Credible Fiscal Policy and Exchange Rates Stabilization

Abstract

This paper aims at analyzing the potential impact of fiscal policy credibility on the exchange rates stabilization. Motivated by the fact that empirical studies concerning this aspect are still limited, we take the case of Indonesia over the period [2001][2002][2003][2004][2005][2006][2007][2008][2009][2010][2011][2012][2013]. Based on the quarterly data analysis, we found that the impact of credible fiscal policy typically depends on characteristics of fiscal rules commitment. In one hand, the credible debt rule policy reduces the exchange rate fluctuation. In contrast, the deficit rule policy -which is incredible -does not have any impact on the exchange rate and thus does not support to the exchange rates stabilization. Given those results, we conclude that credibility matters in stabilizing foreign exchange market. Accordingly, improving the credibility of fiscal policy should be an integral part of the exchange rates stabilization program.

Competitiveness, fiscal policy and corruption: evidence from Central and Eastern European countries

“…The results are extremely interesting and show that the influence of corruption on competitiveness is direct: the less corrupt a country, the greater the competitiveness. The results are similar to those obtained by Kuncoro (2015); Brandao-Marques et al (2018); Jalles et al (2021). Therefore, it can be stated that the H2 hypothesis is confirmed, in the sense that corruption negatively shapes competitiveness if its levels are high.…”

“…All these phenomena, manifested together, determine a negative impact of corruption on real ex-change, a fact demonstrated by the practical aspects, as well: countries with high corruption rates have low real exchanges. Unfortunately, research on the influence of corruption on the exchange rate is in its infancy, and there are very few specialized studies (Kuncoro, 2015;Brandao-Marques et al, 2018;Bierut & Dybka, 2021). Buitrago et al (2021) analyzed 48 emerging economies between 2007-2017 to observe if institutional quality influences competitiveness and they emphasized that deficient policies and the lack of systemic conditions have a significant and negative effect on the international competitiveness of the respective countries.…”

Economic Growth on Labor Absorption: District/City Panel Data Analysis in Lampung Province

“…The four patterns are fast-growing and fast-growing regions (high growth and high income), developed but depressed regions (high income but low growth), fast-growing regions (high growth). and regions that are relatively underdeveloped (low growth and low income) (Kuncoro, 2000;Radianto, 2003). The criteria used to divide the districts/cities in this research are as follows: (1) regions with an accelerated development as well as an accelerated growth are indicated by an increase in per capita income that is higher than the average of Lampung Province; (2) developed but depressed regions have specific characteristics, namely, high perpita income but weaknesses, namely a slower growth rate than the average of Lampung Province; (3) fast developing regions, regions with high growth rates, but lower income per capita than the average of Lampung Province; (4) Regions classified as underdeveloped are regions that have a lower level of economic growth and per capita income than the average of Lampung Province.…”

Impact of Fiscal Rules on Exchange Rate Volatility

“…Отметим, впрочем, что прямому исследованию такой взаимосвязи посвящено лишь небольшое число эмпирических работ. В частности, можно отметить статью [25], в которой продемонстрировано, что принятие правила по ограничению госдолга в Индонезии привело к снижению волатильности курса рупии, в то время как эффект принятия правила по ограничению бюджетного дефицита был незначимым. В свою очередь, в работе [26] указывается на снижение волатильности реальных курсов в странах ЕС после принятия ограничений на бюджетный дефицит и госдолг в соответствии с Маастрихтскими соглашениями.…”