How could a new universal code of conduct prevent and resolve sovereign debt crises? Proposals for design and implementation

In response to the COVID‐19 crisis, government spending around the world has increased significantly and will continue to grow as interest rates rise. In view of protracted and costly sovereign debt restructurings in the previous decades, contractual and noncontractual instruments of the Global Debt Governance‐system have been insufficient to prevent and to resolve sovereign debt crisis. While statutory and comprehensive approaches to resolve sovereign debt crises lack the political support such as an insolvency procedure for states incomprehensive contractual approaches including collective action clauses (CACs) cannot fully secure a comprehensive debt resolution. Codes of conduct could constitute an essential instrument to contribute to preventing and resolving sovereign debt crises. There are two main impediments for establishing and adopting such codes of conduct effectively. First, a range of codes of conduct with different institutional settings and principles have been established − and partly implemented − including those of the Institute of International Finance, the United Nations, the G20, the IMF and the OECD. However, differing institutional settings do not contribute to preventing or effectively resolving debt crises when the actors concerned apply different codes of conduct. We suggest a new universal code of conduct in which the elements of the various proposals made by the public and private sectors would be combined. Second, the global economic governance structure lacks incentives for creditors and debtors to adhere to this new universal code of conduct. This paper proposes measures providing incentives for creditors and debtors to apply the nonstatutory code of conduct.

The effect of increasing health disaster risk and public spending on economy conditions: a DSGE perspective

PurposeThe main motivation of the present study is to understand the severity of the effect of health shock on Iran's oil economy and analyze the role of government under these conditions.Design/methodology/approachDynamic stochastic general equilibrium (DSGE) models can show the precise interactions between market decision-makers in the context of general equilibrium. Since the duration of the virus outbreak and its effect on the economy is not known, it is more appropriate to use these models.FindingsThe results of the survey of hands-on policies scenarios compared to the state of hands-off policy indicate that the effect of government expending shocks on the economy under pandemic disease conditions has much less feedback on macroeconomic variables.Originality/valueAs a proposed policy, it is recommended that the government play a stabilizing role under pandemic disease conditions.Key messages There is no study regarding health shock and its economic effects in Iran using DSGE models. Also, in foreign studies, the health shock in an oil economy has not been modeled.The general idea in the present study is how the prevalence of a pandemic infectious disease affects the dynamics of macroeconomic variables.In three different scenarios, according to the persistence of health disaster risk and the deterioration rate of health capital due to this shock, the model is simulated.In modeling pandemic diseases, quarantine hours are considered as part of the total time of individuals.According to the research findings, it is recommended that the government, as a policy-maker, play a stabilizing role under pandemic crises conditions.

The impact of military expenditures on out of pocket healthcare payments: international evidence based on a dynamic panel data analysis

PurposeThe empirical analysis dealt in this paper emphasizes on the impact of military expenditures on out of pocket (OOP) healthcare payments. A sizeable body of defence economics literature has investigated the trade-off between military and public health expenditure, by testing the crowding-out or growth-stimulating hypothesis;does military expenditure scaling up crowd-out or promote governmental resources for social and welfare programs, including also state health financing?Design/methodology/approachIn this study, panel data from 2000 to 2018 for 129 countries is used to examine the impact of military expenditure on OOP healthcare payments. The dataset of countries is categorized into four income-groups based on World Bank's income-group classification. Dynamic panel data methodology is applied to meet study objectives.FindingsThe findings of this study indicate that military expenditure positively affects OOP payments in all the selected groups of countries, strongly supporting in this way the crowding-out hypothesis whereby increased military expenditure reduces the public financing on health. Study econometric results are robust since different and alternative changes in specifications and samples are applied in our analysis.Practical implicationsUnder the economic downturn backdrop for several economies in the previous decade and on the foreground of a potential limited governmental fiscal space related to the Covid-19 pandemic adverse economic effects, this study provides evidence that policy-makers have to adjust their government policy initiatives and prioritize Universal Health Coverage objectives. Consequently, the findings of this study reflect the necessity of governments as far as possible to moderate military expenditures and increase public financing on health in order to strengthen health care systems efficiency against households OOP spending for necessary healthcare utilization.Originality/valueDespite the fact that a sizeable body of defence economics literature has extensively examined the impact of military spending on total and public health expenditures, nevertheless to the best of our knowledge there is no empirical evidence of any direct effect of national defence spending on the main private financing component of health systems globally;the OOP healthcare payments.

