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Fiscal policy and net capital inflows in developing countries are procyclical. A large amount of literature has examined this phenomenon and explored its consequences for aggregate fluctuations. Multilateral development banks (MDBs) are an important source of external finance for governments and play a key role in financing the execution of fiscal policy. Hence, understanding the behavior of MDB flows is key to gauge their contribution to macroeconomic volatility. This paper investigates the co-movement of sovereign lending from MDBs and private creditors with government expenditure, and finds that multilateral sovereign lending follows government expenditure, and that this correlation does not change if the government is running a surplus or a deficit. This finding raises doubts on the feasibility of MDBs to be counter-cyclical, unless the governments themselves implement counter-cyclical fiscal policies.

We study the interactions between institutional quality, government expenditure, tax revenue, and economic growth in low-income countries (LICs) and lower middle-income countries (LMICs) over 2005–2019. The primary distinguishing factor of the paper is the simultaneous inclusion of all these four variables in a single temporal causal model. A second distinguishing feature of the paper is its focus on LICs and LMICs and a clear distinction between short-run and long-run results. Tax revenue is considered as general revenue as well as revenue from taxes on international trade, and customs and other import duties. Our results show that institutional quality, government expenditure, tax revenue, and economic growth often have endogenous links among each other in the short run. These results are not always uniform across our samples. On the other hand, a robust and uniform result across all samples is that the three covariates are important drivers of long-term economic growth. Thus, the co-development of stronger institutions and more effective fiscal policies (relating to taxes and government expenditure) appear to be key in procuring sustained long-term economic growth of countries.

Unpredictability of development aid has been a key concern for the international community, which has committed, in the Paris declaration on Aid effectiveness, to making development aid more predictable for recipient-countries. At the same time, the international trade community has committed to help developing countries, and in particular Least developed countries (LDCs) better integrate into the multilateral trading system through the provision of higher amounts of Aid for Trade (AfT). The current article investigates the effect of AfT unpredictability on trade-related government expenditure in recipient-countries. The analysis covers an unbalanced panel dataset of 58 countries over the period 2009-2016. Empirical results are primarily obtained using the two-step system Generalized Methods of Moments (GMM) estimator. The findings indicate that over the full sample, unpredictability of total AfT, as well as both positive and negative unpredictability of total AfT exert a negative and significant effect on total trade-related government expenditure. Results show mixed evidence concerning the effect of unpredictability of AfT components on relevant trade-related government expenditure, including in LDCs and NonLDCs (countries that are not LDCs). Finally, there may be a non-linear relationship between AfT unpredictability and trade-related government expenditure. Overall, these findings shed light on the importance for donors and recipient-countries to coordinate efforts so as to make AfT more predictable.

In this paper, we analyze the relationship betweengovernment expendituresand revenues for Italy over the period 1862–2013. The analysis of the expenditures-revenues nexus is also relevant from the point of view of fiscal sustainability. Our empirical strategy adopts the wavelet analysis approach.The empirical evidencedemonstrates the relevance of the frequency domain in analyzing the relationship between government expenditures and revenues, which may lead to alternative policy implications. Indeed, after the recent economic crises, guaranteeing its own financial stability is an increasingly difficult task for a highly indebted government like the Italian one.

This paper explores the effect of financial development on the composition of government expenditure. We establish an endogenous growth model to consider the role of financial development. We demonstrate that because of the efficiency loss induced by lower financial development, private investment is constrained and hence governments tend to spend on higher productive expenditure to maintain a certain economic growth rate. Relying on a large sample of 105 countries over 1984–2009, we find supporting evidence that countries with higher financial development tend to have lower productive expenditure. This result is robust across alternative measures of the key variables and alternative estimations with and without correcting the potential endogeneity issue of financial development.

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.

Prior studies have examined possible antecedents of regional entrepreneurship, with most focusing on the net effect of isolated factors that affect entrepreneurship while neglecting their interdependence. From the perspective of the entrepreneurial ecosystem and using fuzzy-set qualitative comparative analysis on city-level data from China, this study explores the configurational effect of pertinent factors on entrepreneurial quality and quantity. The results suggest that both entrepreneurial quality and quantity can be created through the interaction between factors and the presence of multiple, equally effective pathways that lead to the same outcomes. Furthermore, the results highlight the importance of internet infrastructure and innovation capacity in prompting entrepreneurial quality and quantity; the influence of the size of government expenditure on both high-quantity and quality entrepreneurship was asymmetric. These findings can help policymakers allocate optimal resources in achieving entrepreneurship of high-quality and high-quantity.

