This study investigates the validity of the twin deficits hypothesis for the Turkish quarterly data over the 1988:1-2005:2 periods. To this end, we consider a VAR variable space containing budget deficits, current account deficits, real output, real interest rates and real exchange rates and employ cointegration, equilibrium/error correction mechanism techniques along with Granger-non-causality tests and impulse response analyses. The empirical results from decompositions of the budget and current account deficits into their cyclical and structural components suggest that both CAD and BD are counter-cyclical. The twin deficit hypothesis, consistent with the conventional Mundell-Flemming framework, postulates that current account and budget deficits move together in the long run and the causality runs from the former to the latter. The results from Engle-Granger and Johansen cointegration procedures support either the twin divergence or the Ricardian equivalence postulations but not the twin deficits hypothesis. Current account deficits and budget deficits are also found to be jointly endogenous. The short-run impacts of budget deficits on current account deficits are found to be mainly through the real exchange rate and real interest rate channels.

Στην παρούσα εργασία εξετάζουμε τους προσδιοριστικούς παράγοντες των δημοσιονομικών ελλειμμάτων καθώς και των ελλειμμάτων στο ισοζύγιο τρεχουσών συναλλαγών. Επίσης, προσπαθούμε να ερευνήσουμε την επίδραση των δημοσιονομικών ελλειμμάτων στα ελλείμματα του ισοζυγίου τρεχουσών συναλλαγών (Υπόθεση δίδυμων ελλειμμάτων). Για το σκοπό αυτό χρησιμοποιούμε ένα δείγμα 27 χωρών του ΟΟΣΑ καλύπτοντας την περίοδο 1994-2006. / In this paper, we examine the determinants of budget deficits and current account deficits. Furthermore, we try to investigate the effect of budget deficits to current account deficits (Twin deficits hypothesis). For this purpose, we use a sample of 27 OECD countries covering the period 1994-2006.

In many federal countries, local governments run large deficits, even when fiscal supervision by state authorities is tight. I investigate to which extent party alignment of governments and fiscal supervisors influences budget deficits. The dataset includes 427 German local governments for the period 2000–2004. I exploit a period after a far-reaching institutional reform that entirely re-distributed political powers on both the government level and the fiscal supervisor level. Results do not show that party alignments of governments and supervisors (co-partisanship) drive short-term deficits. Instead, I find that the ideology of partisan governments and supervisors matters: left-wing local governments run higher deficits than their right-wing counterparts; left-wing supervisors tolerate higher deficits than right-wing supervisors. These findings imply that political independence for fiscal supervisors is recommended.

Borrowing money is a core instrument of governments to fund goods with high front costs andlong-term benefits. Scholars have, however, primarily associated public debt with shortsighted policies by office-seeking politicians. The three essays in this dissertation investigate the determinants and outcomes of popular preferences for investment-oriented public debt using novel voting, survey, and budgetary data. The first essay asks: Is a community more amenable to borrowing when its time horizon shortens?Existing theories argue that individuals with shorter time horizons, like seniors, have a higher inclination towards borrowing because they overvalue current consumption and discount future costs. I verify this assumption by studying how population aging affects support for debt-funded investments. Using novel data sets on U.S. state and local bond referendums over six decades, I show that, conversely, aging decreases support for debt-funded investments. Contrary to mainstream predictions, an original conjoint survey experiment further demonstrates that seniors do not have a greater preference for policies with longer repayment maturities and shorter benefit periods. Rather, aging lowers support for investments by increasing fiscal conservatism and shifting consumption away from capital-intensive goods. The effect of aging varies depending on which age groups cohabit with seniors. In particular, aging communities experiencing an influx of nonrelative children show greater opposition to new investments, while increased contact with relative children has no detectable effect on their support for investments. These findings suggest that population aging can complicate the construction of political coalitions over investments, particularly in communities with diverse age distributions. The second essay inquires: Do popular preferences affect how governments fund policies? Policy funding is often presented as technical and hardly influenced by voters. I study this assumption by investigating the effect of population aging on U.S. municipal budgets between 1970 and 2017 with the use of data on municipal finances and mayors’ characteristics. In contrast, I find that aging increases appetite for consumption-oriented policies, leading to more short-term budgeting. When a municipality’s population ages, it substitutes current expenditures for capital spending, shortens its debt maturity, and favors liquid revenues over long-term borrowing. Ultimately, this translates into lower indebtedness and higher property tax revenues. In contrast, its expenditure levels and distribution between policies remain stable as seniors’ fiscal conservatism constrains surges in spending, and seniors’ interest in property values limits cuts in municipal amenities. The effects of aging are not uniform, as municipalities ruled by elderly mayors implement debt policies more aligned with seniors’ preferences. These results contradict the dire budgetary predictions associated with aging and show that seniors’ ideological and economic motives can counterbalance their distributional demands. They also illustrate that the preferences of minorities are better represented when they elect politicians who resemble them. The last essay questions: Do voters care about how a policy is funded? Even if citizens can grasp the technicalities of public finances, policy funding may still not matter to them. Indeed, the Ricardian equivalence argues that people are indifferent about whether a policy is funded by debt or taxation because they internalize the future costs of debt repayment in their bequests. Using a novel dataset of 22,000 local referendums and two original conjoint survey experiments, I demonstrate that, conversely, voters prefer financing policies by small tax increases rather than borrowing. My surveys also reveal that respondents discriminate against policies with longer repayment periods. This result contradicts both the Ricardian equivalence’s assumption that people are indifferent to how policies allocate costs over time and the premise that people overlook future borrowing costs. Time preferences are important to explain opinions regarding debt and taxation, as each funding method distributes costs and benefits differently over time. Specifically, people’s resistance to long repayment periods lowers support for debt-funded projects. Variations in preferences between debt and tax remain after accounting for their temporal differences. My analyses indicate that preferences do not vary by policy content or relative to personal financial investments, although conservative individuals display greater support for borrowing than liberals.

