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Budget Deficit, Primary Deficit and Ponzi Games
Get PDFThe budget deficit, defined as the excess of government expenditures over revenues within a fiscal year, is a central indicator of a nation’s fiscal health and a critical variable in macroeconomic policy analysis. This paper examines the budget deficit from both theoretical and applied perspectives, integrating definitions, classifications, and competing economic interpretations. It explores the structural, cyclical, and political economy factors that contribute to fiscal imbalances, as well as the short- and long-term economic implications of persistent deficits for debt sustainability, inflation dynamics, private sector investment, and external sector stability. Special attention is given to the interaction between the budget deficit and the balance of payments through the twin deficits hypothesis, highlighting the mechanisms by which domestic fiscal policy can influence external imbalances. The paper also discusses the principal methods of financing budget deficits and assesses their macroeconomic consequences. The analysis culminates in a case study of the Republic of Moldova, providing historical trends, policy evaluations, and an assessment of fiscal–external linkages. The findings underscore the importance of maintaining a sustainable fiscal stance through a combination of prudent expenditure management, effective revenue mobilization, and coherent coordination between fiscal and monetary policies, while recognizing the role of temporary deficits in counter-cyclical economic management
La “animal” volatilidad de la economía argentina: misperceptions, expectativas frustradas y conflicto distributivo
Get PDFThis article examines Argentina’s macroeconomic instability from two complementary perspectives. On the one hand, it revisits Daniel Heymann’s approach to expectation formation in unstable contexts and decision-making based on perceptions that may misperceive medium-term macroeconomic trends. On the other, it introduces our approach centered on “structural distributive conflict,” which emphasizes the tension between a social equilibrium —associated with the welfare aspirations of workers— and the macroeconomic equilibrium. The paper seeks to connect both approaches in interpreting Argentina’s economic volatility and its recurrent crises since the mid-20th century
Transition to inflation targeting monetary policy framework in Nigeria
Get PDFInformed by the recent run of rising and persistent inflation in Nigeria, which puts headline and food inflation at 28.2% and 32.8%, respectively, and its attendant consequences on macroeconomic performance, this study makes a case for inflation targeting as an alternative monetary policy framework to achieve the principal goal of monetary policy - price stability. We highlight from the literature and empirically explore relevant criteria that could ensure a smooth transition of the Central Bank of Nigeria to an inflation-targeting institution. First, we suggest either of the following bands for (headline) inflation targeting: 10.56-13.14%, 13.46-14.70%, or 10.90-16.47%, while the Bank can also keep a close watch on food inflation. Second, we propose some well-thought-out econometric models that the Bank can adopt to forecast inflation and determine the optimal policy rate to steer the economy. Third, we recommend legal ways of entrenching the central bank's autonomy through granting the power of appointment, dismissal, and accountability in the legislature rather than the executive to strengthen the central bank's independence. Lastly, we inform that the inflation targeting framework can be enhanced by involving the public through the periodic publication of reports, discussions at town hall meetings, and defence of the monetary policy operation with the legislature
Spatial Analysis and Time Trend Regression of Multifactorial Violence-related Death and its Connection with Public Health in Nigeria
Get PDFInterpersonal violence poses a formidable obstacle to harmonious coexistence, socioeconomic development, and public health globally, given its deleterious consequences and attendant mortality. In a multicultural society like Nigeria, violence is an unfortunate inevitability. This study undertakes a spatial analysis and Poisson time trend analysis of violence-related mortality cases in Nigeria, aiming to elucidate the dynamics, assess the public health burden, estimate relative risk, identify hotspots, and inform policy interventions to mitigate violence in severely affected areas. A total of 195,170 cases were recorded between 2006 and 2023, with Borno (46,425), Lagos (12,086), and Kaduna (10,548) accounting for 24%, 6%, and 5% of cases, respectively. In contrast, Ekiti state had the lowest number of cases (752). Notably, death rates in 2014 and 2015 accounted for 12% and 9% of all deaths rates that were attributed to violence during the period considered. The violent death rate showed clear regional differences, with over half of all deaths occurring in the North Central and North East regions. The South East and South West regions contributed 8% and 10% of the remaining share, respectively, while the North West and South South regions contributed 12% and 14%, respectively. These figures show statistically significant socioeconomic and public health differences between the country's northern and southern regions (F = 82.709, P<0.000). Analysis of relative risk showed that while Plateau, Cross River, and Anambra had constant incidence rates, 27 states had elevated relative risk and seven states had a minimal drop in violence-related death. According to the study's findings, violence can have a significant impact on the health of mothers and children, making the nation's already fragile public health situation much worse. These findings underscore the complexity of Nigeria's violence landscape, highlighting the need for targeted, region-specific interventions to address the escalating violence and its public health repercussions. Policymakers and governments at all levels must prioritize evidence-based strategies to mitigate violence and promote peaceful coexistence in Nigeria
Should Bulgaria wait for 90% real convergence before joining the Eurozone?
