This paper describes the empirical regularities relating fiscal policy variables, the level of development, and the rate of growth. This study assessed on the impact of fiscal policy on economic growth in nigeria from 1981 to 2016. Introduction during the 1980s and 1990s, the vulnerability of emes to shocks was often exacerbated by high fiscal deficits, underdeveloped domestic bond markets, and largecurrency and maturity mismatches. Fiscal policy is one of the most important short term policies that can be applied at the macroeconomic level. Fiscalpolicy has today become a major instrument employed bygovts to achieve economic growth. Pdf fiscal policy and economic growth founder ship. An empirical investigation william easterly, sergio rebelo. This study investigated the impact of fiscal and monetary policy on nigerian economic growth from 1981 to 2015, with the interest in exploring which of fiscal or monetary policy has been effective in propelling economic growth in nigeria and how gdp growth responds to the monetary and fiscal policy. Fiscal policy is the means by which a government adjusts its level of. Modelling fiscal policy for stabilization and economic. According to arthur smith, fiscal policy refers to. This paper surveys the literature on fiscal policy and economic growth. It specifically aimed at assessing the governments fiscal policy over the years and how it has impacted on the nations economic growth.
Theory and evidence 293 policy options 301 annex 9a. This paper develops a generalized model of fiscal policy and output growth. Effect of monetary and fiscal policy on economic growth. We simply used descriptive statistics to show contribution of government fiscal policy to economic growth, and to ascertain and explain growth rates, and an ordinary least square ols in a multiple form to ascertain the relationship between economic growth and government expenditure.
A framework a simple framework may help to organize some of these issues. Impact of fiscal policy on nigeria economic growth 1981. Implications for fiscal policy and crosscountry differences joshua aizenman, kenneth kletzer, and brian pinto nber working paper no. Pdf the impact of fiscal policy on the economic growth of jordan. Fiscal policy for growth and development english the. In fact, governments often prefer monetary policy for stabilising the economy. Skinner, 1992, fiscal policy and growth, national bureau of economic research working paper n.
Nov 21, 2019 fiscal policy is the means by which a government adjusts its spending levels and tax rates to monitor and influence a nations economy. The study investigates the impact of fiscal policy on economic growth in nigeria for the period 19852018. Fiscal policy refers to the use of government spending and tax policies to influence macroeconomic conditions, including aggregate demand, employment, inflation and economic growth. The results provide some support for theoretical models of endogenous growth. Impact of fiscal policy on nigeria economic growth within the period of 19812016. Used properly, fiscal policy can determine the broad direction the economy of a given country is going to take.
Economic growth is one of the most important determinants of economic welfare. Monetary policy refers to policies that affect interest rates and the money supply. In this reading, we have sought to explain the practices of both monetary and fiscal policy. Econometric analysis of time series data from central bank of nigeria was conducted. Both can have a significant impact on economic activity, and it is for this reason that financial analysts need to be aware of the tools of both monetary and fiscal policy, the goals of the monetary and fiscal authorities, and most important the monetary and fiscal policy transmission mechanisms. Fiscal policy is often used in conjunction with monetary policy. The correlation between fiscal policy and economic growth. Eu budget and policy reforms to promote economic growth. Theory, markets, and policy provides complete, concise coverage of introductory macroeconomics theory and policy.
It is at the heart of the policy debate surrounding the sharp increases in official federal budget surpluses in the 1990s, the equally sharp decline in the fiscal outlook since january 2001, and the increasingly imminent retirement of the. Fiscal policy is the use of government spending and tax policy to influence the path of the economy over time. Results of regression analysis 308 notes 311 references and other resources 315 boxes 1. The impact of fiscal and monetary policy on nigerian. This paper aims to examine the role of fiscal policy on economic growth applying the endogenous growth models for sri lankafrom 1960 to 2007. F iscal policy is the use of government spending and taxation to in.
Mix of both fiscal and monetary policy needed to salvage. Boskin, michael1975 notes on the tax treat ment of human capital, compendium of. Download the full reading pdf available to members. Wide range of literature is available on the important role of fiscal policy in fastening economic growth. Eu budget and policy reforms to promote economic growth jorge nunez ferrer jorge nunez ferrer, ceps. Fiscal policy for growth and development english abstract. More subtly, the global crisis has also refocused interest in fiscal policy as an instrument for longerterm growth and development. Data were collected from the central bank of nigeria cbn statistical bulletins. The fiscal policy aims to increase the national income of a country. Nigeria open epub for fiscal policy and economic growth in nigeria. Pdf fiscal policy and economic growth in south africa. We simply used descriptive statistics to show contribution of government fiscal policy to economic growth, and to ascertain and explain growth rates, and an ordinary least square ols in a multiple form to ascertain the relationship between economic growth and government expenditure components after ensuring data stationarity.
