stimulus used in other provinces, to obtain separate instruments for provincial credit and government expenditure. We estimate a fiscal multiplier of 0.8 and a credit multiplier of 0.2 in 2001-2015. The multipliers have changed over time. The fiscal multiplier has increased from 0.75 in 2001-2008 to 1.4 in 2010-2015. The credit multiplier has declined from 0.17 to zero over the same periods. Our results suggest that reducing credit growth in China is unlikely to disrupt output growth, whereas fiscal policy may be effective in supporting macroeconomic adjustment.

The European Monetary Union (EMU) crisis holds special lessons for existing monetary unions. We assess the behaviour of real effective exchange rates (REERs) of members of the Central African Economic and Monetary Community zone with respect to their long-term equilibrium paths. A reduced form of the fundamental equilibrium exchange rate model is estimated for associated misalignments. Our findings suggest that for majority of countries, macroeconomic fundamentals have the expected associations with the exchange rate fluctuations. The analysis also reveals that only the REER adjustments of Cameroon and Gabon are significant in restoring the long-term equilibrium in the event of a shock. The Cameroonian economic fundamentals of terms of trade, government expenditure and openness have different long-term relations with the REER in comparison to those of other member states. There is no need for an adjustment in the level of the peg based on the present quantitative analysis of REER paths. JEL: F31, F33, F42, F61, O55

An attempt is made in this paper to examine the short and long run relationship between government expenditure on agriculture and its allied sector and agricultural output of Meghalaya. The study is based on a time series data of 30 years from 1984-85 to 2013-14. During this period, the state economy has experienced both upswing and downswing in its agricultural sector. Government expenditure in different sectors including agriculture and its allied activities, education, transport etc is expected to promote agricultural production. Here ARDL approach to co integration and an error correction representation of the ARDL model have been used due to certain advantages. The result of the Bounds test indicates the presence of a long-run co integrating relationship between the variables in the study. The results reveal that in the long run, the effect of public expenditure through agriculture and allied activities, on agricultural output is significantly negative, while expenditures on education and transport on agricultural output are significantly positive that is in line with several earlier studies. Public expenditure in healthcare however does not significantly affect agricultural output. The findings reveal that judicious use of government spending have significant potential to accelerate agricultural development and improve its efficiency.

The main purpose of the present study is to develop a statistical analysis of the government expenditure for Macedonia during the period January 2006- September 2013 The source of the official data is the Macedonian Institute of Statistics. The Kolmogorov’s Central Limit Theorem, “fair game” concept in the sense of Stein-Vorobiev, Kolmogorov- Smirnov- Lilliefors test and Shapiro- Wilk test are applied. The government expenditure is estimated based on current price or as a percentage of GDP. The official data of quarterly government expenditure for Macedonia during the period January 2006- September 2013 contradicts the CLT at the confidence level 95%. The official data of quarterly government expenditure expressed as a fraction of GDP for Macedonia during the period January 2006-September 2013 satisfies CLT at the confidence level 95%. The government expenditure process in Macedonia during the period January 2006-September 2013 is an unfair game at the confidence level 95%. The government expenditure as a fraction of GDP in Macedonia during the period January 2006-September 2013 is a fair game at the confidence level 95%. The official data of quarterly GDP for Macedonia during the period January 2006-September 2013 satisfies CLT at the confidence level 95%. The quarterly GDP in Macedonia during the period January 2006-September 2013 is an unfair game at the confidence level 95%.

This study developed an Education Efficiency Index for 31 countries, both developed and developing, which can be used by everybody involved and interested in education such as teachers, lecturers and policy makers. The index is used to demonstrate that countries which invest deeply in education do not necessarily achieve the highest results in nationally recognised educational assessments like PISA, TIMSS and PIRLS. When countries do not invest sufficiently in education, the result is low scores in all subject areas compared to other countries. This index is the first of its kind that can be used by everybody interested in efficiency in education, to predict more accurately how students will perform in international assessments. It can also be used by anybody interested in efficiency measures in any area, once they have access to input and output data.