Get PDFIn the lively public policy debate in Bulgaria on the country joining the Eurozone, a claim is being made that real convergence of at least 90% is a crucial precondition for joining and therefore Bulgaria should wait until the early 2040s, because only then it is expected to achieve such convergence. The claim is supported with theoretical arguments, empirical evidence and forecasts. Here they are examined in some detail in the context of Bulgaria’s unique position as a country in the EU with a Currency board regime anchored in the euro. It is concluded that economic theory does not pose a requirement for any level of real convergence for an economic area to join a monetary union. In theory, problems due to a less-rich country joining a more affluent monetary union may, but also may not, cause problems such as excess inflation or amplified business cycle. It is also concluded that neither the claim that there exists a convergence threshold of 90% of real income per capita, nor the claim that Bulgaria will necessarily need at least two decades to reach it can withstand even most elementary checks for empirical robustness. Both the theoretical and the empirical claims that Bulgaria should wait for a 90% real convergence until at least the early 2040s before joining the Eurozone are found to have no real economic foundation
Asymmetric Effects of Oil Price Shocks on Economic Growth and Inflation in Asia: What do We Learn from Empirical Studies?
Get PDFAsymmetric impacts of oil price shocks on key macroeconomic variables are caused by some important effects, such as income effect, uncertainty effect, precautionary saving effect, irreversible investment and reallocation effects. Due to these effects, output and prices respond diferently to oil price increases and decreases. This asymmetry hypothesis has been empirically tested by many economists. This paper surveys recent empirical studies on the asymmetric impacts of oil price shocks on economic activity and inflation in Asia. The empirical findings in Asian economies shows that the responses of output growth oil price shocks in Japan and South Korea tend to be asymmetric while the responses of inflation seem to be symmetric. For China, the largest oil-importing in Asia, the empirical results show that asymmetry is increasingly discovered. The results of the responses of inflation to oil price shocks in China do not favor the asymmetry hypothesis. The findings in the ASEAN5 economies are likely to support the symmetry hypothesis. In South Asian economies, only few studies favor the asymmetry hypothesis. Because empirical results for other Asian countries are not widely investigated, it is too early to draw some conclusions. One important finding is that Asian oil-exporting countries, Indonesia, Malaysia, and Vietnam, might not escape the adverse impacts of oil price shocks on output growth. Since output and inflation can be unfavorably affected by oil price shocks, some researchers will recommend accommodative monetary policy along with exchange rate policy to stabilize the responses of output and prices when oil price tends to increase
The hour of trial for Europe has come (the vision from Russia).
Get PDFThe short article is devoted to the burning issue of exclusive danger hanging over Europe. A way out of the situation is achievable only in the case of unprecedented efforts on the part of the EU leadership and the national governments in the Conti-nent, supplemented by the most active participation of the European public. Then the path to required overall social progress will be feasible
The linkage of economic growth, income inequality, and military expenditure
Get PDFThis paper explores the macroeconomic linkages between economic growth, income inequality, and military expenditure, assessing their collective impact on economic development. Drawing from a broad array of theoretical and empirical studies, the analysis synthesizes perspectives from classical economic growth models, institutional economics, and modern empirical research. The findings suggest that while economic growth has historically been associated with reductions in poverty, persistent inequalities and disproportionate military spending can hinder long-term development. The paper also highlights the role of political stability, investment, and human capital accumulation in shaping economic outcomes
Performance du secteur bancaire des pays d’Afrique Subsaharienne (ASS) : les effets différenciés de la croissance économique
Get PDFThis study examines the impact of economic growth on banking sector performance for 28 Sub-Saharan African countries. To this end, the study uses a dynamic panel model based on the method of generalised moments in a system over the period 2010-2021. The results show that the estimated effects have been differentiated depending on the type of banking performance. Indeed, during the studied period, economic growth had a positive and significant effect on bank liquidity and on asset quality while the impact has been negative on bank capital adequacy ratio. This counter-performance on bank capital adequacy ratio is likely to encourage banks and prudential authorities to vigilance even in a favorable macroeconomic context
Adjusted principal component estimation for binary factor model
Get PDFIn economic decision-making, the binary factor model is widely employed to characterize decision processes and capture individuals' exposures to various factors. This paper reveals that when the binary response is factorized, additional factors emerge, including an augmented time-invariant item that can lead to overestimation of the individual effect. These findings explain why
the principal component method often produces misleading estimates when applied to binary data. To address this issue, we develop an adjusted principal component (APC) method, which modifies the eigenvalue ratio test to determine factor numbers, estimates factors in the transformed model, and recovers estimates for the original binary model. It avoids parametric error distribution specifications and initial value selection, overcoming limitations of existing iterative methods. Extensive Monte Carlo experiments
confirm APC's robustness. We then apply APC to analyze dividend initiation factors using S&P 500 data (1998-2016), demonstrating its practical effectiveness