High and volatile fiscal deficits may be harmful to welfare, for instance, debtto. Moreover, many believe that such effects of the budget. This process was aggravated during the 1980s by rising real interest rates, which significantly and often unexpectedly. Sachs, determinants oj budget deficits in industrial democrucies increasing role of the government in modern industrial economies. Addis ababa university school of graduate studies the sources of the recent inflationary experience in ethiopia a thesis submitted to the school of graduate studies of addis ababa university in partial fulfillment of the requirements for the degree of master of science in economics international economics by. The means of financing the budget deficit has shifted from external to domestic bank and non bank sources. Seasonality and determinants of child growth velocity and. Bader and magableh 2009 in their part analyzed the determinants of external debt accumulation in jordan and the result indicates that budget deficit, size of external debt, and saving gap were the variables that affect external debt. The increase in exports is associated with significant reduction in the current account only.
A macroeconomicdemographic model for ethiopia by asmerom kidane. However, foreign reserves explain the largest component variation of budget deficit followed by foreign debt, unemployment, economic growth. Introduction investment is an act of current spending for expected future return. This study adopted exploratory design which attempted to examine the determinants of fiscal deficit. The focus of this paper is to identify determinants of tax revenue in ethiopia by using a secondary data and multiple variables regression model using ols method. The use of domestic means of deficit financing as percentage of budget deficit has grown from 34. The present study aims at investigating both demand and supply side determinants of inflation on the basis of statistical criterion as well as on economic criterion and also to trace out causal effects of some macroeconomic.
Project muse the determinants of price inflation in the. Our results suggest that changes in the money supply, the wage rate, the budget deficit and energy prices are important determinants of the inflation rate in the united states. Analysis of equilibrium relationship among government. The study was guided by one objective which was to analyze the determinants of fiscal deficits in kenya. Among these most striking effect of budget deficits is on inflation. However, there are other approaches to explain the determinants of trade balance balance of payments such as the absorption approach and the monetary approach. The study is essential because its results can be used to help policy maker take appropriate option when raising tax. The effect of government budget deficit on monetary. The determinants of individual income tax compliance 3. Munich personal repec archive determinants and potentials of foreign trade in ethiopia.
The main component of ethiopias considerable current account deficit is the merchandise trade deficit. Deficits can be financed by other sources such as borrowing from the market which also indirectly affects inflation. Using the ols estimates for a data range from 1995 to 2011, we reached the conclusion that there are some negative influences of real gdp growth and inflation rate on budget deficit and also, that among these two determinants, the one period lagged budget deficit. Ethiopia faces cyclic food insecurity that alternates between pre and post harvest seasons. Political and economic determinants of oecd budget. A gravity model analysis yeshineh, alekaw kebede 2016. Challenges and prospects of industry parks in enhancing. Among those who contributed to the role played by budget deficits is hobbes 1651 who credited the government as the solitary provider of a decent life. The determinants of budget deficit in ethiopia free download as word doc. Pdf the economic determinants of budget deficits in. Due to the contrasting results obtained in previous studies, in this paper we investigate the shortrun and longrun effects of unemployment rate, longterm interest rate, trade openness, budget deficit, money supply, economic growth rate and exchange rate on u. This page provides ethiopia government debt to gdp actual values, historical data, forecast, chart, statistics, economic calendar and news. Thus, budget deficit and deficit financing are two different concepts. The economic determinants of budget deficits in south africa.
In order to improve the trade balance, two approaches to. Budget approval and the role of the legislature 270 notes 276 references 277. A case of north gondar zone, amhara regional state tsega hagos mirach1 and yemane michael hailu2 1lecturer in economics, school of economics, college of business and economics, university of gondar, gondar, ethiopia 2 phd candidate at addis ababa university, college of business and economics, addis. The list is mainly based on cia world factbook for the year 2016 and 2019. Ethiopia faces big budget deficit due to combine effect of very rapid increase in expenditure and lower increase in revenue. Using investor level information some of the constraints to entry, operation and expansion of private investment in ethiopia were also identified. Nevertheless, shocks that increase cause to appreciate. As a result, ethiopia has faced budget deficit every year since. Budget deficit is a narrower concept, referring to excess of public expenditure over current revenues.
Shebeshi g fiscal deficits and the monetary sector in ethiopia. Determinants and constraints of private investment in ethiopia. Political and economic determinants of budget deficits in the industrial democracies nouriel roubini nber and yale university, new haven, ct06520, usa jeffrey d. The opinions expressed are those of the authors and do not necessarily reflect the views of the ecb. Determinants of import price inflation in ethiopia. Analysis of equilibrium relationship among government budget deficit, money supply and inflation in ethiopia. International journal of asian social science issne.