Every government is a captive institution both from demand side special interests and supply side take over by insiders operating for their own benefit and at the expense of the electorate. State national decline often arises from special interests corrupting a country’s institutions. Such narrow captive interests include crony capitalists (bankers), consumer activists, economic elites and labour unions. Though media does pay less censored attention to government insider-rulers, elected officials, bureaucrats, and public employees, their sphere of economic influence is seismically destructive. In Kenya, these insiders have the ill motive, means and opportunity to co-opt political power for their own benefit and at the expense of national well-being. Political rulers with exorbitant influence in banking and media have enslaved the country for its entire “independent” life. Corruption is an intricate web of fabric upon which fiscal policy is written on. Political dynasties continue to thrive fuelled by constant media hero worship, economic sabotage and outright brute elimination of any threat to their dominance.

The main goal of this paper is to investigate the effectiveness of fiscal policy in Brazil. With a sample spanning from 1997 to 2014, we are not able to obtain evidence of the relevant impacts of fiscal stimuli on output, even when altering both the methodology and the model specifications. Our most robust estimate of the government spending fiscal multiplier is approximately 0.5. Higher multipliers are reported using Threshold Vector Autoregression (TVAR) and other approaches, but they are not robust because of specifications issues, i.e., failure to accept the null hypothesis in the specification tests. Finally, we discuss plausible explanations for such ineffectiveness of fiscal policy. Among several factors highlighted by the economic literature, we suggest that the consistent increases in Brazilian government expenditure undermine the importance of fiscal shocks. This effect could explain the fiscal conundrum manifested in Brazil.

There are over 9,000 public libraries in the United States servicing more than 1.5 billion people and raising over $11.5 billion dollars in revenue with approximately 8% of this total coming from donations. This paper analyzes the determinants of donations to public libraries testing the following hypothesis: is there a crowding-out effect from government funding of public libraries? I address this issue by looking at novel data, the Public Library Survey, and use panel from 2000 to 2013. The results suggest a crowding in effect in all levels of government: 4 to 6 cents in local government, 20 to 23 cents in state government and 75 cents to 1 dollar and 33 cents in federal government. Also, the government expenditure has an inverted U shape.

This paper examines the causal effect of local government spending on labor markets in a developing country. We use plausibly exogenous variation in the allocation mechanism of federal funds at the municipality level in Brazil to estimate the effect of general spending on formal employment. We estimate that an additional 1% of spending at the local level (roughly $72,600) translates to an increase of about 20 formal jobs. This effect is much larger than other employment multipliers estimated in developed countries. We find that the size of the effect is driven by increases in employment from unskilled labor in the private sector, indicating that the transfer of federal funds can have a redistributive effect on the labor market, even if no such policy goal is explicitly stated.

We revisit Wagner’s law of increasing state expenditure by function of government expenditure. Using data of 14 European countries between 1996 and 2013, we apply panel data and SUR methods to assess public expenditure-income elasticities. We find that some functions of government spending for a few countries (e.g. Austria, France, the Netherlands, and Portugal) validate Wagner’s law. For the Netherlands expenditures with environment protection increase more than proportionately to economic growth, and for France that is the case of spending in housing and community amenities. In addition, Greece is the only country where two public spending items react more than one to one to growth.

Empirical studies emphasising supply factors argue that poor countries as a whole show a catching up tendency of rich countries as a whole. We offer a demand side SAM model to highlight the convergence in economic growth. The model predicts, after adjusting for peculiarities of economic systems, higher economic growth for poor compared to rich countries. The main cause behind this convergent tendency is the ability of a poor country to increase significantly shares of government expenditure and foreign demand in GDP; and reap growth benefits from associated changes in the compositional patterns of demanded goods and services. In contrast, rich countries are near satiation regarding shares of government and exports in GDP.

Compared with identification of monetary policy shocks, Identification of fiscal policies shocks are equally important, but there are insufficient in related research of China. Therefore, the paper chooses Sign Restriction to identify fiscal policies shocks of China. After we discuss identification conditions of fiscal policy shocks about foreign and domestic related research, then we adopt quarterly data from 1997Q1 to 2012Q4 to do a empirical analysis. By observing impulse results of business cycle shock and monetary shock, we find there is not a strong relationship between nominal variables, money supply, interest, and real variables, e.g. output, consumption; nominal variables response to fiscal policies shock are not significant. At the same time, real variables response to fiscal policies shock are also not significant in the short run, but the response are negative in the long run. China’s government expenditure has crowding-out effects toward.

