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Article
Publication date: 23 September 2022

Saurabh Sharma, Ipsita Padhi and Sarat Dhal

This paper aims to revisit the theme of fiscal-monetary coordination in a general equilibrium setup that allows for unconventional monetary policy, monetary policy…

Abstract

Purpose

This paper aims to revisit the theme of fiscal-monetary coordination in a general equilibrium setup that allows for unconventional monetary policy, monetary policy transmission and developing country characteristics.

Design/methodology/approach

This paper uses a calibrated new Keynesian dynamic stochastic general equilibrium (DSGE) model to study fiscal-monetary interaction.

Findings

Debt sits at the center of monetary-fiscal interaction. Under high-debt conditions, the inflation-output trade-off rises with an increase in the strictness with which monetary policy targets inflation, undermining the standard prescription of strict inflation targeting. At the same time, the transmission of monetary policy is also impeded, due to which unconventional monetary policy becomes more appropriate. The need for coordination among the policies gets enhanced in the presence of borrowing cost channel. While the presence of borrowing cost channel increases the need for policy coordination regardless of the debt situation, features like higher share of non-Ricardian households and weaker monetary policy transmission affect monetary-fiscal interaction to a greater extent under high-debt environment.

Originality/value

First, this paper uses inflation-output trade-off as a metric, to analyze fiscal-monetary interaction. Second, this paper considers the impact of developing country characteristics (such as a higher share of non-Ricardian households, impeded monetary policy transmission and supply constraints/borrowing cost channel) on fiscal-monetary interaction. Third, the DSGE model developed in this paper incorporates open market operations that could shed light on the role of unconventional monetary policy in the presence of high fiscal deficit and debt, which is particularly relevant in the current context of the COVID-19 pandemic. Fourth, the model also permits an investigation into monetary policy transmission under different debt regimes.

Details

Studies in Economics and Finance, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 1086-7376

Keywords

Article
Publication date: 19 September 2022

Adams Adeiza, Queen Esther Oye and Philip O. Alege

This study examined the macroeconomic effects of COVID-19-induced economic policy uncertainty (EPU) in Nigeria. The study considered the effects of three related shocks…

Abstract

Purpose

This study examined the macroeconomic effects of COVID-19-induced economic policy uncertainty (EPU) in Nigeria. The study considered the effects of three related shocks: EPU, COVID-19 and correlated economic policy uncertainty and COVID-19 shock.

Design/methodology/approach

First, the study presented VAR evidence that fiscal and monetary policy uncertainty depresses real output. Thereafter, a nonlinear DSGE model with second-moment fiscal and monetary policy shocks was solved using the third-order Taylor approximation method.

Findings

The authors found that EPU shock is negligible and expansionary. By contrast, COVID-19 shocks have strong contractionary effects on the economy. The combined shocks capturing the COVID-19-induced EPU shock were ultimately recessionary after an initial expansionary effect. The implication is that the COVID-19 pandemic-induced EPU adversely impacted macroeconomic outcomes in Nigeria in a non-trivial manner.

Practical implications

The result shows the importance of policies to cushion the effect of uncertain fiscal and monetary policy path in the aftermath of COVID-19.

Originality/value

The originality of the paper lies in examining the impact of COVID-19 induced EPU in the context of a developing economy using the DSGE methodology.

Details

African Journal of Economic and Management Studies, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 2040-0705

Keywords

Book part
Publication date: 24 October 2018

M. S. Basnukaev, Z. A. Klukovich, A. A. Mambetova and T. M. Dodokhyan

This chapter is devoted to the problems of an optimal and economically grounded approach to tax revenue distribution among the citizens of the Russian Federation. The…

Abstract

This chapter is devoted to the problems of an optimal and economically grounded approach to tax revenue distribution among the citizens of the Russian Federation. The large territory of Russia and the inhomogeneity of the tax space make this problem more complex. The objective of this research is to determine a fiscal mechanism functioning in the state taxation system. The authors look into the methodological issues of the criteria estimates of the budget components. Having done this research, the authors grounded the augmentation of the new scientific knowledge for the fiscal policy formation aimed at improving the country’s fiscal tools.

Details

Contemporary Issues in Business and Financial Management in Eastern Europe
Type: Book
ISBN: 978-1-78756-449-7

Keywords

Book part
Publication date: 23 October 2017

Mariangela Bonasia and Rosaria Rita Canale

The aim of this chapter is to show the limits of the European policy model and to support the existence, through straightforward empirical analysis, of an inverse…

Abstract

The aim of this chapter is to show the limits of the European policy model and to support the existence, through straightforward empirical analysis, of an inverse relationship both in the short run and in the long run between trust in institutions and unemployment. The empirical methodology relies on dynamic panel data techniques allowing measuring in a single equation both the long-run relationship and the short-run speed of adjustment among variables. This connection appears to be valid both in the Eurozone considered as a whole and in particular in peripheral countries, where the macroeconomic dynamics have been, under this respect, much more divergent from the average. This outcome allows proofing that to consolidate the European process of integration in the long run, institutions should have as main objective not only inflation but especially unemployment.