It examines the short and longrun relationship between the budget deficit, democracy and cabinet size for pakistans. Gross domestic product, foreign direct investment, budget deficit, inflation, literacy rate, population growth rate and labor force that affect the unemployment rate in pakistan and these factors are in line with the theory. For this reason, budget deficit is largely considered as one of the major determinants of the inflation. In developing countries, like ethiopia, the dominant role of the public sector in stimulating and financing economic development makes budget deficit inevitable. Trend of current account deficit in ethiopian in millions of birr. This investigation is focused on five purposely selected public organizations that are expected to represent all other bureaus. The paper investigates the causal link among inflation, money and budget deficits in ethiopia for the period 1964 to 2003 using the bounds test approach to cointegration due to pesaran et al. Our focus is on the effectiveness of fiscal rules and fiscal councils as well as the impact of emu membership and creative accounting, approximated by stockflowadjustments. Budgeting and budgetary institutions local budgeting local public financial management. The supply of money bank behaviour and the implications for monetary analysis portfolio shifts. Deficit compels the central bank to print new money to finance the budget deficit which led to. The results indicate that high level of political stability and democracy and improvement in social and economic condition reduces the budget deficit volatility.
The aim of this study was assess child growth velocity, growth deficit, and their determinants in rural southwest ethiopia. It can hardly be said that he who wishes to study the subject finds the tools of analysis necessary for the interpretation of public expenditure data lying ready to hand. The countries are ranked by their budget revenues in fiscal. The determinants of budget deficit in ethiopia scribd. The chinese, brazilian, indian, and united states government budgets are the figures reported by the international monetary fund the table includes information from governments budgets. This article examines the shortrun and longrun relationships of trade balance with the explanatory variables such as income, money supply, real exchange rate, budget balance and foreign income in ethiopia. Determinants and potentials of foreign trade in ethiopia. Private investment during the period 1975 1989 declined sharply and started to increase slightly during 1990 and 1991 as the previous government started reform in 1989. The case of ethiopia macroeconomic effect of government budget deficit tewolde girma hailemikael research paper postgraduate business economics economic policy publish your bachelors or masters thesis, dissertation, term paper or essay. Pdf this study investigated the relationship between government budget deficit. The merchandise trade deficit, in turn, is a result of stagnating exports and increasing imports over the last two decades.
Ethiopia government debt to gdp 19912018 data 20192020. They reason that the substitution effect means that an increase in the tax rate makes it more profitable to underreport income at the margin i. Along with this growth, however, the country has seen an accelerated, doubledigit increase in the price of goods and services. Budget deficit affects current account deficit positively or there is twin deficit in ethiopia. Deficit financing, money supply and inflation in ethiopia. Ethiopia runs consistent trade balance deficits due to lower production of exportable goods and logistic difficulties. Nominal interest rate has positive pressure on inflation as discussed by 8, 11 and 14. Consequences of fiscal deficit and public debt in financing the public sector aleksandra tesic1, dragan ilic2, anastazija tanja delic3 summary the aim of this paper is to highlight the important issues of the budget deficit and public debt and their impact on economic growth.
Determinants of government expenditure the subject of government expenditures has not received much or satisfactory attention from economists or students of public finance. The impact of government expenditure on economic growth in ethiopia, an empirical analysis using johansen cointegration approach mulugeta dereje mengist m. Thus, equally tax revenue is key for economic development, the study thought to empirically examine the key determinants of tax revenue in east african countries using a novel dataset ranging from 1992 to. Macroeconomic determinants of current account deficit in ethiopia. We analyze the determinants of the budget balance of 27 eu countries from 1991 to 2011 with a panel approach. The supply of money bank behaviour and the implications. Second, the rejection of optimizing models of budget deficits suggests tests of the hypothesis that budget deficits in developing countries depend on the degree of political instability government instability, probability of military coups, etc. High corruption and low institutional quality lead to more fluctuations in the budget deficit. An empirical investigation in determinants of changes in oecd budget balances1 by mika tujula2 and guido wolswijk2 an earlier draft of the paper.
By contrast, if monetary developments deviate from the economic determinants as a result of a shift in money supply that is caused either by a structural change or a shift in the perception of risks, this. This page provides ethiopia balance of trade actual values, historical. In the 201220 budget speech read by minister of finance on thursday 14lh june 2012 at 1. The effect of government budget deficit on monetary aggregates and the foreign sector. Following the controversy regarding budget deficits, this study examines the economic determinants of budget deficit in south africa. Also, the gap between the potential and actual tax revenue in ethiopia will be esti mated using peer country comparisons. The effect of government budget deficit on monetary aggregates. Analysis of equilibrium relationship among government budget. Cointegrated var analysis approach negash haile dedeho1 abstract this study attempted to provide empirical evidences for causal long. A proper understanding of the determinants of inflation in nigeria requires adequate discussion of the movements of the relevant variables over time. The study analyzed data for 10 years 2003 to 2012 which represented the sample size for the study.
