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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.

Details

Journal of Financial Economic Policy, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 1757-6385

Keywords

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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. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 0114-0582

Keywords

Content available
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…

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. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 2516-158X

Keywords

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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

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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

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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

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Article
Publication date: 17 December 2020

Wondemhunegn Ezezew Melesse

Public debt management is now an integral part of overall macroeconomic management in many developing and emerging market economies. Preventing unsustainable debt…

Abstract

Purpose

Public debt management is now an integral part of overall macroeconomic management in many developing and emerging market economies. Preventing unsustainable debt accumulation and maintaining healthy fiscal profile begins with understanding its key drivers both in the short and in the long run. The purpose of this paper is to analyze public debt and current account dynamics in Ethiopia.

Design/methodology/approach

This study applies structural vector auto-regressive (SVAR) model on annual time series data to study general government debt and current account dynamics in Ethiopia for the period 1980–2018.

Findings

Both the impulse response and forecast error variance decomposition results confirm that fiscal balance exerts the strongest influence on both government debt and current account balance in the short run. In addition, own shock as well as shocks stemming from gross fixed capital formation and growth have significant effects on general government debt. The findings were robust to alternative data transformation, differing Choleski ordering of the model variables, and inclusion of exogenous deterministic terms that capture changes in the political landscape.

Practical implications

The most important implication is that since fiscal balance is the strongest determinant of both public debt and current account balance, public investment efficiency is relevant here than anywhere else in the national economy. A recent study by Barhoumi et al. (2018) found that the sub-Saharan region lags behind its peers in terms of public sector investment efficiency with inefficiency gap of as large as 54% depending on the indicator variable for public investment output. Improving public investment spending efficiency would reduce government debt by enhancing productivity and growth – which has significant negative effect on public debt.

Originality/value

First, the few studies conducted on Ethiopia are dominated by single equation specifications and do not account for the possibility of endogenous feedback effects among the model variables. Second, still equally important is the role of rising gross fixed capital formation in Ethiopia, which increased from about 13% (relative to GDP) in the 1980s to about 35% in the 2010s. Ignoring this variable amounts to a major model misspecification when analyzing short-run macro dynamics in low-income economies. Finally, the paper complements existing limited studies on Ethiopia by comparing the strength of shock propagation mechanisms using alternative data transformation techniques.

Details

Journal of Economic and Administrative Sciences, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 1026-4116

Keywords

Content available
Article
Publication date: 19 November 2020

María Dolores Gadea and Isabel Sanz-Villarroya

The purpose of this study is to focus deeply on the short term to explain the relative long-term evolution of the Argentinian economy in the long and the short term.

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Abstract

Purpose

The purpose of this study is to focus deeply on the short term to explain the relative long-term evolution of the Argentinian economy in the long and the short term.

Design/methodology/approach

The study of the long-term evolution of the Argentine economy and identifying the moment in which it began to lose ground compared to other developed economies, such as Australia and Canada, constitutes the central axis of the historiography of this country. However, an additional problem presented by the Argentine economy is its high volatility. For this reason, the long term should be influenced by the short term, an issue that requires a more detailed study of the cyclical behavior and a deep analysis of the relationship between the long and the short term.

Findings

The results obtained point to a cyclical development that influences the long-term evolution and, therefore, explains Argentina’s convergence process with Australia and Canada. Frequent deep busts and short booms characterize the Argentine cycle, offsetting its long-term growth potential.

Originality/value

Although the long term has been profusely studied in Argentina, the short term has not been analyzed to the same extent, which is surprising given the extreme volatility of this economy (Prebisch, 1950). The studies performed on economic cycles have always been partial, disconnected from the long term and carried out without much technical rigor.

Details

Applied Economic Analysis, vol. 28 no. 84
Type: Research Article
ISSN:

Keywords

Content available
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…

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489

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

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Article
Publication date: 22 April 2020

Sasa Randjelovic

This paper evaluates the economic, political and institutional determinants of variation in public investment in emerging Europe.

Abstract

Purpose

This paper evaluates the economic, political and institutional determinants of variation in public investment in emerging Europe.

Design/methodology/approach

Panel econometrics (panel-corrected standard error, generalized least squares and the two-stage least squares) methods have been applied using annual data from 2000 to 2017 for 16 countries from Central and Eastern Europe (CEE).

Findings

Public investment was procyclical in relation to output and negatively associated with the level of public debt. Austerity episodes triggered a significant drop in public investment. Positive drifts in public investment during election periods and the negative impact of the number of cabinet seats held by left-wing parties have been captured. While no firm evidence on the impact of EU membership was found, the results show that arrangements with the IMF were strongly associated with lower public investment. Political factors were of greater importance in Central Europe and the Baltics, while institutional factors had a more significant impact in South Eastern Europe.

Practical implications

To foster public capital formation, it is necessary to: 1) strengthen the countercyclicality of public investment policy and to keep public debt at a low level; 2) adjust the fiscal criteria for EU membership in a manner that would enable countries to use the EU structural fund more effectively, while maintaining fiscal sustainability; 3) put a stronger emphasis on structural features of fiscal policy when designing country-level arrangements with the IMF.

Originality/value

The paper contributes to the literature on determinants of public investment policy by adding empirical evidence for emerging Europe countries.

Details

International Journal of Emerging Markets, vol. 16 no. 3
Type: Research Article
ISSN: 1746-8809

Keywords

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