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Article
Publication date: 25 December 2020

Md. Mahbub Alam, Md. Nazmus Sadekin and Sanjoy Kumar Saha

This paper aims to investigate the impact of selected macro-economic variables like real effective exchange rate (REER), GDP, inflation (INF), the volume of trade (TR) and…

Abstract

Purpose

This paper aims to investigate the impact of selected macro-economic variables like real effective exchange rate (REER), GDP, inflation (INF), the volume of trade (TR) and money supply (M2) on-budget deficit (BD) in Bangladesh over the period of 1980–2018.

Design/methodology/approach

By using secondary data, the paper uses the Vector Error Correction Model (VECM) and Granger Causality test. Johansen’s cointegration test is used to examine the long-run relationship among the variables under study.

Findings

Johansen’s cointegration test result shows that there exists a positive long-run relationship of selected macroeconomic variables (real effective exchange rate, inflation, the volume of trade and money supply) with the budget deficit, whereas GDP has a negative one. The short-run results from the VECM show that GDP, inflation and money supply have a negative relationship with the budget deficit. The Granger Causality test results reveal unidirectional causal relationships running from BD to REER; TR to BD; M2 to BD; GDP to REER; M2 to REER; INF to GDP; GDP to TR; M2 to GDP and bidirectional causal relationship between GDP and BD; TR and REER; M2 and TR.

Originality/value

Bangladesh has been experiencing a budget deficit since 1972 due to a decline in sources of revenue. This study contributes to the empirical debate on the causal nexus between macroeconomic variables and budget deficits by employing VECM and Granger Causality approaches.

Details

South Asian Journal of Business Studies, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 2398-628X

Keywords

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Article
Publication date: 1 March 1996

Huaping Luo and Robert T. Golembiewski

Since China began its market-oriented economic reform in 1979, government budget deficits have been a fact of life. On one hand, the share of resources owned or controlled…

Abstract

Since China began its market-oriented economic reform in 1979, government budget deficits have been a fact of life. On one hand, the share of resources owned or controlled by the government must be shrunk in order to create a favorable environment for the development of the market economy. On the other hand, the government still performs many responsibilities required by the traditional planed economy. After calculating government budget deficits and analyzing their causes, the article assesses the impacts of government budget deficits and predicts the future of deficits in China.

Details

Journal of Public Budgeting, Accounting & Financial Management, vol. 8 no. 4
Type: Research Article
ISSN: 1096-3367

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Article
Publication date: 1 March 1996

Huaping Luo and Robert T. Golembiewski

Since China began its market-oriented economic reform in 1979, government budget deficits have been a fact of life. On one hand, the share of resources owned or controlled…

Abstract

Since China began its market-oriented economic reform in 1979, government budget deficits have been a fact of life. On one hand, the share of resources owned or controlled by the government must be shrunk in order to create a favorable environment for the development of the market economy. On the other hand, the government still performs many responsibilities required by the traditional planed economy. After calculating government budget deficits and analyzing their causes, the article assesses the impacts of government budget deficits and predicts the future of deficits in China.

Details

Journal of Public Budgeting, Accounting & Financial Management, vol. 8 no. 3
Type: Research Article
ISSN: 1096-3367

Open Access
Article
Publication date: 11 August 2021

Hoang Van Khieu

This paper aims to uncover the nexus between budget deficits, money growth and inflation in Vietnam in the period 1995–2012.

Abstract

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.

Details

Fulbright Review of Economics and Policy, vol. 1 no. 1
Type: Research Article
ISSN: 2635-0173

Keywords

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Article
Publication date: 1 March 2004

Christopher G. Reddick

An exciting opportunity that many advanced industrial democracies faced in the late 1990s was the movement from budgetary deficit to surplus. This came after years of…

Abstract

An exciting opportunity that many advanced industrial democracies faced in the late 1990s was the movement from budgetary deficit to surplus. This came after years of persistent deficits. Traditional decisionmaking theories such as budgetary incrementalism failed to explain this longrun relationship, since it has been inherently a short-run theory. This paper uses rational expectations theory to demonstrate its relationship to budgetary decision-making reforms and the deficit (surplus) for Canada, the UK and the United States. The results demonstrated that there was an intertemporal budget constraint in operation in the three countries, and decision-makers at the macro level used rational expectations in the formulation of their annual budget. In the theory, budget actors strived to balance their budget, but did so over the longrun as opposed to the short-run incrementalist interpretation.

Details

Journal of Public Budgeting, Accounting & Financial Management, vol. 16 no. 3
Type: Research Article
ISSN: 1096-3367

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Article
Publication date: 1 March 2005

Vesselin Dimitrov

This article examines the effect of party composition of government on the centralization of budgeting institutions in Hungary, Poland, the Czech Republic and Bulgaria in…

Abstract

This article examines the effect of party composition of government on the centralization of budgeting institutions in Hungary, Poland, the Czech Republic and Bulgaria in 1989-1999, and assesses the impact of the centralization of budgeting institutions on the capacity of these countries to meet the fiscal deficit requirement for the European Economic and Monetary Union (EMU) membership. The article finds that centralization of budgeting institutions through delegation to a strong finance minister and/or prime minister is likely to occur in one-party governments or coalition governments composed of parties which expect to fight repeated elections together, with effective punishment mechanisms. The article finds that countries with centralized budgeting institutions are likely to be more capable of meeting the EMU deficit requirement than countries with decentralized institutions.

