Fiscal Stimulus

The prolonged economic downturn since the onset of
the global financial crisis in 2008 and the subsequent
European sovereign debt crises continue to take a toll on
Europeans. Alongside diminished growth and depressed
rates of public and private investments, the erosion of
public trust in national and EU institutions has been one
of the most striking features of the post-crisis world.
The European Investment Bank (EIB) as the EU’s
development bank has a particularly important role to play
in this context. The 2012 capital increase is testimony
to the need to mobilise funds in times of strained public
budgets, which may be multiplied via the EIB. Similarly,
based on the analysis of persistently low public and
private investment as compared to pre-crisis levels,
Commission President Jean-Claude Juncker promised
an “investment offensive” upon taking office, with the
European Fund for Strategic Investments (EFSI) as the
main innovation. The investment fund was set up in
record time and uses the leveraged EU budget as a
guarantee to absorb any first losses private investors
may incur under projects selected, so as to mobilise
private investments that would otherwise have
been discouraged.
The use of the EU budget necessitates a higher
standard of accountability, especially in a politically
charged environment in which the European Union as
a whole is increasingly questioned. The development of
elements of participatory democracy can and should be
complemented with a demonstrative push for proactive
transparency and openness on the part of EU institutions,
including the EIB. This push that may well serve the
interest of the institutions in ensuring that citizens
appreciate their value added more than has previously
been the case.

In this context, the present study aims to assess the
transparency, integrity and accountability mechanisms
in place at the EIB.

During the international financial and economic crisis of 2008–2010 all OECD member states were facing similar albeit varying challenges. However, their reactions to the crisis greatly differed. While many states passed extensive economic stimulus packages, others solely relied on a restrictive fiscal policy even in times of economic crisis. The composition of the fiscal packages also greatly varied. While some states increased public expenditure and expanded state investments, others enacted considerable tax reductions, thus focusing on an economic stimulus by forgoing public revenue.

This paper aims to identify the main political determinants of the different fiscal policy reactions of the OECD member states to the economic crisis. The centerpiece of the comparative analysis consists of political economic determinants of the size and composition of the fiscal packages. A fuzzy-set Qualitative Comparative Analysis serves to identify the driving forces behind the fiscal policy reactions to the crisis. The conditions are derived from partisan political theory and the “Varieties of Capitalism” approach while other factors are controlled for.

This paper contributes to the understanding of the diversity of capitalism by combining approaches from comparative political economy and development studies, notably developmental state theory. We show that different types of capitalism react differently to global shocks and offer some support for the classic varieties of capitalism argument that external pressure leads to the reinforcement of historically evolved institutions. Moreover, we make several departures from established theories on the variety of capitalism, namely, their Eurocentric bias, their under-theorization of the role of the state, and the methodological “conservative bias” of institutionalist approaches.
At the empirical level, this paper studies the reaction of East Asian countries (China, Japan and Korea) to the global financial crisis with a focus on fiscal stimulus packages that were implemented from 2008 to 2010. Unlike in the West, where a (short-lived) revival of Keynesianism could be observed, East Asian governments implemented large fiscal stimulus packages with strong elements of industrial policies. This paper argues that the size and character of fiscal stimulus packages can be explained by a path dependency of developmental state capitalism. In addition, the paper examines the substantial changes in the transformation from an old-style developmental state to a “neo-developmental state.”

This study investigates the implications of models of capitalism for the responsiveness of countries’ fiscal policies during business cycles using new data for member countries of the Organization for Economic Cooperation and Development and China. We expand the literature by adding the category of East Asian nonliberal capitalism to the established distinction of liberal market economies and nonliberal coordinated market economies. These three differ substantially not just in their fiscal policies, but also in monetary policies, degree of financial market orientation, exchange rate regime, and labor market organization. As in previous studies, we find that governments of liberal economies adopt more countercyclical fiscal policies. Departing from existing studies, however, among the nonliberal models of capitalism, (East Asian) state-led models have more countercyclical fiscal policies than (European) coordinated market economies, perhaps as countercyclical as liberal economies, both historically and during the 2007–9 crisis. This is due to less independent central banks, managed float of exchange rates, and limited financial market orientation and financial openness in East Asia, which allow for more active fiscal policy. Among political factors, left-of-center governments, fractionalized party systems, and election years are associated weakly with countercyclical fiscal policy, as expected. Labor market coordination and welfare generosity have unclear roles in regard to fiscal policy, a topic for future research.

Shpenzimet e zbritshme nga të ardhurat e tatueshme janë politika më popullore aktuale për nxitjen e R&D, të ndjekura nga njohja për pjesën më të madhe të tyre, si shpenzime të njohura. Politika stimuluese të tjera, nxitin një normë amortizimi të shpenzimeve për R&D më të lartë se normat e zakonshme.