Details

Economic Imbalances and Institutional Changes to the Euro and the European Union
Type: Book
ISBN: 978-1-78714-510-8

Keywords

Book part
Publication date: 18 July 2022

Peterson K. Ozili

Purpose: This chapter aims to present the arguments for and against central bank digital currency (CBDC) increasing financial inclusion. Financial inclusion is one of the…

Abstract

Purpose: This chapter aims to present the arguments for and against central bank digital currency (CBDC) increasing financial inclusion. Financial inclusion is one of the many reasons for issuing a CBDC.

Need for the study: There is a need to offer a critical perspective on the proposed financial inclusion benefits of CBDC. This is the first paper to present arguments supporting and statement against CBDC for financial inclusion.

Method: This chapter uses discourse analysis methodology to identify the arguments about CBDC promoting financial inclusion

Findings: The arguments in support of CBDC increasing financial inclusion are that CBDCs can digitise value chains, CBDCs can improve access to digital financial services, CBDCs can help to enlarge the digital economy, CBDCs can enhance the efficiency of digital payments, CBDCs can be used offline when there is no internet coverage, and CBDCs have low transaction costs. Some criticisms are that CBDC may not prioritise financial inclusion, a high price to purchase digital devices for holding a CBDC, non-interest-bearing CBDCs, the strong preference for cash over digital currency, the burdensome identification and regulatory requirements, and the imposition of transaction costs.

Implications: Overall, the arguments presented in this chapter show that there is still disagreement over whether a central bank’s digital currency can increase financial inclusion. Nevertheless, in the light of recent events, many central banks are determined to issue a CBDC for many reasons. Even though CBDCs do not achieve the intended financial inclusion objective, at least the other goals for publishing a CBDC will be performed, such as a significant reduction in cash management costs and the effective conduct of monetary policy.

Details

Big Data Analytics in the Insurance Market
Type: Book
ISBN: 978-1-80262-638-4

Keywords

Book part
Publication date: 8 November 2021

Siddhartha Chattopadhyay

Sufficiently persistent rise in nominal interest increases inflation rate in short-run. This short-run comovement of nominal interest rate and inflation rate is known as…

Abstract

Sufficiently persistent rise in nominal interest increases inflation rate in short-run. This short-run comovement of nominal interest rate and inflation rate is known as Neo-Fisherianism. This chapter proposes a policy based on Neo-Fisherianism to escape Zero Lower Bound (ZLB) using a textbook Forward Looking New Keynesian Model. I have shown that proposed policy with properly chosen inflation target and persistence can stimulate economy and escape ZLB by raising nominal interest rate. I have also shown that the proposed policy is robust to varying degrees of price stickiness.

Details

Environmental, Social, and Governance Perspectives on Economic Development in Asia
Type: Book
ISBN: 978-1-80117-594-4

Keywords

Article
Publication date: 21 June 2021

Abdelkader Derbali, Kamel Naoui and Lamia Jamel

The purpose of this paper is to examine empirically the impact of COVID-19 pandemic news in USA and in China on the dynamic conditional correlation between Bitcoin and Gold.

Abstract

Purpose

The purpose of this paper is to examine empirically the impact of COVID-19 pandemic news in USA and in China on the dynamic conditional correlation between Bitcoin and Gold.

Design/methodology/approach

This paper offers a crucial viewpoint to the predictive capacity of COVID-19 surprises and production pronouncements for the dynamic conditional correlation (DCC) among Bitcoin and Gold returns and volatilities using generalized autoregressive conditional heteroskedasticity-DCC-(1,1) through the period of study since July 1, 2019 to June 30, 2020. To assess the unexpected impact of COVID-19, this study pursues the Kuttner’s (2001) methodology.

Findings

The empirical findings indicate strong important correlation among Bitcoin and Gold if COVID-19 surprises are integrated in variance. This study validates the financialization hypothesis of Bitcoin and Gold. The correlation between Bitcoin and Gold begin to react significantly further in the case of COVID-19 surprises in USA than those in China.

Originality/value

This paper contributes to the literature on assessing the impact of COVID-19 confirmed cases surprises on the correlation between Bitcoin and Gold. This paper gives for the first time an approach to capture the COVID-19 surprise component. Also, this study helps to improve financial backers and policymakers' comprehension of the digital currencies' market elements, particularly in the hours of amazingly unpleasant and inconspicuous occasions.

Details

Pacific Accounting Review, vol. 33 no. 5
Type: Research Article
ISSN: 0114-0582

Keywords

Open Access
Article
Publication date: 2 June 2021

Junchao Li and Shan Huang

Under the background of the overall increase of China's economic policy uncertainty and the urgent need for the transformation and upgrading of the substantial economy…

1082

Abstract

Purpose

Under the background of the overall increase of China's economic policy uncertainty and the urgent need for the transformation and upgrading of the substantial economy, this paper studies the time-varying causality between China's economic policy uncertainty and the growth of the substantial economy through bootstrap rolling window causality test, further refines economic policies and studies the causal differences between different types of economic policies and substantial economic growth, refining the conclusions of previous studies.