A financially secure public school district can provide children with an educational foundation that will eventually transition them into self-sufficient employed adults. These adults will become tax-paying citizens who will contribute to their local economies. The problem with one midwestern public school district is that a history of financial insecurity has affected the district's ability to provide students with all of the programs to which they are entitled. Using Baumgartner and Jones' conceptualization of punctuated equilibrium as the theoretical foundation, the purpose of this quantitative study was to determine the relationship between aspects of the Local Financial Stability and Choice Act (LFSCA) in 1 state and the educational policy outcomes in 1 affected city. The educational policy outcome variables were student retention, graduation rates, college readiness, student assessments, and the annual budget balance. Secondary data were collected from the Michigan School Data website. Data included the entire school district from the periods of Fiscal Year 2007 through Fiscal Year 2016. Data were analyzed using the non-parametric chi-square test of association. The findings indicated that LFSCA legislation has a statistical association with the graduation rate increasing, student assessment scores decreasing, and college readiness rates decreasing. The effect of the LFSCA legislation was found inconclusive for the student count and the annual budget balance. The implications for positive social change include for legislators to use the findings to create performance outcome measures that provide feedback on public school districts or public institutions.

Thesis (Ph.D.)--Public Policy, Georgia Institute of Technology, 2008. / Committee Chair: Willoughby, Katherine; Committee Member: Eger, Robert; Committee Member: Kingsley, Gordon; Committee Member: Sjoquist, David; Committee Member: Wallace, Sally.

In this paper theories regarding the effect of ideology and government type on public budget deficits are put to a test. Following the least likely-method I construct panel data on Swedish municipalities between 1998 and 2014. The data includes four political variables: the local government’s ideology, majority rule, coalition rule and number of parties in the coalition, and several control variables. The results using a fixed effects-model show that there are no effects of neither ideology, majority rule, coalition rule nor the coalition’s number of parties on Swedish municipalities’ budget deficits.

This study examined whether South African government reacted to its debt positions in a sustainable manner during the period 1999 quarter 1 to 2016 quarter 2. Estimation of the fiscal reaction function was conducted by integrating the exogenous short-run impact of monetary policy stance on both primary balance and public debt positions. The VEC model approach was applied to estimate the fiscal reaction function. Results indicate that fiscal policy in South Africa was sustainable during the respective sample period while monetary policy stance had statistically significant impacts on both primary balance and public debt positions. The significant impacts of monetary policy stance on primary balance and public debt show that monetary policy contributes to ensuring fiscal sustainability in South Africa, hence government needs to harmonize monetary efforts in managing public debt. The estimated impact of the business cycle on primary balance positions indicate that fiscal policy was countercyclical in nature. / Economics / M. Com. (Economics)

Thesis (M.Com. (Economics)) -- University of Limpopo, 2022 / The primary goal of this study was to investigate the effects of budget deficit on fixed investment using annual data for the period 1990-2017 in selected African countries namely, Cameroon, Namibia, Ghana, Egypt, Seychelles, Mauritius, Botswana, Lesotho and South Africa. The study employed panel unit root tests including the Augmented Dickey-Fuller test, Philips Perron test and Levin Lin and chu test. The tests revealed that all the variables are integrated at 1st difference. The study further employed the Panel ARDL bounds test to examine the relationship between budget deficit, fixed investment, money supply and inflation. The empirical findings indicated that a long run relationship exists between the variables of interest. Furthermore, the results revealed that the budget deficit has a negative and statistically significant effect on fixed investment. A one percent increase in the budget deficit, ceteris paribus, leads to a reduction in fixed investment by 44 percent in the long run. The findings further postulated a bidirectional causal relationship between budget deficit and fixed investment, between money supply and fixed investment and between fixed investment and inflation. It was evident in the research that indeed the budget deficit is a problematic macroeconomic policy in African countries. Policy makers should limit high government expenditures as they contribute to increased and persistent budget deficits which crowd out private investment.

Unanticipated economic fluctuations exert pressure on state governments to adjust their discretionary fiscal policies to accommodate the changing fiscal situation. Even though states adjust fiscal policy as the economy fluctuates, the typical cyclical economic factors are not the sole determinant of such adjustments. State governments budgeting systems in the United States operate under a variety of budgetary institutions. The most prominent state government budgetary institutions include balanced budget rules (BBRs), tax and expenditure limits (TELs), and supermajority voting requirements for tax increases. This dissertation examines how these budgetary institutions affect state government choices of fiscal policy under different economic conditions. To better understand the effect of state level TELs, a stringency index of state level TEL is constructed considering the major structural features. The fixed-effect panel regressions are used for the analysis of impact of TEL and BBR and tax changes and the fixed-effect Tobit is adopted to test the impact of TEL and BBR on spending cuts after the budget is adopted. The result suggests that TEL plays a more important role affecting states discretionary fiscal adjustment from the tax side, while BBR plays a more important role affecting states discretionary fiscal adjustment from the expenditure side. Results of this research show that TEL exerts pressure on states that hinder state ability to deal with volatile fiscal situations, especially in the case of periods of budget crises.