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1 – 10 of 221James W. Douglas and Ringa Raudla
The purpose of this article is to challenge the balanced budget practices of U.S. state governments and offer alternatives that may lead to better fiscal, economic and policy…
Abstract
Purpose
The purpose of this article is to challenge the balanced budget practices of U.S. state governments and offer alternatives that may lead to better fiscal, economic and policy outcomes. We contend that the norm of balance may be leading U.S. states to make fiscal decisions that result in less-than-ideal outcomes, especially during economic downturns.
Design/methodology/approach
This is a normative article. We examine the scholarly evidence regarding balanced budget practices to assess the appropriateness of balanced budget norms. We also examine the fiscal rules followed by Eurozone countries to draw potential lessons for U.S. states.
Findings
We conclude that state governments should move away from strict norms of budget balance and seek more flexible approaches. We suggest that instead of following strict rules and norms of balance, U.S. states should consider implementing escape clauses, debt and deficit ceilings, and fiscal councils. We also suggest that the Federal Reserve be open to lending directly to states during fiscal crises to ensure that states have access to affordable credit.
Originality/value
The balanced budget norm has become ingrained in U.S. state budgeting practices, so much so that public officials and scholars alike rarely question it. The novel contribution of our article is to question this practice in a systematic way and propose alternative approaches.
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Mohammad Kamal Abuamsha and Lana Majdi Hattab
The present research aims at identifying the latent factors that are driving the rise of the shadow economy in Palestine, assesses its magnitude from 1998 to 2021 and investigates…
Abstract
Purpose
The present research aims at identifying the latent factors that are driving the rise of the shadow economy in Palestine, assesses its magnitude from 1998 to 2021 and investigates the influence that its size has on the financial sustainability of Palestine's public budget.
Design/methodology/approach
The researchers employed the multi-indicator multi-causes (MIMIC) model to estimate the size of the shadow economy and investigate its effect on the financial sustainability of the public budget. Economic factors such as direct taxes, indirect taxes, government welfare, government spending and unemployment were considered causal variables, while indicators of financial sustainability included budget deficit, public debt and gross domestic product (GDP). The shadow economy served as an intermediary variable.
Findings
Based on the findings, the researchers recommend regulating and formalizing legitimate activities within the shadow economy. Additionally, they suggest promoting investment projects to reduce unemployment rates, lowering taxes on essential goods and consumer items and providing support to local producers in Palestine. These measures aim at addressing the challenges posed by the shadow economy and fostering economic stability.
Originality/value
The study reveals that the average size of the shadow economy in Palestine between 1998 and 2021 was 43.80%, fluctuating within the range of 39.92%–46.30%. It further establishes that an increase in direct and indirect taxes as well as unemployment contributes to the expansion of the shadow economy. Conversely, government welfare and spending exert a diminishing effect. Moreover, the study finds that the rise of the shadow economy correlates with an increase in public debt, budget deficit and GDP, indicating a negative impact on the financial sustainability of the public budget.
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Toan Pham-Khanh Tran, Ngoc Phu Tran, Phuc Van Nguyen and Duc Hong Vo
The effects of government expenditure on the shadow economy have been investigated. However, the effect from a moderating factor that affects this relationship has been largely…
Abstract
Purpose
The effects of government expenditure on the shadow economy have been investigated. However, the effect from a moderating factor that affects this relationship has been largely ignored in the existing literature. This paper investigates how fiscal deficit moderates the effects of government expenditure on the shadow economy for 32 Asian countries for the past two decades since 2000.
Design/methodology/approach
The authors use various techniques, which allow cross-sectional dependence and slope homogeneity in panel data analysis, to examine this relationship in both the long run and short run. The analysis also considers the marginal effects of government expenditure on the shadow economy at different degrees of fiscal deficits.
Findings
Empirical findings from this paper indicate that an increase in government expenditure and fiscal deficit will increase the shadow economy size. Interestingly, the effects of government expenditure on the shadow economy will intensify with a greater degree of the budget deficit. The authors also find that enhancing economic growth to improve income per capita and extending international trade appears to reduce the shadow economy in the Asian countries.
Practical implications
The authors consider that policies targeting reducing shadow economy should follow conventional economic policies on economic growth, unemployment and inflation.
Originality/value
To the best of the authors’ knowledge, this is the first empirical study conducted to examine the moderating role of fiscal deficit in the government expenditure–shadow economy nexus in Asian countries.
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The budget is likely to be enacted by the end of the current fiscal year in March 2024. Rapidly increasing military spending reflects drastic changes in Tokyo’s defence policy. On…
The COVID19 crisis has thrown wide open the debate on Europe’s Economic and Monetary Union’s (EMU) future. Next Generation EU (NGEU) has broken the stalemate over a central fiscal…
Abstract
Purpose
The COVID19 crisis has thrown wide open the debate on Europe’s Economic and Monetary Union’s (EMU) future. Next Generation EU (NGEU) has broken the stalemate over a central fiscal capacity. The open question is whether NGEU is a one-off or a first step. The suspension of the Stability and Growth Pact has given new urgency to the debate on reforming EMU’s fiscal rules.
Design/methodology/approach
There is no debate as yet about how these two prospects relate to each other. This paper argues that a permanent fiscal capacity and revised rules should be seen as alternatives.
Findings
This study makes two claims: first, a fiscal capacity renders a reformed pact unnecessary and second, that is an optimal solution politically. A fiscal capacity would provide an efficient asymmetric shock absorber and therefore reduce the need for pre-emptive action against negative cross-border externalities. It would also provide an abundant supply of an EU-wide safe asset around which to structure the EU’s financial system, thus rendering unnecessary the backstopping of member states' debts.
Originality/value
This would restore democratic accountability while eliminating moral hazard and enforcement problems.
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However, because of the large surplus of 2.5% recorded in that year, Riyadh’s public debt is only about 25% of GDP, providing the government and the country’s sovereign wealth…
Details
DOI: 10.1108/OXAN-DB284692
ISSN: 2633-304X
Keywords
Geographic
Topical
Though parameters have changed and national starting positions are recognised more, the reforms are not extensive. Debt and deficit targets remain. Indebted countries, principally…
Details
DOI: 10.1108/OXAN-DB285114
ISSN: 2633-304X
Keywords
Geographic
Topical
Thi Hong An Thai and Minh Tri Hoang
Using imbalanced panel data of nonfinancial Vietnamese listed firms from 2005 to 2021, this paper explores the potential effect of ownership on firms' cash levels.
Abstract
Purpose
Using imbalanced panel data of nonfinancial Vietnamese listed firms from 2005 to 2021, this paper explores the potential effect of ownership on firms' cash levels.
Design/methodology/approach
Two hypotheses are tested using different methods, including pooled ordinary least squares (POLS) and system-generalized method of moments (GMM), to investigate the ownership–cash holding relationship for various firm scenarios. Both book and market measures of the cash ratio are examined.
Findings
Results show that foreign and state ownership encourages firms to increase their cash reserves. The positive relationship between ownership and cash holding is, especially, pronounced for firms in the financial deficit.
Research limitations/implications
This research suggests that in this emerging market, outside ownership substantially accelerates cash to hedge against the unexpected issues caused by poor investor protection, low political accountability and information asymmetry.
Originality/value
The study contributes to the existing understanding of the relationship between ownership and corporate cash holdings in the context of a typical emerging market. Besides, it expands the existing knowledge to the extent of such relations in the event of a financial shortage.
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As a result of dwindling tax revenue, he also said that state spending would be cut by EUR10bn (USD10.8bn). The government’s forecast for this year is more optimistic than…