THE ECONOMY AND POLICY TRADE-OFFS

Good evening. It is a pleasure and an honour to be here at NIESR to give the annual Dow lecture. We are very lucky in the UK to have high-quality independent institutions such as NIESR focusing on the policy landscape, and in my time on the MPC I have always valued their commentary and research.

Introduction: Do we really want a return to normal?

Governments in many nations responded to these upheavals with public spending programmes on vaccines and medical equipment, and financial support for businesses and workers during lockdowns and public safety mandates. Taking a visual approach to borders, through the photographic self-representations of the study's participants, Biglin finds that legal status and a sense of belonging, being at home in one's space, do not correspond. BRETT NICHOLLS is Head of Media, Film and Communication at the University of Otago in New Zealand.

Impact of Direct Taxation on Economic Growth: Empirical Evidence Based on Panel Data Regression Analysis at the Level of Eu Countries

Through fiscal policy, the government can influence businesses and individuals in order to regulate their behaviour. The research used panel data from all 27 EU countries covering the period 2008–2020 to investigate the impact of direct taxation on economic growth at the level of two main clusters of countries concerning fiscal efficiency. Therefore, the analysis employed cluster methods to classify the main EU countries in both groups of countries with a high level of fiscal efficiency and those with a rather limited level of fiscal efficiency. The study employs fixed effect models and dynamic GMM methods to investigate the effect of direct taxation components (personal and corporate income taxes) on economic growth. The analysis also considers the informal economy's role in relation to the official economy. The empirical results revealed that corporate income taxes significantly negatively impact economic growth for both clusters of high- and limited fiscal efficiency countries. Additionally, personal income tax was associated with lower economic growth for countries in the limited fiscal efficiency group. Thus, from the perspective of policymakers, lowering direct taxation can increase disposable income, stimulate consumption and economic growth, encourage investment leading to job creation, increase competitiveness, and reduce tax evasion and avoidance, thereby leading to a more efficient tax system.

Social spending and chronic unemployment: evidence from OECD countries

PurposeSocial spending is at the forefront of the tools used to repair the damage caused by the global epidemic. However, one of the most critical questions in recent days is as follows: what are the effects of social expenditures in eliminating unemployment? The primary purpose of this article is to provide empirical evidence on the impact of social spending on chronic unemployment in the selected organization for economic co-operation and development (OECD) countries.Design/methodology/approachIn this study, the data of 30 selected OECD countries between 1991 and 2018 have been compiled. First, countries have been divided into four categories according to their spending intensity to determine the effects of social spending on the long-term unemployment rate. Then, the auto-regressive distributed lag (ARDL) approach and the error correction models (ECM) examine the variables' short- and long-term interactions.FindingsThe author found that the change in the share of social expenditures in GDP affects chronic unemployment similarly. This finding is consistent with the results of studies in the literature dealing with the relationship between public sector size and unemployment. However, the research findings are specifically about the effects of social expenditures on chronic unemployment. In this respect, the results reflect that expenditures with passive characteristics have an expansionary effect on long-term unemployment. In addition, the progressive effect of social expenditures on chronic unemployment is increasing in countries with high expenditure intensity. In countries with relatively low spending intensity, the impact of social spending is limited to the short run and is lower.Originality/valueMultiple studies have reported that public policies developed in line with the incentives of active employment and public or private sector investments reduce the unemployment rate by positively affecting the output/employment level. This study, unlike other studies, focuses on the effects of social expenditures on chronic unemployment. It also compares the effects of social spending on the long-term unemployment rate for countries with varying spending intensities. Therefore, this article tests the impact of social expenditures used against a concrete socioeconomic problem in the OECD sample. In this respect, the findings contribute to the literature by addressing the relationship between social spending and chronic unemployment.