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.

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.

Pro-cyclical fiscal policy has raised concern in many emerging economies due to its adverse consequences to the economic activities. This paper takes a different approach to the issue, which aims to examine the bidirectional relationships between fiscal policy and stock market activities, using a panel of 12 emerging Asia-Pacific economies from 1990 to 2015. We estimate a variety of Panel Vector Autoregressive models to test for the consistence of the results. The empirical results show that fiscal policies in these countries tend to a pro-cyclical path in responding to stock market movements. The pro-cyclical behavior is found with both government expenditure and government revenue. On the other hand, a fiscal consolidation attempt has a rewarding effect on stock prices.

We implement two different monetary policies – an inflation targeting policy as well as a cash reserve requirement – in a monetary endogenous growth overlapping generations model characterized by production lags and analyse the growth dynamics that emerge from this framework. The growth process is endogenized by allowing productive government expenditure on infrastructure, complementing the lagged private capital input. In the presence of these monetary policies, we show that multiple equilibria emerge along different growth paths, with the low-growth (high-growth) equilibrium being unstable (stable) and locally determinate (locally indeterminate). In addition, we highlight the possibility of convergent or divergent endogenous fluctuations and even topological chaos around the high-growth equilibrium in the growth path where the monetary authority follows a high inflation targeting regime. Conversely, when the monetary authority follows a low inflation targeting regime, oscillations do not occur around either the low-growth or high-growth equilibrium. Moreover, a strictly non-negative cash reserve requirement is a necessary and sufficient condition to initiate the growth process.

Based on the literature on economic growth, there is a non-linear relationship between government size and economic growth, which is usually similar to an inverted U-shaped curve and is used to determine the optimum share of government expenditure. The present study aims to investigate the non-linear relationship among 14 developed European countries during 1995–2014. Final consumption expenditure to gross domestic product (FCE), current expenditure other than final consumption to gross domestic product (OCE), and government gross fixed capital formation to gross domestic product (GFCF) were considered for measuring government size. The results indicate an asymmetric effect of FCE and GFCF on economic growth when they are above and below the optimal level. The optimum values of FEC and GFCF were estimated to be 16.63 and 2.31%, respectively. However, it is noted that OCE always has a negative effect on economic growth. In terms of policy prescriptions, governments of developed countries should be aware that misallocation of public expenditure can occur given it may likely become unproductive after passing an optimal size.

Focusing on the idea that a different allocation of bargaining power between the public official and the private agent can explain the emergence of two types of corruption, this paper develops a theoretical model which provides an account of different level of bribes and incentives when the bargaining power is in the hands of the official (active corruption) or in the hands of the private agent (passive corruption). By employing Italian data which explicitly differentiate between active and passive corruption, the paper empirically re-examines the determinants of the aggregate level corruption. The results show that the various categories of government expenditure, which proxy different allocations of bargaining power, differently affect active and passive corruption.

The economic literature has attributed part of the increase in government expenditure over the 20th century to female voting. This is puzzling, considering that the political science literature has documented that women tended to be more conservative than men over the first half of the 20th century. We argue that the current estimates of this relationship are afflicted by endogeneity bias. Using data for 46 countries and a novel set of instruments related to the diffusion of female suffrage across the globe, we find that, on average, the introduction of female suffrage did not increase either social expenditures or total government expenditure.

We show that time-to-build, which creates a time gap between government spending and the accumulation of public goods, is an important element that weakens the effectiveness of fiscal stimulus. In the environment where private consumption and public goods are Edgeworth complements, adding time-to-build to the model delays the timing of utility-enhancing effects of an increase in government expenditure, leading households to shift consumption from today to the future. The expansionary effect of government spending is hence dampened, which contrasts existing studies with Edgeworth complementarity between private and public consumption.

