There are many different opinions in the literature that
expansionary fiscal policies can be effective on growth during periods of
economic contraction. In this study, the effectiveness of fiscal policy is
included in empirical analysis both in theory and practice, while the results
of its interaction with monetary policy are also included. This study examines
different approaches to expansionary fiscal policies regarding the effects and
tradeoffs between fiscal expenditures-growth, expansionary tax policies-growth,
and inflation-growth. The short-term and long- term effects of fiscal policies
on growth in 110 countries for 2007-2016 were analyzed, considering the
expansionary policies of the 2007-2009 period, the effect of the primary growth
dynamics, and the interaction of monetary-fiscal policies. The results show a
holistic view and effectiveness. When looking at the fiscal policies, only
subsidies were found to be significant among the expenditure items in the short
term, with a low probability. However, no positive relationship was found with
growth. For this reason, it is observed that the fiscal policy composition
discussed within the scope of the study is not pro-growth, and resources are
inadequate or incorrectly transferred at the global level. It becomes clear
that the common area of action in monetary policy supports growth and the
importance of structural growth dynamics. Collaborating in fiscal and monetary
policies among all countries may be more pro-growth. In the processes where
growth was supported, inflation was reflected in the results where the
trade-off was more limited.
Author(s) Details:
Tugba Demirtas,
Central
Bank of the Republic of Turkiye, Istanbul, Turkiye.
Please see the link here: https://stm.bookpi.org/AOBMER-V8/article/view/13107
