Government Spending Effects In Low Income Countries

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Government Spending Effects In Low Income Countries

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Author : Ms.Wenyi Shen
language : en
Publisher: International Monetary Fund
Release Date : 2015-12-30

Government Spending Effects In Low Income Countries written by Ms.Wenyi Shen and has been published by International Monetary Fund this book supported file pdf, txt, epub, kindle and other format this book has been release on 2015-12-30 with Business & Economics categories.

Despite the voluminous literature on fiscal policy, very few papers focus on low-income countries (LICs). This paper develops a new-Keynesian small open economy model to show, analytically and through simulations, that some of the prevalent features of LICs—different types of financing including aid, the marginal efficiency of public investment, and the degree of home bias—play a key role in determining the effects of fiscal policy and related multipliers in these countries. External financing like aid increases the resource envelope of the economy, mitigating the private sector crowding out effects of government spending and pushing up the output multiplier. The same external financing, however, tends to appreciate the real exchange rate and as a result, traded output can respond quite negatively, reducing the overall output multiplier. Although capital scarcity implies high returns to public capital in LICs, declines in public investment efficiency can substantially dampen the output multiplier. Since LICs often import substantial amounts of goods, public investment may not be as effective in stimulating domestic production in the short run.

The Distributional Effects Of Government Spending Shocks In Developing Economies

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Author : Davide Furceri
language : en
Publisher: International Monetary Fund
Release Date : 2018-03-14

The Distributional Effects Of Government Spending Shocks In Developing Economies written by Davide Furceri and has been published by International Monetary Fund this book supported file pdf, txt, epub, kindle and other format this book has been release on 2018-03-14 with Business & Economics categories.

We construct unanticipated government spending shocks for 103 developing countries from 1990 to 2015 and study their effects on income distribution. We find that unanticipated fiscal consolidations lead to a long-lasting increase in income inequality, while fiscal expansions lower inequality. The results are robust to several measures of income distribution and size of the fiscal shocks, to an alternative identification strategy, across expansions and recessions and across country groups (low-income countries versus emerging markets). An additional contribution of the paper is the computation of the medium-term inequality multiplier. This is on average about 1 in our sample, meaning that a cumulative decrease in government spending of 1 percent of GDP over 5 years is associated with a cumulative increase in the Gini coefficient over the same period of about 1 percentage point. The multiplier is larger for total government expenditure than for public investment and consumption (with the former having larger effect), likely due to the redistributive role of transfers. Finally, we find that (unanticipated) fiscal consolidations lead to an increase in poverty.

The Effects Of Government Spending Under Limited Capital Mobility

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Author : Ms.Wenyi Shen
language : en
Publisher: International Monetary Fund
Release Date : 2012-05-01

The Effects Of Government Spending Under Limited Capital Mobility written by Ms.Wenyi Shen and has been published by International Monetary Fund this book supported file pdf, txt, epub, kindle and other format this book has been release on 2012-05-01 with Business & Economics categories.

This paper studies the effects of government spending under limited international capital mobility, as featured by most developing countries. While external financing of government debt mitigates the crowding-out effect, it generates real appreciation, which contracts traded output and lowers the fiscal multiplier in the short run. The decline of the multiplier is larger when facing debt-elastic country risk premia. Also, government spending is more expansionary with more home bias in government purchases, more sectoral rigidities, and a less flexible exchange rate. Whether the twin-deficit hypothesis holds depends crucially on the extent to which government deficits are financed externally.

Exploring The Output Effect Of Fiscal Policy Shocks In Low Income Countries

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Author : Mr.Jiro Honda
language : en
Publisher: International Monetary Fund
Release Date : 2020-01-17

Exploring The Output Effect Of Fiscal Policy Shocks In Low Income Countries written by Mr.Jiro Honda and has been published by International Monetary Fund this book supported file pdf, txt, epub, kindle and other format this book has been release on 2020-01-17 with Business & Economics categories.

What do we know about the output effects of fiscal policy in low income countries (LICs)? There are very few empirical studies on the subject. This paper fills this gap by estimating the output effects of government spending shocks in LICs. Our analysis—based on the local projection method—finds that the output effects in LICs are markedly lower than those in AEs and marginally smaller than those in EMs. We also find that in LICs, the output effects are larger (i) during recessions; (ii) under a fixed exchange rate regime; and/or (iii) with higher quality of institutions. Our analysis could not confirm any statistically significant output effect under floating exchange rate regimes. For the estimation of the output effects of fiscal spending shocks, it is thus important to consider the state of the economy and the country’s structural characteristics. Our results imply that the output costs of fiscal adjustment in LICs may not be as large as previously thought, especially if adopted outside of a recession, based on cutting public consumption, and accompanied by reform to enhance institutions.

