Essays on Government Growth, Fiscal Policy and Debt Sustainability PDF Download

Author: Jan Kuckuck
Publisher:
ISBN:
Category :
Languages : en
Pages : 522

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Author: Fraser William Knox
Publisher:
ISBN:
Category :
Languages : en
Pages : 0

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This thesis consists of three essays which relate to the conduct of fiscal policy and the pricing of sovereign debt. The first chapter examines the credibility of official budgetary projections produced by the fiscal authorities of EU member states, as required under the provisions of the Stability and Growth Pact. Drawing upon existing studies, evidence is presented which demonstrates that these official projections are characterised by optimism bias, i.e. announced budgetary adjustments persistently falls short of those observed in practice. This chapter contributes to the existing literature by identifying a systematic link between the magnitude of this optimism bias and the degree of fragmentation which characterises the government: whereby greater fragmentation of this type coincides with a tendency to submit more optimistic projections. Numerical fiscal rules are then considered as a mechanism for improving the credibility of these projections and it shown that budgetary strictures of this form have been effective in reducing the optimism bias which emerges when government fragmentation increases. The second chapter investigates the relative importance of systematic risk and conventional fiscal indicators in characterising the default risks of EMU member states and as potential explanations of pricing disparities which exist between public debt securities issued by these countries. Using both a portfolio approach and Fama and Macbeth cross-sectional regressions it is demonstrated that measures of systematic default risk (approximated by an issuer's default beta) and fiscal indicators overlap in the manner of risks which they represent. It is also shown that the common variation which exists between these alternate measures is relevant in explaining difference in the excess returns on EMU public debt securities in sample periods which both include and exclude the recent sovereign debt crisis. The third and final chapter uses a panel data model to examine yield spreads on ten-year public debt securities issued by EMU sovereign nations from 2005 to 2012. Existing studies have highlighted that there are (at times) substantial discrepancies between the spreads implied this class of model and the value of spreads observed in practice, particularly since the advent of the sovereign debt crisis in late 2009. Evidence of this nature has been used to substantiate arguments that financial markets have incorrectly priced the relative risks associated with these securities given that their prices cannot be related to an assumed fundamental basis. In this chapter I present an alternative account of evolutions in EMU yield spreads during the crisis which focuses upon the scale of macroeconomic imbalances characterising certain member states and their implications for public debt sustainability. It is shown that once these factors are taken into account up to 83% of the observed variation in yield spreads can be explained over this period. These results re-establish the importance of fundamentals in understanding market based perceptions of sovereign default risk during the crisis.

Author: Lin Lang
Publisher:
ISBN:
Category :
Languages : en
Pages : 0

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Author: Pierre Aldama
Publisher:
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Category :
Languages : en
Pages : 0

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This thesis contributes to the analysis of public debt sustainability and fiscal rules. It starts from the multiple empirical evidence that points to the existence of unsustainable fiscal regimes during which fiscal policy does not increase its primary surplus following an increase of public debt. Do unsustainable fiscal regimes necessarily threaten the long-run sustainability of public debt? If not, how long can fiscal policy be periodically unsustainable without being globally unsustainable? The first chapter answers theoretically this question and proposes a Regime-Switching ModelBased Sustainability (RS-MBS) test. We study a Markov-switching fiscal policy rule, which displays an unsustainable fiscal regime, and derive sufficient conditions for the No-Ponzi Game condition and for a globally stable public debt-to-GDP ratio. The second chapter proposes an empirical application of the RS-MBS to France's fiscal policy between 1962 and 2013. It shows that taking into account regime switches can overturn former results and conclude that France's public debt has been sustainable overall the period. The third chapter considers another case of unsustainable regime, when fiscal policy is constrained by the fiscal limit, and studies the effect of public debt maturity on the debt limit. We show that longer debt maturities do not increase the stochastic default threshold when sovereign default is triggered by bad productivity shocks. Finally, the fourth chapter proposes a critical appraisal of the fiscal architecture of the EMU, based on a literature survey about fiscal sustainability, monetary-fiscal interactions and fiscal rules in monetary unions.

