IMF高级宏观经济学研修班课程CT1405MMF-L06Fiscal.pptx

IMF高级宏观经济学研修班课程CT1405MMF-L06Fiscal.pptx

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L-6FiscalPolicyandDebtSustainability,PresenterClintonShiells,JointChina-IMFTrainingProgramCourseonMacroeconomicManagementandFinancialSectorIssuesCT14.05,LectureOutline,Howdowemeasurefiscalpolicy?

Fiscalpolicyforshort-termmacroeconomicstabilityFiscalpolicytoreducevulnerabilityFiscalpolicyforgrowthandpovertyreduction,ThistrainingmaterialisthepropertyoftheInternationalMonetaryFund（IMF）andisintendedforuseinIMFInstitutecourses.AnyreuserequiresthepermissionoftheIMFInstitute.”,2,HowDoWeMeasureFiscalPolicy?

3,MMF,Howdowemeasurefiscalpolicy?

Fiscalpolicyistheuseofgovernmentspendingandtaxationtoinfluencetheeconomy.FlowindicatorsOverallfiscalbalance:

differencebetweentotalrevenue（includinggrants）andtotalexpenditurespluslendingminusrepaymentsPrimarybalance:

revenueminusnon-interest（primary）expenditureCurrentbalance:

differencebetweencurrentrevenueandcurrentexpendituresCyclicallyadjustedbalance:

nominalfiscalbalancenetofthecyclicalcomponentofthebudget,4,MMF,Howdowemeasurefiscalpolicy?

StockindicatorsNetworth:

differencebetweenassetsandliabilitiesOff-balance-sheetitemse.g.,contingentliabilities,public-privatepartnerships（PPPs）,5,MMF,Whatisfiscalpolicyusedfor?

Short-termmacroeconomicstabilizationReducingvulnerabilitiesGrowthandpovertyreductionRelativeimportanceoftheseobjectivesdependsoncountrycircumstances.,6,MMF,FiscalPolicyforShort-TermMacroeconomicStabilization,7,MMF,Fiscalpolicyformacroeconomicstabilization,Fiscalpolicycanbeusedfor:

Mitigatingcyclicality（recurrentboomsandrecessions）TaminginflationReducingexternalcurrentaccountimbalancesManagingfinancialcrises,8,MMF,Fiscalpolicyversusmonetarypolicy,Fiscalpolicyandmonetarypolicyshouldbedesignedintandemtogettherightmix.Whichismoreeffectiveinmoderatingcyclicality?

Monetarypolicycanbeimplementedfasterbutfiscalpolicymayaffectoutputmoreimmediately.Ingeneral,fiscalpolicyshouldplayabiggerrolewhenmonetarypolicyisconstrained（e.g.,withafixedexchangerate,orwhennominalinterestratesareclosetozero,orwhenfinancialsystemsarelessdeveloped）.,9,MMF,1.Countercyclicalfiscalpolicy,Twochannels:

AutomaticstabilizersDiscretionarymeasures（fiscalstimulus）,10,MMF,（ii）Discretionaryfiscalpolicy,Keyconsiderations:

SizeofthefiscalstimulusMultiplierTimingCompositionDurationFiscalstimulusmeasuresshouldbetimely,targeted,andtemporary（TTT）,11,MMF,Whatdeterminesthesizeofthemultiplier?

Thesizeofthemultiplierislargerif:

“Leakages”arefewHighmarginalpropensitytoconsume（c）,lowmarginalpropensitytoimport（m）NoRicardianequivalenceMonetaryconditionsareaccommodativeSmallornoincreaseininterestrates（nocrowdingout）SmallornoexchangerateappreciationThecountrysfiscalpositionafterthestimulusissustainable,12,MMF,2.Fiscalpolicyandinflation,Fiscalpolicycanaffectinflationthroughmanychannels:

Intheshortrun,fiscalpolicyaffectsthepricelevelthroughitsimpactonaggregatedemand.Fiscalpolicycanleadtosustainedinflationifthefiscaldeficitismonetized.Fiscaladjustmentcanalsoaffectinflationviathedemandformoney,includingthroughinflationexpectations,interestrates,andconfidence.,13,MMF,3.Fiscalpolicyandthecurrentaccountbalance,14,MMF,Thegovernmentssaving-investmentbalanceislinkedtothecurrentaccountbalancethroughtheexpostincomeidentity:

