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The financial crisis of the last decade has brought to the fore many discourses on the stability of the financial system under the current interest rate regime and whether issuing more debts, that create further divergence between the financial and real sector of the economy, is a sustainable solution to the ensuing debt crisis that followed. Invigoratingeconomic development may need more than just achieving mere growth in GDP numbers and other mainstream macroeconomic key performance indices. Social equity, environmental conservation, inclusive development, and equitable income distribution are concepts that are increasingly given more weight in the measurement of economic development. The onset of the pandemic of the current decade has further emphasized the importance of these considerations as well as the concept of sharing of risks and return. This book analyses the past and current fiscal situation in Malaysia and identifies areas of improvements in the current tax system and public sector financing in generating the required revenue and financing government expenditure. The alternative fiscal framework proposed in this book covers a tax structure that features a simple and fairer tax system that is based on the ability to pay and public financing which is free of interest and provides opportunity for broader participation of the public. As Malaysia has a comprehensive framework as well as firm regulatory and government support for Islamic finance, the fiscal reform builds on an important feature of risk sharing Islamic finance that brings the real and financial sectors of the economy close together. The fiscal policy reform recommended in this book seeks to address the public debt burden, expand fiscal space, increase financial inclusion, reduce income and wealth disparities, increase employment and income for the growing population and ultimately improve social solidarity especially for a pluralistic country such as Malaysia.

In Formal and Informal Social Safety Nets, Ashraf analyses the role of social safety nets in a time when our global economy threatens our way of life, as entire cities such as Detroit are declared bankrupt, The Great Recession increased public debts across the globe and has thus reinvigorated the debate over social safety nets. Provision of social safety nets is often cited as one of the main reasons for the recent growth in public debt. In Formal and Informal Social Safety Nets, Ashraf analyses the role of social safety nets in a time when our global economy threatens our way of life, as entire cities such as Detroit are declared bankrupt. By dividing safety nets into two major categories, 'informal social safety nets' and 'formal social safety nets,' in conjunction with empirical evidence based on in-depth statistical analyses of data, Ashraf argues that government-provided, tax-funded formal social safety nets are not only essential for a modern economy, but may even promote innovation and economic growth and development

PurposeNon-performing loans (NPLs) may determine an overall weakness of the banking system within a country. The purpose of the present study is to analyze the impact of government failures on NPLs in Asian countries in the time span 2000–2020. The variables employed as proxies of government failures are public debt as % of gross domestic product (GDP) and a government ineffectiveness index proposed by the World Bank.Design/methodology/approachThe econometric approach employed is a panel generalised time series (GLS) model with heteroskedasticity and autocorrelation specific to each panel.FindingsThe results confirm that public debt as % of GDP and governmental ineffectiveness impacted significantly on NPLs for Asian countries in the observed period.Originality/valueThe literature offers similar results only for some individual Asian countries, while a wider analysis is lacking for Asian macroareas. The present paper considers 31 Asian countries, and supports the idea that a healthy financial sector is correlated to institutional quality and political regime. Hence, policy makers are advised to monitor governance indicators to reduce NPLs.

Abstract
This contribution analyses the nineteenth-century debate on one of the most hotly debated topics of Italian history: public debt and taxation. Starting in the 1850s, fiscal policies were weaponised by liberal nationalist elites and their opponents alike to promote their contrary worldviews by arguing over the merits of national unification and a parliamentary system on the basis of their fiscal outcomes. First Piedmont, then unified Italy, were eagerly expected by Catholics and Bourbon legitimists to default on their debts as a result of their moral and fiscal profligacy, while liberals were concerned about popular support for the national cause in a context of rising taxes. Southern Italy in particular was very vocal in denouncing its perceived fiscal mistreatment by the Italian government, an accusation the North rejected by portraying Southerners as unpatriotic tax evaders. Today, these narratives are re-emerging not only in public debates questioning the Risorgimento as the nation's founding myth but also in the discourse about European integration.

Historically, there are many examples of countries that have had to deal with the unpleasant consequences of economic mismanagement. A recent example is Venezuela, which has imploded into hyperinflation. It is therefore important to consider the question of fiscal sustainability in the South African context. This study ultimately aimed to test the sustainability of South Africa's fiscal policy and public debt, with fiscal policy defined as the satisfaction of the intertemporal budget constraint. The Augmented Dickey–Fuller test was used to assess the stationarity of national government revenue and national government expenditure – both expressed as percentages of GDP – while the Engle–Granger test was used to test the residuals of the regression between national government revenue and national government expenditure for a long-run relationship. A long-run relationship was found between these two variables, suggesting that fiscal policy and South Africa's public debt are sustainable. However, due to weakened institutions, the South African government should remain aware that the country's fiscal policy could easily move into unsustainable territory.

