Search

Abstract In theory and practice, the opinion predominates that tax cuts stimulate economic activity. But possible contractionary repercussions due to public spending that falls with tax receipts is not discussed. As part of an elementary macroeconomic analysis, the first step is to examine how varying tax returns and alternative budget reactions influence national income. Well-established recipes for boosting aggregate demand turn out to be counterproductive. The critique that government expenditures on credit can never be self-financing is also untenable as the objection rests on an abridged deficit multiplier. However, the desired economic stimulus will be paralyzed if the extra tax yield is used to repay debt. Disposable private income depends on the effective budget deficit but not on the tax rate, although it affects the share of public goods in domestic product. Guidelines for a welfare-oriented debt management complete the recommendations for a functional fiscal policy.

The economy fell off a cliff in 2008 as we experienced the most devastating downturn since the Great Depression. Unemployment hit double digits resulting in significant economic hardship and increasing demands on government safety nets and services to help those in need. At the same time, state revenues plummeted as workers lost their jobs and business activity contracted. As states struggled to balance their budgets in this weak economic climate, public officials in multiple states argued that the fiscal gaps were due to government workers and their unions.The fallout from the political jostling around public workers has been that hundreds of bills related to public employees and unions were introduced in state legislatures—most of which sought to restrict public sector unions. At least twelve states have significantly restricted collective bargaining through new legislation in 2011 including: Wisconsin, Ohio, Indiana, Arizona, Idaho, Michigan, New Hampshire, Oklahoma, South Carolina, Tennessee, Utah and Wyoming. A common rationale for these proposals is that growing costs associated with public sector workers, especially union-represented workers, are at the root of state budget deficits. Governor Scott Walker of Wisconsin said “we can no longer live in a society where the public employees are the haves and taxpayers who foot the bills are the have-nots.” A conservative columnist in the Daily Journal noted “like Governor Christie, he [Governor Walker] decided to actually fix the problems that brought Wisconsin to this point. His budget limits government collective bargaining…” But, were public sector workers and their unions to blame for state budget problems?In this brief, we review the relevant research and analyze the relationship between public sector workers, their unions and state budget deficits. Our analysis finds that the size of the public sector workforce per thousand residents is not growing and previous studies have found that public sector compensation, as a share of public budgets, has not grown. Researchers have consistently found that public sector workers are not compensated more highly than their private sector counterparts after taking into account level of education, experience and other important factors. Finally, our regression analysis shows large state deficits were due, in large part, to the decline in house prices and not due to public sector workers and their unions. The bursting of the housing bubble was the precursor to the Great Recession and it is clear that the large drop in house prices (which capture much of the deteriorating economic climate) was central.

Copyright of Journal of Research in Economics, Politics & Finance / Ekonomi, Politika & Finans Arastirmalari Dergisi is the property of Journal of Research in Economics, Politics & Finance and its content may not be copied or emailed to multiple sites or posted to a listserv without the copyright holder's express written permission. However, users may print, download, or email articles for individual use. This abstract may be abridged. No warranty is given about the accuracy of the copy. Users should refer to the original published version of the material for the full abstract. (Copyright applies to all Abstracts.)

Purpose – This paper aims to uncover the nexus between budget deficits, money growth and inflation in Vietnam in the period 1995–2012. Design/methodology/approach – The paper uses a structural vector auto-regressive model of five endogenous variables including inflation, real GDP growth, budget deficit growth, money growth and the interest rate. Findings – It is found that inflation rose in response to positive shocks to money growth and that budget deficits had no significant impact on money growth and therefore inflation. This empirical evidence supports the hypothesis that fiscal and monetary policies were relatively independent. Money growth significantly decreased in response to a positive shock to inflation; interest rates had no significant effect on inflation but considerably increased in response to positive inflation shocks. This implies that the monetary base was more effective than interest rates in fighting inflation. Originality/value – This paper sheds light into understanding the link between budget deficits, money growth and inflation in Vietnam during the high-inflation period 1995–2012. The finding supports the hypothesis that fiscal and monetary policies were relatively independent over the period.

This paper aims to provide empirical evidences about the extent to which budget deficits contribute to influencing price stability within the Algerian economy, using unconstrained VAR models, and based on annual data base covering the period (1990-2019). The results of Granger causality tests revealed the absence of causal relationships between budget deficit and money supply in either direction, which means that budget deficit doesn't affect prices through the monetary channel, which doesn't support the fiscal dominance hypothesis (SW-H). Same results indicated that there're two-way causal relationships between budget deficit and price levels, which indicates a direct impact of budget deficit on prices, in line with the theory of financial origin of inflation (FTPL). These results were confirmed by the results of impulse response functions and variance decomposition, which showed that an important part of inflationary pressures in the Algerian economy is directly fueled by imbalances in the government budget.

Copyright of Journal of Social Sciences Research / Sosyal Bilimler Arastirmalari Dergisi is the property of ODU Journal of Social Sciences Research and its content may not be copied or emailed to multiple sites or posted to a listserv without the copyright holder's express written permission. However, users may print, download, or email articles for individual use. This abstract may be abridged. No warranty is given about the accuracy of the copy. Users should refer to the original published version of the material for the full abstract. (Copyright applies to all Abstracts.)

