Fiscal externalities across jurisdictions can arise from imperfect tax enforcement and the avoidance behavior of taxpayers. Base shifting to low tax jurisdictions tends to generate positive fiscal externalities, while understating the overall tax liability leads to negative fiscal externalities when the tax base is apportioned across jurisdictions. While much of the literature has focused on ba...

This paper investigates fiscal sustainability in an overlapping generations economy with endogenous growth coming from human capital formation through educational spending. We assess how budgetary imbalances affect economic dynamics and the outlook for economic growth, thereby providing a rationale for fiscal rules ensuring sustainability. Our results show that the appropriate response of fisca...

This paper investigates the past effectiveness of the Maastricht Treaty (MT) and Stability and Growth Pact (SGP) in disciplining fiscal policy in the Euro zone. We estimate fiscal reaction functions for a panel of 11 members of the Euro zone including the more recent period of the reformed SGP, and compare them with fiscal responses from other “industrialized” OECD countries. Our main finding i...

Fiscal sustainability is a concern in many economies, especially with increasing government debt countries, including Indonesia. This study aims to analyze fiscal Indonesia for the 1970-2018 period. There are two methods measure sustainability: testing stationarity of using budget constraints and estimating reaction function. Error Correction Model used estimate The test function had consistent...

We examine the effect of fiscal policy on sovereign risk spreads and investigate whether the interaction of fiscal variables with political institutions affect financial markets. Using panel data from emerging market countries, we find that revenue-based adjustment lowers spreads more than spending-based adjustment. Financial markets also react to the composition of spending. Cuts in current sp...

This study investigates the impact of fiscal space on probability that government Indonesia will be able to implement counter-cyclical behavior. We use ordinary least squares and probit methods estimate policy reaction function. confirms increasing can increase execute its behavior policy. A proposal includes generating alternative sources revenues from taxes non-taxes redesigning subsidies tow...