This paper studies the impact of commodity terms of trade (CToT) volatility on economic growth (and its sources) in a sample of 69 commodity-dependent countries, and assesses the role of Sovereign Wealth Funds (SWFs) and quality of institutions in their long-term growth performance. Using annual data over the period 1981–2014, we employ the Cross-Sectionally augmented Autoregressive Distributive Lag (CS-ARDL) methodology for estimation to account for cross-country heterogeneity, cross-sectional dependence, and feedback effects. We find that while CToT volatility exerts a negative impact on economic growth (operating through lower accumulation of physical capital and lower TFP), the average impact is dampened if a country has a SWF and better institutional quality (hence a more stable government expenditure).

This paper develops a two-country, two-sector model under both monetary union and flexible exchange rate regimes featured with trade openness differentials, and then uses it to examine the relative macroeconomic effects of trade openness under both regimes. Some main results emerge from our analysis regarding an adverse shock of either country-wide productivity or country-wide government expenditure. First, the decline in output is greater for a country with low openness under both regimes. Second, the monetary union will result in a greater decline in output if the monetary authority attaches a higher weight to output stabilization. Third, the high elasticity of substitution results in a greater difference in output between the two regimes.

Summary In this paper we explore the effects of fiscal policies and growth on measures of household welfare across the distribution of expenditures for two African countries: Rwanda and Tanzania. We explore the effect of government expenditures on expenditure growth in each quintile of the expenditure distribution and the effect of growth for each group. We find that the benefits of growth are concentrated among the better-off sectors of the population in these two countries (perhaps to the detriment of the poorer sectors) by looking at the effects within a country and across different groups of households and administrative entities. We exploit variation in expenditures and growth across and within regions of each country to estimate the elasticities of expenditure with respect to fiscal expenditure and mean expenditure growth at different points of the expenditure distribution, using household survey data and government expenditure data at the district level. We find that, overall, mean expenditure growth benefits the top expenditure groups. The welfare spillovers are mostly present for top 20% of the expenditure distribution, with the middle of the distribution in Tanzania responding slightly to these spillovers. Public/social expenditures do not appear to affect inequality considerably, but do tend to work toward decreasing inequality. However, mean expenditure growth is related to increases in inequality in the sense that the richest sectors of the population benefit the most from growth. We find that the growth elasticity of expenditure is only above one for the top quintile in both countries. In Tanzania, a 1% increase in average household expenditure is related to a 1.96% expenditure growth in the top quintile and 0.43% in the third quintile. In Rwanda, a 1% increase in average household expenditure is related to a 1.93% increase in household expenditure in the top 20% of the distribution.

This study examines the effects of democratization on the size and composition of government expenditure using the data of 125 countries between 1972 and 2010 at most. Specifically, we focus not only on the total expenditure but also on the composition, and we employ dichotomous indices of political regimes rather than score indices. Moreover, we construct instruments for democratization based on the democratization wave and conduct an instrumental variables estimation to address endogeneity problems. Our results show that while democratization does not have a significant impact on total expenditure, it increases expenditure on health. Democratization decreases expenditure on defense, although the result of the instrumental variables estimation is not significant. Furthermore, considering the time-varying effect of democratization, defense expenditure starts decreasing immediately after a regime change and health expenditure increases in the medium and long run, while they do not significantly vary before a regime change. Thus, while focusing only on total expenditure does not uncover the effects of democratization, considering detailed categories of government expenditure enables us to understand how democratization changes governments’ behaviors.

This paper uses historical data since mid-19th century to test the validity of Wagner's Law for the Italian economy. Unlike the previous studies, we accommodate possible nonlinear asymmetric effects of total gov- erment spending and GDP toward their long-run equilibrium. Our results show the presence of a threshold cointegrating relationship between the two variables with significantly different error correction adjustments in normal and extreme regimes. Particularly, we find the validity of Wagner's Law from 1862 to 2009, only when we take into account strong nonlinear responses of government spending during the WWI and WWII period. Robustness checks clearly recognize nonlinear behaviour of government expenditure driven by military spending.

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

This paper employs a stochastic growth model to study the impact of international financial liberalization on the share of productive government expenditure in GDP. Financial liberalization is specified to take the form of reducing the costs of both lending to, and borrowing from, abroad. This is shown to impinge on the economy through (i) its interaction with the volatility of returns to domestic capital, and (ii) the impact on agents’ allocation of their portfolio across domestic and foreign assets, and its effect on domestic activity. Reduced foreign lending costs tend to divert resources from the domestic economy, requiring the government to compensate by increasing the share of domestic output allocated to productive activity. Reducing borrowing costs have the opposite effects. Empirical evidence, using a dataset of 97 countries over the period 1970 to 2015 provides convincing support for these findings and the underlying mechanism.