Public Expenditure Handbook

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Author : Mr.Ke-young Chu
language : en
Publisher: International Monetary Fund
Release Date : 1991-09-15

Public Expenditure Handbook written by Mr.Ke-young Chu and has been published by International Monetary Fund this book supported file pdf, txt, epub, kindle and other format this book has been release on 1991-09-15 with Business & Economics categories.

This handbook, edited by Ke-young Chu and Richard Hemming, offers guidance to officials formulating public policy recommendations, so that the aggregate level of public spending conforms with the economy's overall resource capacity. The handbook looks at the impact of public spending on the efficiency of resource use and explores the basis for distinguishing between productive and unproductive spending.

Efficiency And Equity In Social Spending

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Author : Nancy Birdsall
language : en
Publisher: World Bank Publications
Release Date : 1990

Efficiency And Equity In Social Spending written by Nancy Birdsall and has been published by World Bank Publications this book supported file pdf, txt, epub, kindle and other format this book has been release on 1990 with Desarrollo social categories.

In most countries it is easy to identify reallocations of public spending for social programs that would improve efficiency and simultaneously improve the distribution of income and better serve the poor. The authors suggest why these reallocations are difficult but not impossible to bring about.

Government Expenditure And Economic Growth

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Author : International Monetary Fund
language : en
Publisher: International Monetary Fund
Release Date : 1989-05-15

Government Expenditure And Economic Growth written by International Monetary Fund and has been published by International Monetary Fund this book supported file pdf, txt, epub, kindle and other format this book has been release on 1989-05-15 with Business & Economics categories.

This paper examines the empirical evidence on the contribution that government and, in particular, capital expenditure make to the growth performance of a sample of developing countries. Using the Denison growth accounting approach, this study finds that social expenditures may have a significant impact on growth in the short run, but infrastructure expenditures may have little influence. While current expenditures for directly productive purposes may exert a positive influence, capital expenditure in these sectors appears to exert a negative influence. Experiments with other explanatory variables confirm the importance of the growth of exports to the overall growth rate.

The Effects Of Government Spending Under Limited Capital Mobility

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Author : Wenyi Shen
language : en
Publisher:
Release Date : 2012-05-01

The Effects Of Government Spending Under Limited Capital Mobility written by Wenyi Shen and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2012-05-01 with categories.

This paper studies the effects of government spending under limited international capital mobility, as featured by most developing countries. While external financing of government debt mitigates the crowding-out effect, it generates real appreciation, which contracts traded output and lowers the fiscal multiplier in the short run. The decline of the multiplier is larger when facing debt-elastic country risk premia. Also, government spending is more expansionary with more home bias in government purchases, more sectoral rigidities, and a less flexible exchange rate. Whether the twin-deficit hypothesis holds depends crucially on the extent to which government deficits are financed externally.

Public Finance And Economic Growth

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Author : Matthew O. Odedokun
language : en
Publisher:
Release Date : 2001

Public Finance And Economic Growth written by Matthew O. Odedokun and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2001 with Developing countries categories.

Growth Governance And Fiscal Policy Transmission Channels In Low Income Countries

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Author : Naoko C. Kojo
language : en
Publisher: International Monetary Fund
Release Date : 2003-12-01

Growth Governance And Fiscal Policy Transmission Channels In Low Income Countries written by Naoko C. Kojo and has been published by International Monetary Fund this book supported file pdf, txt, epub, kindle and other format this book has been release on 2003-12-01 with Business & Economics categories.

Private investment is the principal transmission channel through which fiscal policy affects growth in high-income countries. In low-income countries, governance and also other considerations suggest that the primary channel is factor productivity. Empirical results reported in this paper confirm this expectation: in low-income countries, factor productivity is some four times more effective than investment as a channel for increasing growth through fiscal policy. Although the private investment response to fiscal contraction may be minor, high-deficit, low-income countries can nonetheless benefit from a reduction in unsustainable fiscal deficits because of governance-related factor productivity responses that increase growth.