This paper provides an empirical analysis of how the frequency and severity of terrorism affect government revenue and expenditure during the period 1970–2013 using a panel dataset on 153 countries. We find that terrorism has only a marginal negative effect on tax revenue performance, after controlling for economic and institutional factors. This effect is also not robust to alternative specifications and empirical strategies. On the other hand, we find strong evidence that terrorism is associated with an increase in military spending as a percent of GDP (and a share of total government expenditure). Our estimations reveal that this impact is greater when terrorist attacks are frequent and result in a large number of fatalities. Empirical findings also support the view that public finances in developing and low-income countries are more vulnerable to terrorism than those in countries that are richer and diversified.

We develop and estimate an equilibrium model of geographic variation in the intergenerational elasticity of earnings (IGE). The theory extends the Becker-Tomes model, introducing a production sector in which workers’ human capital inputs are complements. In this setting the return to parental human capital investments is lower where skill complementarity is more intense, and this is reflected in less intergenerational persistence. We also show that education subsidies may be more desirable where skill complementarities are stronger, endogenously leading to a negative correlation between progressive public policy and IGE. Using microdata we construct location-specific measures of skill complementarity and document that patterns of geographic variation in IGE are consistent with this hypothesis. Geographic differences in skill complementarity directly account for roughly one fifth of cross-country variation in IGE, and possibly more if one allows for the indirect effect through government expenditure in public education.

This paper studies the implications of changes in the fiscal (spending-tax) policy mix when all categories of spending and taxes are according to their functional breakdown. In so doing, we build a general equilibrium OLG model which naturally incorporates the main functional categories of public spending and taxes as in the euro area. Departing from the crisis year of 2008, the main result is that an increase in public spending on education and health would have outperformed all other changes in fiscal policy that have either happened or have been debated in policy circles.

Viet Nam has faced with trade deficits for a long time since opening the economy in 1986 until 2012. Improving trade balance is one of the main objectives of Vietnam’s Government. This study’s objective is to analyse main factors that affect to trade balance in Vietnam from 1989 to 2013. The examined factors are Gross domestic product (GDP), Foreign direct investment (FDI), Government expenditure (GEXP), Household expenditure (HEXP), Oil price (OIL) and Industrial growth rate (INDGR). The study uses annual data from 1989 to 2013 and applies Ordinary Least Square (OLS) method in order to investigate impact of those factors on trade balance in Vietnam. The results shows that Gross domestic product, Foreign direct investment and oil price have positive impacts on trade balance while Government expenditure, Household expenditure and industrial growth rate have negative impacts on trade balance.

This study examines the potential impact of the 2008-2009 financial crisis on economic growth. Expectations of future growth are critical to evaluating of the sustainability of overall budget trends and the financial condition of the Old-Age Survivors and Disability Insurance (OASDI) and Medicare trust funds. The paper includes an assessment of the experience of other industrial economies with similar situations in earlier decades. The Nordic countries achieved a relatively complete recovery within a period of 5-10 years, but the slump in economic growth in Japan has continued for over a quarter century. The analysis of the current experience in the United States focuses on recent changes in the supply of labor and capital and changes in the growth of total factor productivity (TFP). The large decline in the labor force participation rate is largely the result of demographic changes and not the recession. Similarly, the growth of TFP has slowed in recent years, but most studies perceive it as predating the onset of the recession.The paper finds that:-- Even though they may not be directly due to the financial crisis, expectations have been cut back in a wide range of analyses of future growth prospects.-- The recent decline in labor force participation is dominated by demographic changes that will continue in future decades. Only a small portion appears to be related to cyclical factors.-- The growth in TFP has also slowed, but the change predates the financial crisis and is also likely to continue in future years. The policy implications of the findings are:-- The economic assumptions that underlie current projections of government expenditure programs are likely to be overly optimistic, particularly because the changed expectations are not cyclical or temporary in nature.