The supply, maintenance and repair of vehicles and equipment related to country's security by the defence industry, development of new technologies and military personnel expenses constitute defence expenses. In line with the rise in security and defence needs of the communities, the share of defence expenditures in the budget is also increasing. This increase trend observed in defence expenditures, along with macro-economic variables such as unemployment and inflation as much as political and military growth creates a significant burden on the public budget. Because increasing defence expenditures return to society as heavy tax burden or budget deficit. In this study, using the data covering 2000-2017 period of 22 selected OECD countries, the issue of whether or not the defence expenditures have an effect on budget deficits is analysed by using Panel Data Analysis method. The results show that the defence expenditures in selected OECD countries are found to have a very significant share of public expenditure. The main result is that a 1% increase in defence expenditures causes an approximately 0.43% rise in budget deficits. This result demonstrates that the defence expenditure is one of the real reasons of increase in public expenditures for selected OECD Countries. Furthermore, it is thought that the focusing on budgetary side of defence expenditures can contribute to the literature, different from focusing on its effects on macroeconomic variables widely studied in the literature. [ABSTRACT FROM AUTHOR]

The sustainability of budget deficits is one of the most important macroeconomic problems in countries. High public spending and insufficiency of public revenue are the main reasons for the collapsing of Greek, Italy, Spain, Portugal and Ireland economies. In this study, the sustainability of budget deficit has been examined for 17 EU countries by means of panel cointegration with multiple structural breaks under cross-section dependence, for the period of 1996-2012. At the end of the analysis; cross-section dependence was determined in these countries. Therefore, an economic shock that comes to one of these countries also affects the others. According to the long-run analysis, budget deficits of these countries are sustainable in weak form.

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

An approach to the effect of the budget deficit on the current account deficit has always been the focus of economists. In the macroeconomics literature, there are two approaches to investigate this relationship: the Keynesian approach and the Ricardian approach. The Keynesian approach accepts the existence of a relationship between the budget deficit and the current account deficit, while the Ricardian approach rejects this relationship. By examining the studies conducted in the field of Twin deficits, this study examines the hypothesis of Twin deficits and Triple deficits, as well as the impact of monetary policies on Triple deficits. In order to achieve the mentioned goal, the System Dynamics method and data from the period of 1999-2020 were used. The results of the study indicate the establishment of twin and triple deficit. The trend of the capital account shows that this account is always facing a deficit. However, the domestic savings gap does not seem to be fully compensated by foreign capital. The imbalance in the balance of payments aggravates the created budget deficit and can create an accelerated cycle of budget deficit. Also, in this study, the effect of monetary policy on triple deficits was also investigated. The results of the study show that using the monetary policy does not affect the formation of twin deficits and triple deficits [ABSTRACT FROM AUTHOR]

Purpose: This paper analyses the direct relationship between budget deficits and economic growth, the channels through which budget deficits inhibit growth and finally, the Granger causality between budget deficit and economic growth in South Africa over the period 1975 to 2020. Design/methodology/approach: In a bid to control for endogeneity that is common in economic growth regressions, the author employed the dynamic ordinary least squares (DOLS) approach. Findings: Towards analysing the direct relationship between budget deficit and economic growth, results show that a 10-percentage rise in the budget deficit slows economic growth by 0.2 percentage points. Results show that the growth inhibiting consequences of the budget deficit in South Africa are principally driven by negatively affecting private and public physical capital accumulation growth, as well as a drop in gross national savings. However, results show no evidence of a deficit reduction effect through long term-real interest rate. The findings reveal a one-way Granger causality running from budget deficits to economic growth. Practical implications: Based on the findings in this article, expanding the fiscal deficit to support growth is not a viable policy option for the South African economy. Originality/value: The originality of this paper lies in establishing the Granger causality between budget deficit and economic growth, thus adding to the scant literature, as well as establishing the channels through which budget deficit retards economic growth for the South African economy. [ABSTRACT FROM AUTHOR]

This study examines the economic consequences of political instability in Pakistan, focusing on its effects on fiscal policy and investor confidence. Pakistan’s history of political turbulence has repeatedly disrupted economic growth, leading to fiscal imbalances, public debt, and diminished investor confidence. Political events often result in short-term fiscal decisions that have long-lasting negative impacts on the economy. The research employs a qualitative approach, analysing secondary data from government reports, economic surveys, and investor sentiment studies to assess the relationship between political instability, fiscal policy, and investment trends. The study finds that political instability contributes to rising budget deficits, inflation, and exchange rate volatility, while also undermining both domestic and foreign investor confidence. Frequent policy reversals and uncertainty further exacerbate economic challenges. To mitigate these effects, the study suggests adopting resilient fiscal frameworks, enhancing transparency in economic governance, and leveraging support from international institutions like the IMF and World Bank during times of political instability. [ABSTRACT FROM AUTHOR]

The study analyzed the determinants of the current account balance in Nigeria between 1981 and 2020, using three different models: oil current account balance, non-oil current account balance, and total current account balance. The dependent variables were the respective current account balances, while the explanatory variables included income, consumption, investment, budget deficit, exchange rate, financial deepening, broad money supply, unemployment rate, inflation rate, and age dependency ratio. The data was analyzed using the autoregressive distributed lag (ARDL) technique. The results indicated that budget deficit, exchange rate, and financial deepening were statistically significant in determining the oil current account position in the short run, while income, budget deficit, and exchange rate were statistically significant in the long run. For non-oil current account position, budget deficit, money supply, unemployment rate, inflation rate, and age dependency ratio were significant determinants in the short run, while budget deficit, money supply, unemployment rate, and inflation rate were significant in the long run. In the case of the total current account position, budget deficit, financial deepening, unemployment rate, and age dependency ratio were significant in the short run, while budget deficit, unemployment rate, and age dependency ratio were significant in the long run. The study suggests that policymakers in Nigeria should focus on reducing budget deficits, promoting financial deepening, and maintaining stable exchange rates to improve the current account balance, particularly in the short run. [ABSTRACT FROM AUTHOR]