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The Effect of Fiscal Policy Shocks on Income Inequality and Household Poverty Reduction: Evidence from Nigeria

From a paper by Iyanuoluwa Fatoba and Adewumi Otonne:

“This study aims to investigate fiscal policy shocks’ impact on Nigeria’s Income Inequality and
Household Poverty. Using the impulse response function and variance decomposition technique
within the Bayesian Vector Autoregressive framework (BVAR), findings from the study show that
from year 2 to 15, a 1% shock to tax revenue (i.e., when taxes are suddenly changed) generates a
reduced average impact of 0.036% on household poverty. In contrast, household poverty increases
with shocks to government expenditure (i.e., when government expenditures are suddenly altered) in
the short run, with an average impact of 0.022%. In other words, household poverty increases in the
short run (years 2 to 4) and decreases in the medium to long run (years 5 to 15) with shocks to
government expenditure. Similarly, the results show that shocks to tax revenue reduce income
inequality (years 2 to11), and it increases the gap between the rich and the poor in the long run (years
12 to 15). Meanwhile, shocks to government expenditure increase the gap between the rich and the
poor in the short to medium run (year 2 to 6) while decreasing the gap in the medium to long run
(year 7 to15). The implication of these findings suggests that shocks to tax revenue directly benefit
low-income families and individuals in Nigeria. Moreover, as unanticipated alteration of government
expenditure increases household poverty and income inequality in the short run to medium run, any
shock to government expenditure (internal or external) should be combated with pro-poor policy
action.”

From a paper by Iyanuoluwa Fatoba and Adewumi Otonne:

“This study aims to investigate fiscal policy shocks’ impact on Nigeria’s Income Inequality and
Household Poverty. Using the impulse response function and variance decomposition technique
within the Bayesian Vector Autoregressive framework (BVAR), findings from the study show that
from year 2 to 15, a 1% shock to tax revenue (i.e., when taxes are suddenly changed) generates a
reduced average impact of 0.036% on household poverty.

Read the full article…

Posted by at 9:51 AM

Labels: Inclusive Growth

Analyzing the Divergent Effects of Oil Price Changes on BRICS Stock Markets

From a paper by Neha Gupta, Namita Sahay, and Miklesh Prasad Yadav:

“We analyse the asymmetric impact of oil prices on the stock markets of the BRICS nations. Employing the Nonlinear Autoregressive Distributed Lag (NARDL) model, we examine the weekly data spanning from October 29, 2010, to May 28, 2021 for West Texas Intermediate (WTI) spot prices in USD per barrel, alongside stock price data from official stock market indices websites. The findings reveal a substantial long-run association of oil prices with stock markets of BRICS nations except South Africa with significant asymmetry observed in both short and long-term impacts. Specifically, fluctuations in oil prices exhibit divergent effects on stock markets within these nations necessitating nuanced policy responses. Investors and portfolio managers are encouraged to adopt nonlinear models for forecasting and portfolio management leveraging asymmetric effects for risk mitigation strategies. These suggestions underscore the importance of recognizing the nonlinear and asymmetric nature of oil price dynamics in shaping investment decisions and formulating effective policy measures to mitigate associated risks in BRICS stock markets.”

From a paper by Neha Gupta, Namita Sahay, and Miklesh Prasad Yadav:

“We analyse the asymmetric impact of oil prices on the stock markets of the BRICS nations. Employing the Nonlinear Autoregressive Distributed Lag (NARDL) model, we examine the weekly data spanning from October 29, 2010, to May 28, 2021 for West Texas Intermediate (WTI) spot prices in USD per barrel, alongside stock price data from official stock market indices websites.

Read the full article…

Posted by at 9:48 AM

Labels: Energy & Climate Change

Relationship between Oil Price, Inflation, and Economic Growth in BRICS Countries: Panel Cointegration Analysis

From a paper by Aina B. Aidarova, Aissulu Nurmambekovna Ramashova, Karlygash Baisholanova, Galiya Jaxybekova, Aliy Imanbayev, Indira Kenzhebekova, and Dinmukhamed Kelesbayev:

“In 2001, Jim O’Neil coined the term “BRIC” to refer to the economies of Brazil, Russia, India and China. In 2011, South Africa joined the group, and it was updated to “BRICS.” These countries have a significant impact on the world economy, and there are numerous studies examining their macroeconomic structures. This study focuses on the relationship between economic growth, oil revenues, and inflation levels in BRICS countries from 2000 to 2021 and uses panel cointegration analysis. Many studies showed a relationship between these variables in different countries and unions. This study aims to determine if these relationships hold for BRICS countries. The results suggest a cointegration relation and a causality relation between economic growth, inflation, and oil revenues in BRICS countries. This finding demonstrates the impact of energy, specifically oil revenues, on economic growth. However, other macro indicators also affect economic growth, as suggested by existing literature. Therefore, future studies could improve on this research by including additional social and economic variables to evaluate the impact of oil revenues on economic growth from multiple perspectives.”