The paper provides theoretical and empirical justifications for the instrumentality of foreign aid in stimulating private investment and fixed capital formation through fiscal policy mechanisms. We propose an endogenous growth theory based on an extension of Barro (1990) by postulating that the positive effect of aid mitigates the burden of the taxation system on the private sector of recipient countries. The empirical validity is based on data from 53 African countries for the period 1996–2010. While the findings on the tax effort channel are overwhelmingly consistent with theory across specifications and fundamental characteristics, those of the ‘government expenditure’ channel are a little heterogeneous but broadly in line with the theoretical postulations. Justification for the slight heterogeneity and policy implications are discussed.

Drawing on National Sample Survey unit level data (NSS 64th Round, 2007-08) on India, the article estimates coefficients of elasticity to examine two important questions on the nature of household expenditure on higher education in India – (a) whether households complement or substitute Government’s efforts in spending on higher education? and (b) how do households behave in spending on higher education, given a change in their levels of income. The results indicate that there is a complementary relationship between household and government expenditures on higher education; and that household expenditures respond favorably but less than proportionately to changes in household incomes. Further the study also shows that stipends or scholarships play pivotal role in households’ decision making regarding the resource allocation for higher education.

From Nigeria to Malawi, Kenya to South Africa, Dr John Magufuli is making waves. Everyone is talking about his incredible way of doing things. He is a social media sensation. He is the benchmark for African leaders. Many students and experts around the world will study and are already studying his governance style. This paper analyses his time in power and compares his management style to that of his other Africa counterparts.

We assess the behavior of real effective exchange rates (REERs) of members of the CEMAC zone with respect to their long-term equilibrium paths. A reduced form of the fundamental equilibrium exchange rate (FEER) model is estimated and associated misalignments are derived for the period 1980 to 2009. Our findings suggest that for majority of countries, macroeconomic fundamentals have the expected associations with the exchange rate fluctuations. The analysis also reveals that, only the REER adjustments of Cameroon and Gabon are significant in restoring the long-term equilibrium in event of a shock. The Cameroonian economic fundamentals of terms of trade, government expenditure and openness have different long-term relations with the REER in comparison to those of other member states. Ultimately, there is no need for an adjustment in the level of the peg based on the present quantitative analysis of REER paths.

We examine the long-run GDP impacts of changes in total government expenditure and in the shares of different spending categories for a sample of OECD countries since the 1970s, taking account of methods of financing expenditure changes and possible endogenous relationships. We provide more systematic empirical evidence than available hitherto for OECD countries, obtaining strong evidence that reallocating total spending towards infrastructure and education is positive for long-run output levels. Reallocating spending towards social welfare (and away from all other expenditure categories pro-rata) may be associated with modest negative effects on output in the long-run.

Aim of this study is to identify the existence of Wagner’s Law in Indonesia economy during post-reformation era. This study takes period sample of five regimes during 1999-2011, which are following: a) Development Reformation Regime; b) National Unity Regime; c) Mutual Cooperation Regime; d) Indonesia Unite I Regime; e) Indonesia Unite II Regime. In order to test the existence of Wagner’s Law, we also elaborate exogenous variable (tax revenue and population) as variable control. We find the result that Wagner Law did occur in post-reformation era by performing an ARDL co-integration model, yet volatility of government expenditure has to be captured. Hence, we run a GARCH model to estimate the volatility of government expenditure by elaborating the regime variable. The ARDL approach, causality test and co-integration test also support the existing of Wagner Law in this study.

The poor quality and effectiveness of much of government expenditure in India makes it important to analyze ways of improving effectiveness through institutional reform. Improvements in outcomes include better targeting of redistributive measures and more efficient spending on productive projects. Four potential areas of institutional reform are: (1) improved functioning of individual ministries and departments, at the central and state levels; (2) better coordination across individual ministries and between the center and states, through reform of the Planning Commission; (3) reassignment of expenditure responsibilities across levels of government (center to state and/or state to local); and (4) reassignment of tax authorities to provide improved incentives for expenditure governance through electoral accountability. The paper will discuss each of these four areas of potential institutional reforms, their likely impacts, and possibilities for implementing change.