Economic Role of Government Budget Revision in the Presence of COVID-19

Fiscal policies are one of the most important instruments of government to guide the progress of the country's economic development. They find significant use in cases where the economy is experiencing a period of recession, such as the current one caused by COVID-19. This study aims to assess the multiplier effects that budget revision has on the economy for the case of Albania, and more specifically by referring to the initial and revised budget scenario for the year 2020 which is characterized by significant changes caused by the presence of COVID-19. Referring to the multipliers from the input–output tables (IOT) the total effect that the state budget brings to the economy for a certain year is derived. From this paper, it appears that the budget restructuring that takes place during the year does not take into account the multiplier effect in the economy, but is mostly done for specific purposes related to certain government functions. In this context, it is very important that various options during budget revision are evaluated, concluding with the option that has the highest returns for the economy.

Fiscal Space Policies for Sustainable Development and Debt Relief: Empirical Analysis in West African Countries

The uncertainty that the COVID-19 pandemic has brought demonstrates that income redistribution and traditional debt relief mechanisms are insufficient to meet public spending needs, mitigate external debt, and comply with the UN's Sustainable Development Goals (SDGs), which aim to reduce multilateral debt to sustainable levels. Also, West African countries have focused their attention on the long-term fight against poverty and inequality and strengthening their social programs, especially in primary health care and macroeconomic stability. However, for more than a decade, the developing and least developed countries of West Africa have faced rapidly weakening macroeconomic conditions, combining several interrelated crises such as the sharp decline in oil prices, volatile financial markets and tourism disruptions, a global recession, the crisis of climate change, and shortages of food and energy, along with the economic contraction of COVID-19. Data from these countries show that health spending increases economic growth, minimizes infant mortality rates, and reduces debt. Furthermore, increasing government spending efficiency reduces the total debt and improves the health sector, in particular.

La réaction de la France face à la pandémie de Covid-19 sous l'angle des finances publiques

La réaction française à la pandémie de Covid-19 a entraîné de considérables baisses de recettes et hausses de dépenses publiques. Faut-il pour autant la réduire à un coût pour les finances publiques ? Si celui-ci est considérable et mérite d'être précisé, la stratégie adoptée s'apparente également à bien des égards à un investissement pour l'avenir.Alternate abstract: France's strategy to address the Covid-19 pandemic led to a significant deterioration in government revenue and increase in its expenditure. Does this strategy only involves costs for public finances ? These are significant and need to be identified, but the Government policy in response to the pandemic also appears to be an investment for the future.

The impact of public sector employment on regional economic activity: countering seasonal fluctuations and economic shocks

This research documents multidimensional facets of public value provided by public sector employment in regional Australia. Evidence and estimates of the contribution and impact of public sector employment to regional labour markets and economic activity are documented for the Illawarra, South Coast and Capital regions of New South Wales, Australia. Using a mixed methods approach, results presented illustrate that public sector employment embodies a significantly larger proportion of total employment and economic activity in most regional labour markets compared to Greater Sydney or Australia in general. Other analyses reveal both counter-seasonal and countercyclical contributions of public sector income and spending to regional economic activity. The main finding of this research is that public sector employment provides a stable foundation to regional economies that are otherwise strongly influenced by seasonal patterns associated with tourism and agriculture. The importance of public sector employment to the regional economies has been amplified in recent crisis periods associated with large scale bushfires and COVID-19.

Can bigger health budgets cushion pandemics? An empirical test of COVID-19 deaths across the world

How has public healthcare spending prepared countries for tackling the COVID-19 pandemic? Arguably, spending is the primary policy tool of governments for providing effective health. We argue that the effectiveness of spending for reducing COVID deaths is conditional on the existence of healthcare equity and lower political corruption because the health sector is particularly susceptible to political spending. Our results, obtained using ordinary least squares and two-stage least squares estimations, suggest that higher spending targeted at reducing inequitable access to health has reduced COVID deaths. Consistent with the findings of others, our results indirectly suggest that health spending is necessary, but not sufficient unless accompanied by good governance and equitable access. Equitable health systems ease the effects of COVID presumably because they allow states to reach and treat people more effectively. Spending aimed at increasing health system capacity by increasing access thus seems a sound strategy for fighting the spread of disease, ultimately benefiting us all.