Author: George Kopits
Publisher: OUP Oxford
ISBN: 0191665428
Category : Business & Economics
Languages : en
Pages : 300

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Restoring Public Debt Sustainability: The Role of Independent Fiscal Institutions represents the first comprehensive survey of a new generation of independent fiscal institutions, established to promote transparency in public finances through real-time monitoring of the soundness of budgetary policymaking. The chapters, authored by heads of the institutions, as well as distinguished policy analysts and academics, explore the rationale and experience of these fiscal watchdogs. Consequently, useful lessons and implications are drawn for the design and practical operation of such institutions. The timeliness of the volume is underscored by the potential role of fiscal watchdogs in containing the public debt crisis that has engulfed a number of countries. Indeed, the recent proliferation of these institutions has been in response to the need for enhancing policy credibility of highly indebted governments in financial markets and, more generally, for strengthening the quality of economic governance. The first part of the book deals with key analytical and institutional issues: the political environment, the scope and limits of these institutions, the delegation of monetary policymaking to an independent body, and the implications of rising public indebtedness. The second part contains case studies of institutions that, for the most part, were born as a result of domestic political developments. The third part presents the experience of institutions whose origins can be traced directly or indirectly to an earlier or a recent financial crisis. The chapters are written from a multidisciplinary - economic, financial, political, legal - perspective, intended for academics, researchers, and practitioners alike.

Author: International Monetary Fund
Publisher: International Monetary Fund
ISBN: 1498344658
Category : Business & Economics
Languages : en
Pages : 257

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This paper explores how fiscal policy can affect medium- to long-term growth. It identifies the main channels through which fiscal policy can influence growth and distills practical lessons for policymakers. The particular mix of policy measures, however, will depend on country-specific conditions, capacities, and preferences. The paper draws on the Fund’s extensive technical assistance on fiscal reforms as well as several analytical studies, including a novel approach for country studies, a statistical analysis of growth accelerations following fiscal reforms, and simulations of an endogenous growth model.

Author: Beatrice Mäder
Publisher:
ISBN:
Category :
Languages : en
Pages : 0

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This thesis contains three essays in public economics. The first two chapters are concerned with the sustainability of government finances. The third chapter examines the effect of physician coverage on infant mortality. The first chapter investigates the effect of parliamentary supermajority voting requirements for the adoption of new expenditures on government spending. I analyse the introduction of supermajority voting rules in three Swiss cantons in the 1990s. I consider total current expenditures as well as spending on security, education and social security. This allows to investigate whether higher voting quorums lead to substitution effects between goods mainly public and goods mainly private in nature. The results suggest that supermajority voting rules in a legislature have no effect on expenditures independent of the necessary voting quorum and the expenditure type. The second chapter aims to calculate maximum sustainable debt ratios in advanced economies. We estimate a model based on countries' economic fundamentals. The model incorporates feedback effects between interest rates and debt ratios, allows for multi-period debt and considers different fiscal policy scenarios. Simulation methods are used to solve the model. We apply the model to a sample of 17 advanced economies. Our simulation results suggest that in a number of industrial countries a continuation of current fiscal policies is not compatible with long-run debt sustainability. The third chapter examines the effect of physician coverage on infant mortality and the incidence of common childhood diseases. We utilise historical data and variation in the regional physician density provided by discriminatory policies in Germany in 1933, when Jewish physicians were expulsed from health insurance schemes and subsequently emigrated in large numbers. The results indicate that increasing the supply of physicians can substantially reduce infant mortality, stillbirth.

Author: Banca d'Italia. Servizio studi
Publisher:
ISBN:
Category : Economic forecasting
Languages : en
Pages : 768

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Author: Fernando Maximiliano Martin
Publisher:
ISBN:
Category :
Languages : en
Pages : 107

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Author: Alfredo Schclarek Curutchet
Publisher:
ISBN:
Category : Argentina
Languages : en
Pages : 105

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