ABSTRACT
The article discusses the determinants of fiscal policy in the times of COVID-19. Most economists share the opinion that fiscal packages are necessary to mitigate the health and economic costs of a pandemic. However, the scale of fiscal intervention and the types of fiscal policy instruments that should be used raise doubts. The aim of the article is to explore the factors determining the size and structure of fiscal packages which have been implemented globally in response to the crisis caused by the COVID-19 pandemic. In addition, attention is drawn to the potential impact of fiscal intervention on public finance sustainability, bearing in mind that most governments have chosen to use fiscal support instruments to enhance consumption and investment following the COVID-19 hit, although the cross-country differences are evident both in the magnitude and composition of fiscal stimulus packages. A descriptive analysis was conducted along with a panel data analysis to examine the determinants of government fiscal support in response to the COVID-19 crisis. The empirical analysis is based on cross-sectional data from the International Monetary Fund, OECD and Eurostat. The sample consists of 40 countries representing advanced and emerging economies. Based on the panel analysis, it was found that the total fiscal stimulus packages depended mainly on the fiscal space. Fiscal intervention in countries with greater tax-collection capacity (such as Germany, United States, United Kingdom and Japan) was greater compared to others. A positive and statistically significant relationship between the average income level and the size of fiscal stimulus was also confirmed. Moreover, it turned out that countries with larger populations and higher fatality rates provided greater fiscal support for the COVID-19 pandemic.The empirical analysis expands the existing knowledge on the determinants of the fiscal policy implemented in response to the COVID-19 crisis under the conditions of low interest rates, when macroeconomic stabilization can only be ensured through fiscal stimulus programs. © 2022 Anna Wildowicz-Szumarska, published by Sciendo.
ABSTRACT
Any economic system can be identified as cyclical fluctuations: Ups and downs in the economy, which are caused by shocks of aggregate demand and aggregate supply and called business cycles, economic or business cycles. The phases of business cycles are the rise, "peak", recession (or decline) and "bottom", i.e. the crisis. Often such fluctuations in business activity are unpredictable and irregular. At the present stage of development, the state of Ukraine is unstable and characterized by significant crisis processes and phenomena, including critical growth of debt, devaluation of the national currency and limited reserves of the National Bank, reduced lending by banks to the real sector, low financial stability and more. These challenges are exacerbated by the impact of modern global external factors destabilizing financial systems at various levels and financial and economic relations, including the COVID-19 pandemic, which raises the issue of justifying the development and implementation of effective innovative monetary and fiscal policy instruments. The authors explored the nature, components and objectives of monetary and fiscal policy. The authors analyzed the challenges of stabilizing the monetary sector and fiscal policy and developed improving tools. The authors proposed an algorithm for assessing the effectiveness of the monetary policy, where the main criteria for the effectiveness of monetary policy are the criteria that contribute to macroeconomic stability. Regarding innovative fiscal policy instruments, the authors proposed to provide targeted support for industries or projects, namely, the algorithm for determining targeted support for sectors, which implies the creation of clusters of industries and considers the possible negative consequences of the COVID-19 pandemic. The proposed instruments will allow stabilizing the economy to a greater extent, as well as to ensuring more excellent price stability, maintaining a stable exchange rate and promoting balanced economic growth. © 2021 by authors.