Information and volatility linkages between real estate, equity, bond and money markets in Australia

PurposeThe purpose of this paper is to examine information and volatility linkages among real estate, equity, bond and money markets in Australia.Design/methodology/approachA novel rational expectations framework of financial contagion (Kodres and Pritsker, 2002), along with a combination of robust statistical methods including simple and dynamic correlations and generalized impulse response (Fereidouni et al., 2014) have been employed using data covering three dynamic pre-pandemic economic cycles, namely, global financial crisis (GFC) period, pre-pandemic housing boom and pre-pandemic housing downturn from 2008 (February) to 2019 (December).FindingsResults reveal information linkages across real estate, equity, bond and money markets through correlations in return and volatilities of these series. Finding indicates that the three financial markets (equity, bond and money markets) are interdependent and integrated through information and volatility linkages during the GFC period and pre-pandemic housing downturn period. Financial markets have stronger associations with real estate market during pre-pandemic housing boom. The findings contribute to the general notion that the performances of three financial markets are closely related to the "boom” phase of the real estate cycle.Originality/valueThis research provides an extension of existing literature regarding the information and volatility contagion of the expanded set of core investment markets in Australia. The findings could assist household buyers and investors in designing strategic investment portfolios/hedging strategies and minimizing asset specific risks through diversification over short-term and long-term. In addition, results could support the maintenance, growth and development of a combination of competitive balanced investment markets including real estate, equity, bond and money markets in post-pandemic economy.

Entrepreneurial Performance: Determinants of Performance in Stimulus-Oriented Granting

Local governments consistently face challenges of economic depression and the unexpected events that precipitate them, such as COVID-19. The depressions leave governments taxed for resources, infrastructure, and time. These depressions are often helped by large infusions of federal grant dollars, otherwise known as stimulus-oriented granting. Key variables in determining success in spending these stimulus dollars include government structure and different forms of capacity. These are traditionally tested characteristics that governments already possess. What we know less about is how governments take advantage of these spending opportunities without regard to the resources that are under their control. This is referred to as entrepreneurial orientation. Using the American Recovery and Reinvestment Act (ARRA), this study tests the effect of entrepreneurial orientation, form of government, and capacity on local government spending of federal grant dollars, specifically in stimulus-oriented granting. This study has implications for other stimulus-oriented granting, such as the COVID-19-motivated, Coronavirus Aid, Relief and Economic Security Act (CARES).

Editorial Note

Despite Africa‘s endowment of natural and human resources, it still struggles with the inherent problems of governance, corruption, lack of transparency and accountability, insecurity, poverty, malnutrition, the re-emergence of military interventions, mediocrity in government, disregard for the rule of law, and fundamental human rights. These ugly conditions have adverse implications for Africa‘s economic growth and distort public spending, as well as undermine domestic revenue mobilization for sustainable development. Currently, Africa faces multiple crises emanating from the COVID-19 pandemic, the Russia-Ukraine war, and the ongoing challenges of climate change, which have collectively impugned its efforts to achieve sustainable development goals (SDGs). This precarious condition in which Africa finds itself brings to the fore the need for Africa to embrace good governance and consolidate her democracy. One of the indicators of consolidated democracy is good governance, which in the long run reduces vulnerabilities to corruption, improves service delivery both in the private and public realms, increases access to information, and promotes institutions and civil society organizations to make governments more responsible. However, in Africa, the reality is that democracy suffers limitations that undermine good governance. Although Africa has a long and chequered history, its progress and development are dogged by challenges, including leadership problems, an absence of the rule of law, and insecurity, among others.