Using a fractional integration approach, we find that developing countries recover their economic growth faster than developed countries in response to a shock. The main finding is that longer civil conflicts are associated with a faster recovery process. To shed light on the channels, we explore correlations with components of GDP, military spending, institutions and aid and find heterogeneous effects of these channels by duration of conflict. Higher government spending is correlated with faster recoveries post longer conflicts and higher consumption spending is linked to faster recoveries following shorter conflicts. Military spending appears to be driving the government expenditure that makes countries recover from longer conflicts. More democratic institutions are associated with faster recoveries post short wars but slower recoveries following long wars. Finally, we can benchmark our recovery rates with respect to natural disasters, interstate wars and leadership change and we provide impulse response functions for a sample of countries in response to civil war.

This article examines the relationship between government budgetary policy and the pursuit of accelerated economic growth. The authors review the academic debate over long-term economic growth and associated short-term fluctuations and conclude that Russian budgetary intended to smooth fluctuations in economic activity are of limited effect and that there are no opportunities for increasing public expenditure in the medium and long-term. For these reasons, the structure of expenditures must be changed and budgetary institutions must be transformed with a view to creating the preconditions for economic growth in the long-term.

This paper explores the links between fiscal multipliers and household discount rates. We report evidence of a large and statistically significant relationship between reported rates of time preference across countries and the government expenditure multiplier. This study uses recent cross-country data on reported rates of time preferences gathered by Wang, Rieger and Hens (2011). We find that a higher reported rate of time preference is strongly associated with a larger government expenditure multiplier. Our findings may help to explain some of the differences in view over the optimal path for fiscal consolidation in Europe today, between the Germanic and Northern European countries (whose representatives appear to favour a faster fiscal retrenchment) and those in the South (who would like their required fiscal adjustment to occur less rapidly).

In this paper, I deploy a broad array of econometric tests to thoroughly examine fiscal sustainability in Malaysia. Results of the multicointegration test suggest the absence of cointegration between the cumulated cointegration errors, real government expenditure and real government revenue. Meanwhile, standard cointegration analyses indicate that the fiscal process fulfills only the weak-form sustainability. Most importantly, results from a fiscal sustainability model which incorporates revenues from oil and gas exports, do not strongly support the view that fiscal process is sustainable. Some policy-implications follow from these findings.

Many contributions in the recent literature have investigated over the relationship between GDP growth and its volatility without getting a clear and unambiguous answer. Besides reassessing the well-known effect of output volatility on growth as benchmark analysis, this study aims at looking into the “black box” of the business cycle volatility by disentangling the impacts of volatility of GDP major components—that is, private consumption, private investment and government expenditure—on growth, simultaneously considered. Our empirical analysis unveils a remarkably robust and strong negative correlation of consumption volatility with mean growth and a positive one with volatility of investment and of public expenditure. If these findings shed some additional light on the (still controversial) relationship between economic fluctuations and growth, they will also make it possible to compare the relative impact of each component, with possibly relevant policy implications. Importantly, this might reconcile opposite views about the issue that different empirical results might originate from the relative importance across empirical studies of the various components of volatility.

To examine how government spending affects the Australian economy, we apply a vector autoregressive (VAR) model, based on the recursive approach of Caldara and Kamps (2008). The estimation results suggest that (i) the government expenditure shock has positively contributed to Australia’s economic growth; (ii) the shock has also had positive effects on price levels, inflation and interest rate; and (ii) interestingly, an increase in the government spending is not always offset by an increase in taxes in the short-term.

Motivated by the recent experience of the U.S. and the Eurozone, we describe the quantitative properties of a New Keynesian model with a zero lower bound (ZLB) on nominal interest rates, explicitly accounting for the nonlinearities that the bound brings. Besides showing how such a model can be efficiently computed, we find that the behavior of the economy is substantially affected by the presence of the ZLB. In particular, we document 1) the unconditional and conditional probabilities of hitting the ZLB; 2) the unconditional and conditional probabilty distributions of the duration of a spell at the ZLB; 3) the responses of output to government expenditure shocks at the ZLB, 4) the distribution of shocks that send the economy to the ZLB; and 5) the distribution of shocks that keep the economy at the ZLB.

