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This paper seeks to explore the sensitivity of these parameters and their impact on fiscal policy outcomes. We use the existing literature to establish possible ranges for each parameter, and we examine how changes within these ranges can alter the outcomes of fiscal policy. In this way, we aim to highlight the importance of these parameters in the formulation and evaluation of fiscal policy.

The role of fiscal policy, its effects and multipliers continues to be a subject of intense debate in macroeconomics. Despite adopting a New Keynesian approach within a macroeconomic model, the reactions of macroeconomic variables to fiscal shocks can vary across different contexts and theoretical frameworks. This paper aims to investigate these diverse reactions by conducting a sensitivity analysis of parameters. Specifically, the study examines how key variables respond to fiscal shocks under different parameter settings. By analyzing the behavioral dynamics of these variables, this research contributes to the ongoing discussion on fiscal policy. The findings offer valuable insights to enrich the understanding of the complex relationship between fiscal shocks and macroeconomic outcomes, thus facilitating informed policy debates.

This paper aims to investigate key elements of New Keynesian Dynamic Stochastic General Equilibrium (DSGE) models. The focus is on the calibration of parameters and their impact on macroeconomic variables, such as output and inflation. The study also examines how different parameter settings affect the response of monetary policy to fiscal measures. In conclusion, this study has relied on theoretical exploration and a comprehensive review of existing literature. The parameters and their relationships have been analyzed within a robust theoretical framework, offering valuable insights for further research on how these factors influence model forecasts and inform policy recommendations derived from New Keynesian DSGE models. Moving forward, it is recommended that future work includes empirical analyses to test the reliability and effectiveness of parameter calibrations in real-world conditions. This will contribute to enhancing the accuracy and relevance of DSGE models for economic policy decision-making.

This study is motivated by the aim to provide a deeper understanding of the roles macroeconomic model parameters play concerning responses to expansionary fiscal policies and the subsequent reactions of monetary authorities. Comprehensive reviews that encompass this breadth of relationships within a single text are rare in the literature, making this work a valuable contribution to stimulating discussions on macroeconomic policies.

The study investigates the influence of inclusive growth on tax revenue. It validates the fiscal exchange and resource bargaining theories, which suggest that tax compliance improves when citizens perceive that their tax contributions lead to enhanced welfare and that the government negotiates with people to provide public goods and services in exchange for taxes received.

The paper employs inclusive growth measures, including an integrated GDP and equity growth measure and alternative proxies based on GDP per person employed and Asian Development Bank (ADB) inclusive growth indicators. Using 39 sub-Saharan African countries as a sample, our analysis captures spatial interactions across these contiguous countries using the Fixed-Effect model with the Driscoll and Kraay non-parametric consistent covariance matrix and the spatial Durbin Arellano–Bond linear dynamic panel generalized method of moment (Spatial GMM) approach with an interaction weight matrix to capture interactions between countries in the region.

The paper shows that inclusive growth positively influences tax revenue in the region. This validates the fiscal exchange and resource bargaining hypotheses, demonstrating that tax compliance is positively influenced by public goods provision and the government’s ability to emphasize the necessity of taxes for service provision. It indicates that citizens are more willing to pay taxes when the government effectively promotes welfare. We find a significant positive spatial spillover effect, suggesting that inclusive growth not only boosts tax revenue within a specific country but also extends its benefits to neighboring countries, aligning with the spillover theory.

The study posits that the government implements policies that guarantee effectiveness and accountability in public welfare delivery as well as sufficient tax bases and tax revenue. An inclusive growth policy that engenders GDP growth, employment and equity growth should be implemented since the rate of tax compliance of the citizens improves for every welfare provided by the government.

This study tests the validity of the fiscal exchange and resource bargaining theories in Sub-Saharan Africa. Accommodating spatial dependence and cross-border effects, the study sheds light on how inclusive growth impacts tax revenue across contiguous countries in the region. As such, the region should prioritize regional integration, fostering economic ties and harmonizing policies through knowledge sharing and cross-border investment.