EFFICACY OF EDUCATIONAL SPENDING IN INDIA: AN ARDL APPROACH

Education is the fundamental cornerstone in the economic and social development of any nation. It is argued as one of the basic factors which vindicates the gap between developed and underdeveloped nations. India, being a developing country, exhibits fragile spending hovering around 3 to 4 percent of total expenditure. Besides, centre as well as states jointly spent on an average 3 percent of Gross Domestic Product (GDP) during 2014-15 to 2018-19 (Economic Survey 2019-20). However, National Education Policy (NEP) 2020 recommends 6 percent of Gross Domestic Product (GDP) to be spent on education. The linkage between public spending and educational outcomes has been explored very well in the literature. However, such efforts are found mainly focussed towards developed countries. Pertinently, among the developing countries very sparse studies have been conducted in India. This paper plugs the gap by investigating the nexus between public spending and educational outcomes in the Indian context. The study concluded with the findings that spending does not prove fruitful in improving the gross enrollment rate at various levels both in the short run as well as long run.

Improvement strategy for regional financial performance affecting macroeconomics in regency/city in Jambi province

This research aims to determine the strategy for improving regional financial performance that impacts the macro-economy of regencies/cities in Jambi province. To analyze the research objectives was used a SWOT analysis mode. A secondary data analysis research method is used to obtain the data and information needed by the analytical model, which was equipped with an observation method. The results of this study conclude that the strategy for improving regional financial performance must be based on increasing regional revenue and regional expenditures through increasing regional economic growth, especially in the sub-sector and non-oil and gas sectors. The results of the study suggest increasing regional revenue and spending related to regional economic activities, increasing the acquisition of transfer funds from the central government (APBN), and increasing regional labor productivity so that it impacts the regional economy.

ASSESSMENT OF THE IMPACT OF GOVERNMENT REVENUE MOBILISATION ON ECONOMIC GROWTH IN NIGERIA

[...]this study focuses on the relationship between revenue generation and economic growth in Nigeria. [...]the study recommends economic diversification through strategic programs aimed at enhancing growth rather than remaining a mono-economy. According to Nzotta (2007), the tax system constitutes one of the very effective and efficient ways of generating internal revenue for the government. According to Alade (2017), government revenue sources comprise privatization proceeds, taxes, interest received, sale proceeds of goods, the commission received, and rent received among others.

EFFECT OF GOVERNMENT AGRICULTURAL EXPENDITURE ON ECONOMIC GROWTH: EVIDENCE FROM A DEVELOPING COUNTRY

Fiscal policy has been used by various governments to promote economic growth. The effectiveness of government expenditure on economic growth depends on recipient sector of government expenditure. This study contributes to this research area by investigating the effect of government agricultural expenditure on economic growth in the Kingdom of Lesotho. The government of Lesotho identified the agricultural sector as a productive sector that is central to the achievement the economic growth goal and development plan. Descriptive statistics and inferential econometric techniques (ARDL, DOLS and VEC Granger causality) over time-series data for the period 1982-2019 were utilized in this study. The results suggest that while current level and pattern of government agriculture expenditure cannot stimulate the desired economic growth and prosperity in the country, domestic investment appear to be a stimulant of the desired economic prosperity. Consequently, any economic growth policy or strategy that is premised on government agricultural sector expenditure would fail. Thus study recommends that countries including Lesotho should prioritize sustained increase in domestic investment.

Fiscal sustainability in highly indebted countries: evidence from Jamaica

Purpose>This study aims to explore the sustainability of Jamaica’s public debt over a highly volatile period of time.Design/methodology/approach>The authors use a suite of econometric tools, including, unit root testing, cointegration testing and estimating a fiscal reaction function. The authors control for structural breaks in the regression analysis.Findings>The authors find that whilst reschedulings might be indicative of cash-flow problems in Jamaica, fiscal policy has responded effectively to increase the public debt, thereby making the debt sustainable. Notwithstanding the political economy and social demands of the population prior to the impact of the pandemic, the implications of higher debt stocks (higher debt-servicing and lower social expenditures) might make this approach to fiscal policy and debt management infeasible. As a result, the authors recommend that the government will need to take an active approach in managing its debt position to facilitate responses to shocks and provide conditions within which maintaining fiscal discipline is feasible.Originality/value>To the best of the authors’ knowledge, this is the first study to explore fiscal sustainability in Jamaica over this time period whilst taking into consideration structural breaks caused by the global financial crisis and debt restructurings. The authors also take into consideration variables such as exchange rates and the occurrence of elections, which have not been included in previous studies.