Design/methodology/approach

This paper first studies the causal relationship between China's economic policy uncertainty and substantial economic growth in the full sample period through bootstrap Granger causality test. Then, the paper tests the short-term and long-term stability of the parameters of the VAR model, and it is found that the model parameters are unstable in both the short and long term, so the results of the Granger causality test of the full sample are not credible. Finally, we conduct a dynamic test of the causal relationship between China's economic policy uncertainty and substantial economic growth by means of rolling window, so as to comprehensively analyze the dynamic characteristics and sudden changes of the relationship between them.

Findings

The research shows that economic policy uncertainty in China has a significant inhibiting effect on the growth of substantial economy. Growth in the substantial economy will drive up economic policy uncertainty before 2016 and restrain it after that. In addition, this paper further subdivides economic policy uncertainty to explore the causal differences between different types of economic policy uncertainty and substantial economic growth. The test results show that the relationship between them has obvious policy heterogeneity. The fiscal policy uncertainty and the monetary policy uncertainty, as the main policy means in China, has a significant impact on the growth rate of substantial economy in multiple ranges, but the effect time is short. Although trade policy uncertainty has a significant impact on the growth rate of substantial economy only during the financial crisis, the effect lasts for a long time. The impact of exchange rate and capital account policy uncertainty on the growth rate of substantial economy is mainly reflected after 2020.

Originality/value

The values of this paper are as follows: First, the economic policy uncertainty is combined with the growth of substantial economy, which makes up the gap of previous studies. Second, the economic policy uncertainty is further subdivided. The paper explores the causal differences between different types of economic policy uncertainties and the growth of substantial economy, so as to make the research more detailed. Finally, different from the previous static analysis, this paper uses dynamic model to examine the relationship between China's economic policy uncertainty and the growth of substantial economy from a dynamic perspective, with richer research conclusions.

Details

Marine Economics and Management, vol. 4 no. 2
Type: Research Article
ISSN: 2516-158X

Keywords

Article
Publication date: 17 August 2021

Rafael Acevedo, Jose U. Mora and Andrew T. Young

Mora and Acevedo (2019) report that the government spending multipliers in Latin American countries are notably higher than what is typically reported for developed…

Abstract

Purpose

Mora and Acevedo (2019) report that the government spending multipliers in Latin American countries are notably higher than what is typically reported for developed economies. Latin American countries have been inclined toward using procyclical fiscal policies. Those policies have been perceived as being effective at mitigating the effects of the 2008–2009 Great Recession. This study aims to estimate the government spending multiplier using Latin American panel data from 19 Latin American countries from 2000 to 2018. The estimates are conditional on the extent of openness, capital mobility and economic freedom. Based on the results, the latter is important: the less economically free a country, the larger its spending multiplier. Lower economic freedom in Latin American countries can help to account for their large spending multipliers. In particular, restrictions on international trade are positively associated with multipliers. This is the case even while controlling the trade share of GDP.

Design/methodology/approach

The authors provide regression results that are conditional on the extent of openness, capital mobility and economic freedom.

Findings

The less economically free a country, the larger its spending multiplier. Lower economic freedom in Latin American countries can help to account for their large spending multipliers. In particular, restrictions on international trade are positively associated with multipliers. This is the case even while controlling the trade share of GDP.

Originality/value

To the best of the authors’ knowledge, this is first study to estimate the fiscal multiplier conditional on economic freedom levels. The authors provide correctly calculated multipliers conditional on different levels of economic freedom. The authors point the way to future studies considering the effectiveness of fiscal policy conditional on institutional/policy quality.

Open Access
Article
Publication date: 14 August 2020

Abdelkader Derbali, Lamia Jamel, Monia Ben Ltaifa, Ahmed K. Elnagar and Ali Lamouchi

This paper provides an important perspective to the predictive capacity of Fed and European Central Bank (ECB) meeting dates and production announcements for the dynamic…

724

Abstract

Purpose

This paper provides an important perspective to the predictive capacity of Fed and European Central Bank (ECB) meeting dates and production announcements for the dynamic conditional correlation (DCC) between Bitcoin and energy commodities returns and volatilities during the period from August 11, 2015 to March 31, 2018.

Design/methodology/approach

To assess empirically the unanticipated component of the US and ECB monetary policy, the authors pursue the Kuttner's approach and use the federal funds futures and the ECB funds futures to assess the surprise component. The authors use the approach of DCC as introduced by Engle (2002) during the period from August 11, 2015 to March 31, 2018.

Findings

The authors’ results suggest strong significant DCCs between Bitcoin and energy commodity markets if monetary policy surprises are incorporated in variance. These results confirmed the financialization of Bitcoin and commodity energy markets. Finally, the DCC between Bitcoin and energy commodity markets appears to respond considerably more in the case of Fed surprises than ECB surprises.

Originality/value

This study is a crucial topic for policymakers and portfolio risk managers.

Details

Journal of Capital Markets Studies, vol. 4 no. 1
Type: Research Article
ISSN: 2514-4774

Keywords

1 – 10 of 56