A defining feature of (at least) the last three general elections has been the emphasis placed on each political party's fiscal credibility and their ability to deliver "sound public finances". Applying the logic of household book-keeping, balancing the fiscal budget is said to capture such soundness. There is, however, little evidence that a balanced budget is necessarily sound. Instead, the evolution of public finances depends on (1) both the fiscal choices made on the level of spending and taxation, (2) the underlying growth of the economy which depends on far more than the fiscal decisions, and (3) interest rates on government debt and the financing needs of the government. As the economic situation changes, so too does the likely path of debt to GDP and hence the possible fiscal options open to a country. Sticking to the soundbite of "sound finances" has often distracted from the underlying menu of political choices and as such is a disruptive narrative in UK economics today.

AbstractThe sovereign debt crisis and the euro crisis have prompted heads of state and government in Europe to intensify supranational cooperation. However, some political leaders and policy makers aim for more. They propose the introduction of a common European economic government that would prevent Europe from experiencing further financial threats and stabilise national budgets and financial markets, as well as the euro. The results of a survey among well‐informed people imply a rather ambivalent attitude towards this venture. While a slim majority favours the general idea of centralised economic governance in Europe, or in the eurozone, the concrete ideas for the design of such a government are not popular among the respondents. A centralised macroeconomic policy, a common budget that is set centrally and using eurobonds as a common means of debt financing in the eurozone all receive limited approval. So, if they are aiming for more supranational cooperation, public and corporate policy makers need to take clear‐cut steps that offer tangible benefits that influence public opinions favourably.

This paper identifies the determinants of macroeconomic forecasts (budget balance, public debt and real GDP growth), of the governments of the 15 EU countries. We have used the forecasts of the Stability and Convergence Programmes submitted between 1998/99 and 2008/09 and the European Commission's. Results show that, in general, economic growth forecasts submitted by European governments are more optimistic than those published by the European Commission. The lack of accuracy of government forecasts is due to "misinformation" regarding the economic situation at the time of their publication. The differences between observed and forecast changes of budget balance and public debt are explained by the output growth forecast errors and the forecasts of the changes in the two fiscal indicators. These forecast changes tend to revise downwards the changes submitted in the previous Program. Therefore, the governments' "bad intention" seems to result from their lack of commitment to the objectives of previous programs and it explains the recurrent delays in the implementation of their fiscal consolidation plans.

A budget surplus arises in a country when the total revenue earnings surpass expenditures in a particular financial year. Having a budget surplus is very important in the sense that it brings about a decrease in the net public debt, while the public debt is increased in the event of a budget deficit. Both budget deficits and budget surpluses also exert indirect influences on taxpayers. Normally, it is not essential on the part of the government to maintain a budget surplus, though it needs to be very careful when running a budget deficit to have the proper buffer. � ; Od kilkunastu lat polityka fiskalna Chile jest oparta na koncepcji równowagi budżetowej. W przeciwieństwie do równowagi efektywnej, która pokazuje aktualną sytuację fiskalną, ta pierwsza odzwierciedla średnioterminową perspektywę budżetu. Nadrzędną zasadą systemu jest szacowanie wpływu netto z podatków w określonym średnim okresie. Wydatki muszą być przy tym równe wpływom. W praktyce oznacza to oszczędzanie podczas wzrostu gospodarczego oraz wydawanie uzyskanej nadwyżki w okresie, kiedy wpływy z podatków są mniejsze.

A budget surplus arises in a country when the total revenue earnings surpass expenditures in a particular financial year. Having a budget surplus is very important in the sense that it brings about a decrease in the net public debt, while the public debt is increased in the event of a budget deficit. Both budget deficits and budget surpluses also exert indirect influences on taxpayers. Normally, it is not essential on the part of the government to maintain a budget surplus, though it needs to be very careful when running a budget deficit to have the proper buffer. ; Od kilkunastu lat polityka fiskalna Chile jest oparta na koncepcji równowagi budżetowej. W przeciwieństwie do równowagi efektywnej, która pokazuje aktualną sytuację fiskalną, ta pierwsza odzwierciedla średnioterminową perspektywę budżetu. Nadrzędną zasadą systemu jest szacowanie wpływu netto z podatków w określonym średnim okresie. Wydatki muszą być przy tym równe wpływom. W praktyce oznacza to oszczędzanie podczas wzrostu gospodarczego oraz wydawanie uzyskanej nadwyżki w okresie, kiedy wpływy z podatków są mniejsze.