This paper examined the impact of expenditures of household, firm and government on aggregate and sectoral carbon emissions in the world economies during 1990–2015. The modified heterogeneous panel data technique was used to estimate both carbon emission and income models from which both the direct and indirect effects of expenditure categories were estimated along with long-run and short-run analyses. Empirical results indicate that, in the long-run, the negative direct effect of government expenditure was reduced by the positive indirect effects, leading to positive total effect on aggregate carbon emission. However, in the short-run, the negative direct effect was enhanced by the negative indirect effect, culminating into negative total effect. Further, in the long-run, the positive direct effect of investment expenditure was reduced by the negative indirect effects, resulting into negative total effect on aggregate carbon emissions. However, the negative short-run direct effect was reduced by the positive indirect effect leading to marginal positive total effect. The total direct effect of household consumption spending was negative in the long-run and could be relatively large in the short-run. The effect of the household expenditure on sectoral carbon emissions was negative, while that of private investment was positive, and that of public spending was diverse. The policy lessons include the need to conduct value chain environmental pollution implications of any expenditure policy.

This paper derives a NEG-style model that outlines several spatial spillover channels and examines the effects of proximities to spatially distributed factor supply and market demand on Chinese urban economies. A panel dataset of 283 prefecture or higher-level cities from 2003–2013 is used for the empirical analysis. The estimation shows that proximities to government expenditure on science and technology, to professionals in science and technology, and to the domestic and foreign markets all contribute to urban manufacturing growth, while concentrations of specialized labor force and producer services in neighboring cities have negative effects. The spatial effects of factor proximities and market potentials differ in China's three regions. Surprisingly, cities in the central region have the most significant gain from spillovers of factor supply, and cities in the eastern and western regions benefit substantially from the domestic and foreign markets. Policy implications are derived from the findings.

This article analyses GDP over time in the post-Soviet republics over the 2000–2014 period. Its aim is to characterise the evolution of the economies of each country with respect to opportunities for mutual co-operation. Particular features of each country are identified in terms of GDP structure and creation. Over the period looked at, GDP rose very significantly. Russia and Kazakhstan can be included amongst the main driving forces behind this growth. The growth was affected by the transformation of the economies of the countries looked at, growth in prices of mineral resources and a major influx of foreign investments. Growth in the Russian Federation's GDP is also linked to a growth of transfers which should contribute to a higher standard of living, but which also contribute to increasing household consumption. Another growth factor is the impact of gross fixed investments. These two variables contributed most to GDP creation. In contrast, GDP elasticity in relation to the value of resources and the balance of external relations is negative for many of the countries looked at.

This paper examines the effects of fiscal policy on CO2 emissions using Vector Autoregressions on U.S. quarterly data from 1973 to 2013. In particular, we analyze the short- and mid-term interactions between fiscal policy and emissions by using sign restrictions to identify the policy shocks. We construct the impulse responses to linear combinations of fiscal shocks, corresponding to the scenarios of deficit-financed spending and deficit-financed tax-cuts. To consider possible variations of the effect of fiscal policy according to the sources of pollution, we distinguish between production- and consumption- generated CO2 emissions. The results point out that the implementation of expansionary fiscal spending provides an alleviating effect on emissions from both sources of the pollutant, whereas deficit-financed tax-cuts are associated with an increase on consumption-generated CO2 emissions. The exact pattern of the effects depends on the source of emissions, the scenario of fiscal policy that is implemented and the functional class of government expenditure being increased.

We develop a two-sector model of physical and human capital accumulation, where public goods provide both productive capital (i.e. infrastructures) and utility enhancing services. We analyze the impact of both the level of government expenditure and its composition on growth and welfare, under different production technologies, and derive their respective growth and welfare-maximizing levels. We show that contrary to what happens with welfare, the long-run growth rate is increasing in the intertemporal elasticity of substitution but decreasing in the relative weight of public goods in utility. Furthermore, the welfare-maximizing tax rate is lower than the growth-maximizing tax rate, whereas the welfare maximizing share of productive government expenditure is greater than the growth maximizing share. Finally, we employ numerical simulations to get a better understanding of the model.