Details

International Journal of Organization Theory & Behavior, vol. 8 no. 1
Type: Research Article
ISSN: 1093-4537

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Article
Publication date: 1 March 2003

Barry Anderson, Sandy Davis and Theresa Gullo

The federal budget process is a compilation of many rules and procedures, enacted primarily over the past century. Initially neutral as to budget outcome, that process, by…

Abstract

The federal budget process is a compilation of many rules and procedures, enacted primarily over the past century. Initially neutral as to budget outcome, that process, by the mid-1980s, had evolved to emphasize reducing the deficit. And the budget enforcement procedures put in place to control deficits, combined with robust economic growth, helped to produce historic budget surpluses by the end of 1990s. But in 2001, the economy slowed significantly. The budgetary effects of that slowdown, of the terrorist attacks of September 11, 2001, and other factors, brought a return of the deficit in 2002--- ironically, just as the budget enforcement framework put in place to control deficits expired. Now, lawmakers face the question of what new framework should take its place. This article discusses the evolution of federal budgeting, emphasizing the major characteristics of each period and what factors drove reform efforts at each stage.

Details

Journal of Public Budgeting, Accounting & Financial Management, vol. 15 no. 2
Type: Research Article
ISSN: 1096-3367

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Article
Publication date: 2 March 2021

Sima Rani Dey and Mohammad Tareque

This study attempts to examine the twin deficits hypothesis for Bangladesh. Along with the traditional twin deficits hypothesis associated with the current account and…

Abstract

Purpose

This study attempts to examine the twin deficits hypothesis for Bangladesh. Along with the traditional twin deficits hypothesis associated with the current account and fiscal deficit, the paper also explores the causal relationship between the trade deficit and fiscal deficit.

Design/methodology/approach

We start with the investigation of the conventional twin deficit hypothesis employing autoregressive distributed lag (ARDL) bounds testing approach in a multivariate framework. Due to the absence of cointegration between the budget deficit and trade deficit, the study adopts a multivariate vector autoregressive (VAR) model to analyze the nexus.

Findings

The study supports the presence of the twin deficits hypothesis in Bangladesh, both in the short run and long run. Unidirectional causation running from the budget deficit to the current account deficit in the long run. The trade model also supports the twin deficit hypothesis, like the aforementioned current account model.

Practical implications

Therefore, the sustainable fiscal deficit is the key to maintain a stable current account deficit and trade deficit in Bangladesh.

Originality/value

The study incorporates the country risk indicators to address the governance issue while analyzing the models' deficit scenarios because good governance is an integral part of explaining the development outcome and failure of a country like Bangladesh.

Details

International Journal of Emerging Markets, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 1746-8809

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Article
Publication date: 1 December 1997

Shu‐hung Tang

The Hong Kong government emphasizes very much the importance of achieving the “financial stability” objective, and has been very successful in controlling expenditure…

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Abstract

The Hong Kong government emphasizes very much the importance of achieving the “financial stability” objective, and has been very successful in controlling expenditure growth and in accumulating fiscal reserves. This remarkable performance is attributed to adhering consistently to budgetary guidelines. Managing the financial budgets through budgetary guidelines is a unique feature of the Hong Kong fiscal system. Discusses the role of budgetary guidelines in the Hong Kong fiscal system, and reviews the evolution of these budgetary guidelines since the early 1970s. It turns out that the guideline on expenditure growth is the most important budgetary guideline. Fiscal performance is assessed against these budgetary guidelines. With the financial stability objective having long been achieved, strict adherence to these budgetary guidelines would unduly constrain social and economic developments in Hong Kong. Recommends comprehensive review of the role and function of these budgetary guidelines.

Details

International Journal of Public Sector Management, vol. 10 no. 7
Type: Research Article
ISSN: 0951-3558

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Article
Publication date: 1 May 1997

Anghel N. Rugina

The equation of unified knowledge says that S = f (A,P) which means that the practical solution to a given problem is a function of the existing, empirical, actual…

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Abstract

The equation of unified knowledge says that S = f (A,P) which means that the practical solution to a given problem is a function of the existing, empirical, actual realities and the future, potential, best possible conditions of general stable equilibrium which both pure and practical reason, exhaustive in the Kantian sense, show as being within the realm of potential realities beyond any doubt. The first classical revolution in economic thinking, included in factor “P” of the equation, conceived the economic and financial problems in terms of a model of ideal conditions of stable equilibrium but neglected the full consideration of the existing, actual conditions. That is the main reason why, in the end, it failed. The second modern revolution, included in factor “A” of the equation, conceived the economic and financial problems in terms of the existing, actual conditions, usually in disequilibrium or unstable equilibrium (in case of stagnation) and neglected the sense of right direction expressed in factor “P” or the realization of general, stable equilibrium. That is the main reason why the modern revolution failed in the past and is failing in front of our eyes in the present. The equation of unified knowledge, perceived as a sui generis synthesis between classical and modern thinking has been applied rigorously and systematically in writing the enclosed American‐British economic, monetary, financial and social stabilization plans. In the final analysis, a new economic philosophy, based on a synthesis between classical and modern thinking, called here the new economics of unified knowledge, is applied to solve the malaise of the twentieth century which resulted from a confusion between thinking in terms of stable equilibrium on the one hand and disequilibrium or unstable equilibrium on the other.

Details

International Journal of Social Economics, vol. 24 no. 5
Type: Research Article
ISSN: 0306-8293

Keywords

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