Pdf determinants of import price inflation in ethiopia. The fast increase in budget deficit started in 199798 when doubled from its previous years from 1billiopn to 2. Economic, political and institutional determinants of budget. Intrinsic factors affecting budget utilization in ethiopian public universities dejene tafa semeneh bessie madda walabu university, ethiopia abstract higher education budget utilization has been adversely affecting proper implementation of government policies, programs and projects in ethiopia. The current account balance weakened due to trade balances and declining transfers. The lagged deficit is included to allow for slow adjustment of budget deficits.
The case of ethiopia macroeconomic effect of government budget deficit tewolde. Pdf the effect of budget deficit on current account deficit in. Sachs nber and harvard university, cambridge, ma 028, usa. For the last five years, contemporary ethiopia has gathered momentum by recording a steady economic growth. By examining the cyclically adjusted budget deficit, it is possible to evaluate how much of the budget deficit is due to the state of the economy and how much is due to the stance of fiscal policy. The deterioration is on account of a worsening trade deficit which was driven by weak export performance and large imports of capital goods for public investment programs. The foreign income of top 20 trading partners of ethiopia is also included in the model to test the effect on trade balance of ethiopia. The paper deploys both descriptive and empirical analysis. The main purpose of this study is to investigate the determinants of budget control in ethiopian public organizations the benishangulgumuz regional state. The determinants and role of budget deficits have always been debated, however yielding assorted conclusions. The determinants of budget deficit in ethiopia government. The most important forces behind food inflation in the long run are real income, money. The findings of the study suggest that the determinants of inflation differ between sectors food and nonfood and the time horizons under consideration. The determinants of individual income tax compliance.
This study is an attempt to check some political factors determining budget deficit in pakistan. Macroeconomic determinants of current account deficit in. Bader and magableh 2009 in their part analyzed the determinants of external debt accumulation in jordan and the result indicates that budget deficit, size of external debt. Specifically, the study seeks to ascertain if budget deficits in south africa are a result of the fight against economic problems. Oct 20, 2016 the inclusion of budget balance is purposely to examine the existence twin deficit hypothesis in the ethiopian context. The inclusion of budget balance is purposely to examine the existence twin deficit hypothesis in the ethiopian context. Fekadu 2012 examined the determinants of food price. Outlook the ethiopian economy has experienced impressive growth performance over the last decade with average gdp growth rate of 11 %, which is about double of the average growth for sub saharan africa. Economic, political and institutional determinants of budget deficits volatility in selected asian countries introduction the extent of government deficits and debt has been one of the most debated issues in economics in recent years.
In response to this, we shall focus mainly on trends in inflation, budget deficit, monetary growth, growth in real gdp and exchange rate movements in the period between 1970 and 1989. The increase in exports is associated with significant reduction in the current account only in the short run. The study empirically investigates the effects of fiscal policy or government budget deficit shocks on the current account and the other macroeconomic variables, real output, real interest rate. Selective attention is given to particular economic variables which are. Journal oflnternational money and finance 1991, 10, s49s72 economic and political determinants of budget deficits in developing countries nouriel roubini yale university, nber, and cepr, usa the evidence from a large sample of developing countries tends to reject the empirical implications of optimizing models of the process of determination of fiscal deficits, tax rates, seigniorage and.
The adverse shocks of high unemployment result in increasing deficits. Due to aforementioned deficiencies, ethiopia struggles with budget deficits for a long time. Allingham and sandmo liken these two terms to a positive income effect and a negative substitution effect. Economic and political determinants of budget deficits in. It expands the productive capacity of a nation and plays a crucial role in the economic growth and development process. In these studies the growth rate of income, depositing interest rate, current account deficit, and inflation, degree of financial depth, foreign saving and dependency ratio were included to identify the major determinants of domestic saving. Determinants of the inflation rate in the united states. For this investigation, we use a vector autoregressive model that includes major variables interacting with the price level in the macroeconomy.
While the descriptive segment attempts to dwell on trend analysis in drm and tax performance, the empirical model attempts to identify key determinants of the ratio. Determinants of tax revenue in east african countries. This merchandise trade deficit divergence has resulted to. Budget theory in the public sector edited by aman khan, and w. In present study an attempt is made to analyze empirically the determinants of tax revenue and assess the response of tax revenue to changes in its determinants in ethiopia.
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