The authors employ historical data, recent cross section data, and newly constructed public investment series. Economic and fiscal outlook march 2020 office for budget. A read is counted each time someone views a publication summary such as the title, abstract, and list of authors, clicks on a figure, or views or downloads the fulltext. Fiscalmonetary policy and economic growth in nigeria. The role of fiscal policy automatic stabilizers and discretionary fiscal policy as economic activity fluctuates, fiscal expenditures and taxes respond automatically in ways that stabilize the economy. Fiscal policy and economic growth world bank pdf book. Jun 17, 2019 fiscal policy is the use of government.
This results in economic growth, which in turn increases the gdp, per capita income and national income of the country. Boskin is a regular columnist for the economists voice. Pdf the impact of fiscal and monetary policy on nigerian. What is the effect of the fiscal policy on economic growth in jordan, measured against government spending. This is because the statute books are replete with dormant rules and regulation. The economic decisions of households can have a significant impact on an economy. Furthermore, the recent euro area crisis has underlined the importance of longterm fiscal sustainability for macroeconomic stability. It was popularized by thepublication of general theory of j.
Role of fiscal policy in economic development of under developed countries. The lack of clear evidence on how tax policy affects growth could partly be accounted for by the expenditure policies simultane ously being pursued. The effect of fiscal policy on economic growth is a controversial and longstanding topic in economic theory, empirical research, and economic policymaking. As is well known, public policy neoclassical growth models consign the role of fiscal policy to one of determining the level of output rather than the longrun growth rate kneller, et al. Country growth performance and temporary shocks, journal of monetary economics, this issue. Expansionary and contractionary fiscal policy macroeconomics.
Read online fiscal policy for growth and development world bank book pdf free download link book now. Report a mix of monetary and fiscal policy measures are need to salvage the economy from covid19, a sbi report said. I extend a wellknown model of fiscal policy volatility and output growth by including more general institutional processes. Kenya inclusive growth and fiscal management development policy financing project english abstract. Fiscal policy has recently gained prominence, both in public debate and in governments policy agendas figure 1.
Fiscal policy had its birth almost after worldwide depression in 1930. This study investigated the impact of fiscal and monetary policy on nigerian economic growth from 1981 to 2015, with the interest in exploring which of fiscal or monetary policy has been effective in propelling economic growth in nigeria and how gdp. These channels include the macro economic for example, through the influence of the budget deficit on. Its goal is to slow economic growth and stamp out inflation. Fiscal policy is the means by which a government adjusts its spending levels and tax rates to monitor and influence a nations economy. Automatic stabilizers, which we learned about in the last section, are a passive type of fiscal policy, since once the system is set up, congress need not take any further action. Friedman professor of economics and hoover institution senior fellow, stanford university. This study investigated the impact of fiscal and monetary policy on nigerian economic growth from 1981 to 2015, with the interest in exploring which of fiscal or monetary policy has been effective in propelling economic growth in nigeria and how gdp growth responds to the monetary and fiscal policy shock.
It notes that there exist a mild longrun equilibrium relationship between economic growth and fiscal policy variables in nigeria. They also position the federal government to formulate and implement economic policy. It examines the canadian economy as an economic system, and embeds current canadian institutions and approaches to monetary policy and fiscal policy. The effect of fiscal policy on economic growth in myanmar. Thus, if unemployment is regarded as too high, income and expenditure taxes may be varied to stimulate the level of aggregate expenditure demand. Using statistical software the author examines the possible correlations between fiscal policy and economic growth in three eu countries.
We find that several tax rates and expenditure categories exhibit a direct impact on the growth rate of the economy. The latest update of our forecasts was published on the 11 march 2020 in the march 2020 economic and fiscal outlook. Pdf the impact of fiscal policy on the economic growth. The purpose of the paper is to examine the effect of fiscal policy variables on economic growth in south africa. Empirical evidence from eu countries nikos benos university of ioannina june 2009 abstract. First, what are the development objectives to which fiscal policy should contribute figure 3. On the other hand, discretionary fiscal policy is an active fiscal policy that uses.
The effects of monetary and fiscal policies on economic. Fiscal policy for economic development international monetary fund. Read online fiscal policy and economic growth world bank book pdf free download link book now. Fiscal policy and economic growth an empirical investigation. All books are in clear copy here, and all files are secure so dont worry about it. In the standard neoclassical growth model, the pace of growth in output over the longrun is determined by growth in. The debate on the effectiveness of fiscal policy as a tool for promoting growth and development remains inconclusive given the positions of economic theories as well as conflicting results of past studies. Download fiscal policy and economic growth world bank book pdf free download link or read online here in pdf. The longterm impact of inflation can damage the standard of living as much as a recession. In 2012 the debate on the size of the fiscal multipliers has become even more relevant, as the economic recovery was weaker than expected in most european countries and the euro area fell into recession for a second time. This paper describes the empirical regularities relating fiscal policy variables, the level of development and the rate of. The program development objectives of the inclusive growth and fiscal management development policy financing project for kenya are to. The data were collected on annual scale from the period of 197980 to 2012.