In the early decades of the contemporary world economy, Portugal had to perform twice difficult stabilization processes: during the 1890s as a consequence of the collapse of external and public debt payments, and during the 1920s in the wake of the First World War. This paper will analyse these Portuguese situations: the 1890s stabilization based on leaving the gold standard monetary system and on partial default of the external public debt payments led to a period of economic stagnation, which lasted until the First World War, in spite of the good international background provided by the so called belle époque; the 1920s stabilization based on a very tough fiscal adjustment opened the way to an interwar period of slight growth , in spite of the unfavourable international background provided by the problems of the 1920s and the Great Depression during the 1930s (although it was not enough to sustain the liberal republican regime, which was replaced by a military dictatorship, and later an authoritarian right-wing regime).

The purpose of this article is to analyze the principal aspects of the new regulation, the so-called "Lei de Responsabilidade na Gestão Fiscal" using the framework of the budget imbalance as a government failure. The principle of the new regulation is that if the government planning is highly detailed and the deficit is under control, we will observe neither inflation nor debt pressures. There are two great issues of control: limits to expenditures with personnel salaries and the amount of debt. The new regulation restrains the public action during the last year of mandate and deals with the importance of spreading information on fiscal issues and the public participation on the budgetary practices. Despite the good aspects of the regulation - especially on the last year of a given government's expenditures, there are still some problems: the lack of discussion on the adequate size and functions of the government and the anti-cyclical component of the government action which is despised by the law. (Rev Econ Pol/DÜI)

This paper proposes a novel theory of reserve accumulation that emphasizes the role of an independent central bank. Motivated by a positive correlation between reserve accumulation and central bank independence in Latin America, the paper develops a quantitative sovereign default model with an independent central bank that can accumulate a risk-free foreign asset. The findings show that if the central bank is more patient than the government and as patient as households are, in equilibrium, the government issues more debt than what is socially optimal, and the central bank accumulates reserves to undo government over-borrowing. A key insight is that the government can issue more debt for any level of reserves but chooses not to because doing so would increase sovereign spreads, making it more costly to borrow. Quantitatively, the analysis finds that the central bank independence channel accounts for 75 percent of the average reserve levels observed in Mexico from 1994 to 2017. Finally, the paper shows that accumulating reserves improves social welfare. Welfare gains come from reducing the costs of front-loading public spending.

This paper analyses the evolution of fiscal and monetary variables in Ghana, from the discovery of oil in 2007 through to 2014. It documents the deterioration of fiscal and monetary discipline over this period, which resulted in a rebound of debt, a deterioration of the external balance, and a decrease in public investment. The paper goes on to analyse the potential causes of this deterioration, including the political economy context, and the fiscal and monetary institutional framework. The suggested causes include the politics of Ghana's dominant two-party system. Finally, the paper discusses what Ghana could have done differently to avoid the various damaging effects associated with the oil discovery. It does not aim to provide specific fiscal policy recommendations for Ghana, but rather to give an empirical account of Ghana's experience that may be useful for other countries that discover oil.

This working paper contains some reflections on the potential consequences of the Eurozone's policy response to the Covid-19. Let's summarise them in the following bullet points: • No fiscal contraction nor money supply reduction might be expected over a period of 3-4 years. Both government deficit/debt and M3 aggregate might continue to rise to even more unprecedented amounts, at least in peacetime. The ECB's balance-sheet operations would accompany public budget expansions to prevent the Eurozone's government´s policies from financial market punishment. • As a result, austerity policies, based on fiscal contractions (public spending reduction and tax cuts) are not in the Eurozone's medium-long run horizon. Taxes simply take resources away from productive activities and cause distortions to market operators. Aggregate demand multipliers are formidable theoretical artefacts that take for granted the absence of pro-cyclical effects. A great deal of research has recently been done to refute the Keynesian tradition on the robust historical dataset. • Getting back to monetary stability would be much tougher for the Eurozone than it should be in rational terms. Sadly, I recognise that the EU's constitutional counterfeits facilitate rather than refrain from monetary disequilibria. In the absence of an EU centralised (federal), lithe governmental decision-making (comitology is omnipresent), the ECB rises like the saviour for all seasons in the shape of a universal liquidity provider. • Effectively, double-digit inflation would be the inevitable consequence of the failure of a rule-based monetary strategy for the Eurozone. Along with it, weak productivity recovery and private sector zombification pave the path to Japan-like stagflation. ; Universidad de Málaga. Campus de Excelencia Internacional Andalucía Tech.