Fiscalconsolidationcontributestoexternaladjustmentbutaone-for-oneimprovementinthecurrentaccountbalanceisunlikely.Inthecaseofexpansionaryfiscalconsolidationthecurrentaccountbalancecouldevendeteriorate.,4.Fiscalpolicyandfinancialcrises,Whenacapitalaccountcrisishits,fiscalconsolidationisusuallyunavoidablebecauseexternalfinancingdriesup.Iffiscalproblemsaretherootcauseofthefinancialcrisis（lossofconfidence）,fiscalconsolidationisnecessarytoregainmarketaccessandlowerthecostofborrowing.Iffiscalproblemsarenottherootcause,fiscalcontractionmaybecounterproductive;fiscalexpansionmaybeneededinstead.,15,MMF,Achievingmedium-termfiscalcredibility,FiscalrulestoconstrainfuturebehaviorReasonablemulti-yearspendingceilingsFiscaltransparency;openandaccountablebudgetingEstablishapolitically-independentfiscalagenttomonitorfiscalpolicymakingProvidethepublicwithcomprehensiveinformationonthestateofpublicfinancesDisciplinedbudgetpreparationandexecution,MMF,16,MMF,17,Fiscalpolicyhasplayedasignificantroleinsupportingdemandsincethecrisis,withoff-budgetandLGFVspendingbecomingespeciallyimportantcountercyclicaltool,FiscalPolicytoReduceVulnerability,18,MMF,Fiscalpolicytoreducefiscalvulnerability,Acountryspublicfinancesmayappearsound,butmaybevulnerableifunderlyingweaknessesthreatenitsfuturefiscalpositionandlimitthegovernmentsabilitytorespondtofiscalpolicychallenges.Examples:

DebtsustainabilityContingentliabilitiesanddebtstructureFiscalrigiditiesEmergingfiscalpressures,e.g.,demographicchanges,19,MMF,Debtsustainability,Publicdebtissustainablewhenthegovernmentcancontinueservicingitwithouttheneedforanunrealisticallylargefuturecorrectiontoitsrevenueorprimary（non-interest）expenditurepath.Marketexpectationsareimportanttoogovernmentsthatareabletoassuremarketsaboutfuturefiscalpoliciesmaybeabletomaintainlargerlevelsofdebtthanotherwise.,20,MMF,MMF,21,Augmentedfiscaldebthasrisentoabove45percentofGDP,22,MMF,China:

PublicDebtSustainability:

BoundTests（AugmenteddebtinpercentofGDP）,23,MMF,China:

PublicDebtSustainability:

BoundTests（AugmenteddebtinpercentofGDP）,Nopolicychange,24,MMF,China:

PublicDebtSustainability:

BoundTests（AugmenteddebtinpercentofGDP）,Longertermfiscalpressures,Demographicchanges（mainlyagingpopulations）willposeincreasingburdensonpublicfinancesofmanydevelopedandsomedevelopingcountries.,Source:

Heller（F&D2006）,Oldagedependencyrate（%）,25,MMF,FiscalPolicyforGrowthandPovertyReduction,26,MMF,Fiscalpolicyforgrowthandpovertyreduction,Asoundfiscalpositioniskeytoachievingmacroeconomicstability,whichiscriticalforsustainedgrowthandpovertyreduction.PerceptionsandinvestorconfidenceHigh-qualityfiscaladjustmentcanalsomobilizedomesticsavings,increasetheefficiencyofresourceallocation,andhelpmeetdevelopmentgoals.Governmentsaving“Fiscalspace”,27,MMF,Mobilizingandallocatingresources,Economicgrowthdependsonaccumulatingphysicalandhumancapital,whichinturnrequiressavings.Asprivatesectorsavingsareoftenlowindevelopingcountries,fiscalpolicycanplayacentralroleinmobilizingresourcesbyraisingrevenueandreducinglessproductivespending.Butthemobilizedresourcesmustbeinvestedproductively.Publicspendingshouldbedirectedtoareaswiththehighestsocialreturnandshouldcomplement,ratherthancompetewith,theprivatesector（e.g.,health,education,andpensionsinChina）.,28,MMF,29,MMF,HighsocialsecuritycontributionratesareanimpedimenttodomesticrebalancinginChina,Fiscalspace,FiscalspaceintheimmediatetermNeedtofindresourcestofinancepressingexpenditurestodayLinktofiscalsustainabilityFiscalspaceinthemediumtermNeedtoensurethatfuturebudgetaryresourcesarenotexhaustedbygovernmentexpenditurecommitments,inordertohavescopetorespondtounanticipatedfiscalchallenges,MMF,30,