We employ historical data, recent crosssection data and newly constructed public investment series. To this end, we estimate the impact of fiscal policy variables on total factor productivity and its implications for economic growth rates over the 20002015 period by applying a random varying coefficients growth accounting model to data from 27 oecd countries classified into four groups according to their total government outlays relative to gdp. It is the sister strategy to monetary policy through which a. The fiscal policy variables considered in the study include government gross fixed.
Keywords fiscal policy, economic, growth, public expenditure, and components. Download the full project work below in an doc editable format. This may work via changing tax rates or the rules about liability to tax or via changes in government spending on. This paper decomposes public spending and revenues into various subcategories and estimates the impact of each of them on economic growth. Ogbole, amadi, and essi 2011 wrote on fiscal policy and its impact on economic growth in nigeria 19702006. The various tools of fiscal policy such as budget, taxation, public expenditure, public works and public debt can go a long way for maintaining full employment without inflationary and deflationary forces in underdeveloped economies. Fiscal policy and economic growth zagler 2003 journal. The second type of fiscal policy is contractionary fiscal policy, which is rarely used. The hutchins center fiscal impact measure shows how much local, state, and federal tax and spending policy adds to or subtracts from overall economic growth, and. The study developed and specified a multiple regression model to establish the relationship between the dependent variable and the independent. The study deals with the impact of fiscal and monetary policies on economic growth in bangladesh.
Mix of both fiscal and monetary policy needed to salvage the economy. Ministry of finance and the public service fiscal policy paper 2018 page 1 part 1 fiscal responsibility statement introduction. The main points of these sections are summarized below. This is because fiscal policy facilitates the capital formation. Fiscal policy is the means by which a government adjusts its levels of spending in order to monitor and influence a nations economy. Download fiscal policy for growth and development world bank book pdf free download link or read online here in pdf. Furthermore, the recent euro area crisis has underlined the.
We present a unifying framework for the analysis of long run growth implications of government expenditures and revenues. The tools of contractionary fiscal policy are used in reverse. Orszag, senior fellows, the brookings institution, february 3, 2003. According to the need of the central government, bangladesh bank conducts monetary policy.
Yet, the role of fiscal policy in stimulating growth is poorly understood. He chaired the presidents council of economic advisers from 19891993. This study sought to determine the effect of fiscal policy variables on the economic growth of subsaharan african countries. These channels include the macroeconomic for example, through the influence of the budget deficit on. In the early stages of the crisis, there was a widespread turn to countercyclical fiscal stimulus. Mar 25, 2020 the hutchins center fiscal impact measure shows how much local, state, and federal tax and spending policy adds to or subtracts from overall economic growth, and provides a nearterm forecast of. Economic growth with constraints on tax revenues and public debt. Fiscal policy, public debt and monetary policy in emerging.
Fiscal policy is the general name for the federal governments taxation and expenditure decisions and activities, particularly as they affect the economy. This article aims at determining the impact of various components of fiscal policy on the nigerian economy. F15,f43,h20,o41 abstract this paper evaluates optimal public investment and fiscal policy for countries characterized. A reassessment of fiscal policy is taking place, stressing its greater role in fostering sustainable and inclusive growth and smoothing the economic cycle. This study examines the effect of fiscal policy on economic growth in myanmar. Despite the lofty place of fiscal policy in the management of the economy, the nigerian economy is yet to come on the path of sound growth and development. Fiscal policy can therefore affect a countrys economic development. The impact of fiscal deficit on nominal gross domestic product is.
Fiscal policy generally refers to the use of taxation and government expenditure to regulate the aggregate level of economic activity. Fiscal policy for economic growth stanford university. Kenya inclusive growth and fiscal management development. The study involves comparative analysis of the impact of fiscal policy on economic growth in nigeria during regulation and deregulation periods. Fiscal policy, public debt and monetary policy in emes. It examines the canadian economy as an economic system, and embeds current canadian institutions and approaches to monetary policy and fiscal policy within that system. Fiscal policy, total factor productivity and economic growth. An overview benedict clements, sanjeev gupta, and gabriela inchauste fiscal policy can foster growth and human development through a number of different channels. It means fiscal policy does not have a long run impact on economic growth.
For example, a decision on the part of households to consume more and to save less can lead to an increase in employment, investment, and ultimately profits. Pdf fiscal policy and economic growth charles shaw. Fiscal policy aims to stabilise economic growth, avoiding a boom and bust economic cycle. The global economic crisis that broke out in 2008 has reawakened interest in fiscal policy. The results provide empirical support to the notion that fiscal policy stability generates higher longrun growth. The impact of fiscal and monetary policy on nigerian economic.
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