From a paper by Aina B. Aidarova, Aissulu Nurmambekovna Ramashova, Karlygash Baisholanova, Galiya Jaxybekova, Aliy Imanbayev, Indira Kenzhebekova, and Dinmukhamed Kelesbayev:

“In 2001, Jim O’Neil coined the term “BRIC” to refer to the economies of Brazil, Russia, India and China. In 2011, South Africa joined the group, and it was updated to “BRICS.” These countries have a significant impact on the world economy, and there are numerous studies examining their macroeconomic structures.

Read the full article…

Posted by at 7:58 AM

Labels: Energy & Climate Change

Okun’s Law, V/U and the fiscal multiplier

From a paper by Jerome Creel, and Jonas Kaiser:

“This paper investigates the stabilization property of fiscal policy by revisiting the notion of
potential output via the use of Okun’s Law including the vacancy-to-unemployment ratio (V/U)
to proxy economic slack. We propose new measures of the US fiscal stance based on observable
data and transparent targets. Our results suggest that the US actually had a more conservative
fiscal stance than official data indicate. This paper also examines fiscal multipliers, which are
larger when V/U, rather than the unemployment rate, is used as measure of economic slack. We
find that state-dependence of fiscal multipliers is as sensitive to thresholds for bad years than
to the slack measure employed in Okun’s Law.”

From a paper by Jerome Creel, and Jonas Kaiser:

“This paper investigates the stabilization property of fiscal policy by revisiting the notion of
potential output via the use of Okun’s Law including the vacancy-to-unemployment ratio (V/U)
to proxy economic slack. We propose new measures of the US fiscal stance based on observable
data and transparent targets. Our results suggest that the US actually had a more conservative
fiscal stance than official data indicate.

Read the full article…

Posted by at 8:33 AM

Labels: Inclusive Growth

Looking behind the facade of the Feldstein-Horioka puzzle

From a paper by Jan Acedański and Marek A. Dąbrowski:

“This paper provides novel insights into the Feldstein-Horioka puzzle. The famous finding of Feldstein and Horioka (1980) is that despite perfect international capital mobility, domestic saving does not flow among countries to equalise yields but instead is tightly related to domestic investment. We observe that the link between empirical results and their theoretical foundations rarely goes beyond the saving-investment identity, and the research is dominated by empirical approaches coupled with advanced econometric techniques. This paper harnesses open economy macroeconomic models to demonstrate that the saving-retention coefficient informs about the relative importance of shocks rather than the degree of international capital mobility. Using the Monte Carlo experiments and the open economy RBC model, we show that the dominance of spending and foreign shocks moves the distribution of the estimated coefficient towards zero, whereas the prevalence of investment (productivity) shocks shifts the distribution towards one. On the empirical side, we proxy shocks to saving with debt and current account surprises constructed from the IMF’s forecasts and employ them to instrument the saving ratio. Using the CCE estimator, we uncover that, in line with the theoretical framework, the saving-retention coefficient is significantly lower in the instrumental variable regressions than in the regressions without instruments. Finally, we replicate the puzzling finding that investment-saving correlations are higher in advanced economies than in emerging market economies only in a few regressions without instrumentation and demonstrate that the difference disappears when the endogeneity of the saving rate is adequately remedied.”

From a paper by Jan Acedański and Marek A. Dąbrowski:

“This paper provides novel insights into the Feldstein-Horioka puzzle. The famous finding of Feldstein and Horioka (1980) is that despite perfect international capital mobility, domestic saving does not flow among countries to equalise yields but instead is tightly related to domestic investment. We observe that the link between empirical results and their theoretical foundations rarely goes beyond the saving-investment identity, and the research is dominated by empirical approaches coupled with advanced econometric techniques.

Read the full article…

Posted by at 4:48 PM

Labels: Inclusive Growth

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