In diesem Artikel wird die Umsetzung der Konjunkturmaßnahmen 2009 analysiert. Es zeigt sich, dass statt den angekündigten mehr als 6 Mrd. Euro letztendlich nur knapp die Hälfte tatsächlich wirksam werden. Dafür werden vier wesentliche Gründe gefunden. Erstens gibt es Definitionsunterschiede: Wir argumentieren, dass Haftungen und Kredite sowie Maßnahmen, die nicht zum Zweck der Konjunktur- oder Arbeitsmarktbelebung beschlossen wurden, nicht sinnvoll als gleichwertige Konjunkturmaßnahmen addiert werden können. Zweitens war die Darstellung bei der Ankündigung oft ungenau: Die Steuersenkungen wirken etwa erst 2011 zur Gänze, ihr endgültiges Volumen wurde aber bereits 2009 mit diesem Wert angesetzt. Drittens wurden Maßnahmen verzögert umgesetzt, insbesondere im Bereich der Infrastrukturinvestitionen. Viertens war bei einzelnen Maßnahmen nicht nachvollziehbar, ob bzw. wofür zusätzliche Mittel geflossen sind.
Wir schätzen mittels der durchschnittlich publizierten Multiplikatoren der Vorstudien 2009 den tatsächlichen Wachstumsimpuls der Konjunkturmaßnahmen der Bundesregierung auf mindestens 0,4% und den zusätzlichen Beschäftigungseffekt auf über 6.000 Arbeitsplätze. Die im Vergleich zu bisherigen Studien geringeren Wachstums- und Beschäftigungsimpulse gehen – neben definitorischen Unterschieden – in erster Linie auf die Verzögerung bei den Infrastrukturinvestitionen bzw. auf die noch nicht vollständig wirksamen Steuersenkungen zurück. Gleichzeitig wird das aber dazu führen, dass die Wirkung 2010 und 2011 zum Teil höher sein wird, als bisher geschätzt wurde.
Im Internationalen Vergleich zeigt sich für 2009, dass in Österreich die Maßnahmen sehr rasch beschlossen wurden und das Gesamtvolumen in etwa dem europäischen Durchschnitt entspricht – angesichts eines weniger dramatischen Wirtschaftseinbruch umso beachtlicher. Hinsichtlich der Zusammensetzung ist zu erwähnen, dass der Anteil der permanenten Steuersenkung besonders groß ist, aber auch jener der Arbeitsmarktpakete über dem Durchschnitt liegen dürfte.

While the general discussion focuses on quantitative factors regarding the financial mania in Iceland 2003-2008, this essay focuses on qualitative precipitating factors of what might develop sociologically into a speculative financial bubble.  A comparison to studies by Robert Shiller is used. This essay is thus in essence a study of socio-economics by use of an approach often referred to in the filed of economics as behavioral finance or literary economics.  The aim is creating a different and more holistic viewpoint of past events. Some of those applicable factors are compared to the Roaring Twenties, showing a remarkable similarity between the two periods despite being 70 years apart.  The discussion should show that danger signs could not only be detected by glancing at macro numbers or balance sheets of banks but also by detecting the development of society in Iceland as a whole.

The coronavirus disease 2019, recognizable under the abbreviation
Covid-19, is an infectious disease caused by the severe acute respiratory syndrome coronavirus 2 (SARS-CoV-2). The disease appeared in Wuhan, China in December 2019, and then spread to the entire world. The imposed measures of isolation and social distancing have led to a reduction in the volume and, in many cases, a complete cessation of economic activity in many industries. In order to remedy the effects of the coronavirus, the National Bank of Serbia and the Ministry of Finance, each in their respective jurisdiction, have adopted a set of measures. The National Bank of Serbia lowered the key reference rate to support credit and economic growth, then provided additional dinar and foreign currency liquidity to the banking sector, through EUR/RSD swaps and repo auctions, and made decisions prescribing a moratorium on
debt payments. The Ministry of Finance has adopted a The Program of Economic Measures for Reducing the Negative Effects Caused by the Covid-19 Pandemic and Supporting the Serbian Economy. The Program includes tax policy measures, direct assistance to the private sector, measures to preserve liquidity for the private sector and other measures.

The Commission of Audit has handed the Abbott government a blueprint for privatisation at the exact time the pink batts inquiry is revealing the dangers of outsourcing, writes Jean Parker

On the same day that the Commission of Audit was released in Canberra, Tony Abbott’s Royal Commission into the Home Insulation Program (HIP) resumed its hearings in Brisbane. Reading like a neoliberal how-to guide, Tony Shepherd’s report calls for a new wave of outsourcing and privatisations. Yet the evidence emerging from the HIP Royal Commission provides a salutary warning for Abbott and Hockey: outsourcing government programs to the market comes at a cost.