Serbia’s public sector wage bill constitutes a significant share of total government expenditure. In response to the recent fiscal crisis, the Government has frozen wages and hiring. While this approach has succeeded in reducing the wage bill (as a percent of GDP) it is not sustainable over the long term. This report recommends a more durable approach to the wage bill, based on reforms in the system of establishment control and wage setting.

The paper considers the determinants of reading proficiency of the working population in an economy using data on the per capita circulation of newspapers for forty countries over some years. The results indicate that parents’ education and government expenditure on education during schooling are important in developing reading proficiency. Based on this analysis the paper develops a measure of the quality of education of the working population in terms of its impact on the per capita circulation of newspapers. By incorporating this measure in growth regressions it is observed that the quality of education may have a significant effect on the growth of nations.

The Indian economy seems to be heading for a stagflation situation. While government expenditure and concomitant high fiscal deficit sustains demand, high inflation prevails due to supply side exigencies. This cryptic article seeks to act as a pointer to the situation and evoke thoughts towards the ideal solution, demand side as well as supply side.The article starts with GDP and macro growth picture and then goes to a brief glimpse of the important sectors of the economy.

This paper is organized in six small sections. The first section discusses briefly the Millennium Development Goals (MDGs) and section two addresses the Human Development Index (HDI) for the Sudan and investigates the country’s efforts and attempts to achieve the MDGs by 2015. It analyzes the existing situation and reviews some of the Sudan’s attempts to achieve these goals. The purpose is to shed light upon the current situation of social and economic development in the Sudan and to briefly outline what is expected of the country in order to achieve the MDGs. The third section is a continuation of the analysis from the previous subsection and gives more data and updates on the Sudan’s efforts in achieving the MDGs and the major handicaps and impediments facing it. The fourth and fifth sections discuss the issues of government expenditure allocation to social services sectors generally and to health, education and water in particular. They examine the magnitudes of spending and their distribution among different services and their trends and direction. The main idea is to show how past and current government spending patterns have been affecting and will continue to affect the achievements of the MDGs Section six examines the issue of MDGs cost, especially for the education, health and water sectors. The discussion on the cost of achieving MDGs was originally done by the Joint Assessment Mission (JAM) to the Sudan in the format of matrixes of objectives and cost tables for these objectives for two phases; 2005-2007 and 2008-2011. The section examines these costing estimates for various sectors and then attempts to evaluate the potential of achieving MDGs given the historical fiscal experiences in the Sudan and the availability of budget finances to meet these objectives in the Sudan. The main point to be stressed is that little resources have been allocated to sectors influencing the achievement of the MDGs and we are arguing that if this pattern of spending continues in same manner and magnitude, there is a slim chance that the MDGs targets will be met. It is important also to mention that the analysis in this MDGs section, like other ones, is severely handicapped by a shortage of detailed and reliable data. We start with an introduction to the MDGs.

The aim of this work is to identify the determinants of health spending differentials among Italian regions, which could highlight the existence of potential margins for savings. The analysis exploits a dataset for the panel of the 21 Italian regions starting in the early 1990s and ending in 2006. After having controlled for standard healthcare demand indicators, spending differentials appear to be associated with differences in the degree of appropriateness of the treatments, supply structure and social capital indicators. These results suggest that savings could be achieved without reducing the amount of services supplied to citizens. This is particularly important in view of the expected rise in health spending associated with the forecast demographic developments.

State and federal governments in the United States face massive looming fiscal deficits. One policy change that can reduce deficits is ending the drug war. Legalization means reduced expenditure on enforcement and an increase in tax revenue from legalized sales.This report estimates that legalizing drugs would save roughly $41.3 billion per year in government expenditure on enforcement of prohibition. Of these savings, $25.7 billion would accrue to state and local governments, while $15.6 billion would accrue to the federal government.Approximately $8.7 billion of the savings would result from legalization of marijuana and $32.6 billion from legalization of other drugs.The report also estimates that drug legalization would yield tax revenue of $46.7 billion annually, assuming legal drugs were taxed at rates comparable to those on alcohol and tobacco. Approximately $8.7 billion of this revenue would result from legalization of marijuana and $38.0 billion from legalization of other drugs.