Achieving the SDG7 goal, among other things, requires doubling efforts in energy efficiency improvements. However, in Africa, the progress has been slow, proving difficult for the continent to achieve the target set for 2030. The purpose of this study was to examine the effect of government expenditure (conditioned on external debt finance) on fossil fuel energy efficiency in 28 African countries, using data from 1988 to 2016. We employed the stochastic frontier method to estimate energy efficiency and Tobit regression to examine the relationship between energy efficiency and the conditional effect of government expenditure. The results showed that increasing government expenditure reduces TFFEE, but when conditioned on external debt finance, the effect is positive and partial in nature. This rather suggests an optimal mix of tax and debt finance instead of the total reliance on the latter to promote energy efficiency. While increasing debt finance for energy efficiency purposes can trigger a generational paradox in energy efficiency, responsible savings by current generation of energy efficiency gains and altruistic behaviour of the current generation could help deal with this generational paradox in energy efficiency.

Insurance is one of the key activities in a globalised financial and economic environment. Through its benefits, it offers income, life and property protection to the insured and their keens, as well as income accumulation that can be used at retirement to help preserve the desired lifestyle or living standards. Motivated by this end of insurance, the goal of this paper is to study the contribution of insurance growth to economic growth, by employing the benefit side of the insurance activity, next to the acquisition side that has already been considered. More precisely, the findings provide evidence that gross claims payments and gross operating expenses are significantly and positively related to economic growth. At the same time, the results confirm the findings of the existing literature that gross premia and insurance penetration are also significantly and positively related to economic growth. The outcomes hold true for total, life and non-life insurance, both during the pre- and post- 2008-crisis periods, even though less strong after the crisis. Furthermore, the positive and statistically significant impact of gross capital formation, government expenditure, secondary schooling, FDI inflows, trade openness and financial development is validated, in line with certain theoretical expectations.

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 debate on the use of fiscal policy as a tool of macroeconomic stabilization is quite vehement in Australia and abroad. This paper contributes to the discussion by estimating government expenditure multipliers for Australia and one if its states, Queensland. Impulse response functions derived from a SVAR model indicate that the multipliers are positive and greater than one. This suggests that government consumption expenditure should be used counter-cyclically to stabilize output. However, a chronology of business cycles and government expenditure dynamics reveals that this is not frequently the case. At both national and state level, government consumption expenditure “aligns” with the business cycle only about one third of the times. This means that more often than not, fiscal policy is run pro-cyclically or (at best) a-cyclically. Moreover, from the point of view of Queensland, federal and state fiscal policies are jointly aligned with the Queensland business cycle only 20% of the times. Conversely, federal and state fiscal policies are jointly misaligned with the Queensland business cycle in 60 quarters out of 116, i.e. about 50% of the time. This misalignment is a factor of destabilization of the Queensland economy.

The paper estimates a system of structural equations to determine the effect of US government expenditure on the business cycle of other OECD countries. The estimated coefficients from the system are used in a simulation exercise to compute the dollar value of the international multiplier of the US government expenditure. This multiplier turns out to be positive: an extra dollar of the US government expenditure increases foreign output by 7 cents on average. However, the size of the multiplier significantly differs across sub-samples of countries and over time.

In the past decade, the Chinese government was increasingly relying on revenues from land sales to finance the public spending. This paper examines the impacts of land financing on business cycle fluctuations in China in an estimated DSGE model. The simulation results indicate that the overall effect of land financing is to increase the business cycle fluctuations by 12.6%. However, the impacts of land financing on business cycle fluctuations depend on shocks hitting the economy. The policy implication of this paper is that cutting the direct linkage between the government expenditure and the land sales could mitigate the business cycle fluctuations.

In the classical Ramsey Model, temporary increase of government expenditure will raise real interest rate. By using the data of American expenditure on national defense and the interest rate of 10-year constant maturities from 1959 to 2002, the paper points to the conclusion from the empirical analysis of positive correlation between government expenditure and real interest rate that temporary increase of government expenditure will surely lead to a rise in real interest rate.

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.