Social cyclicality in Asian countries
16 Aug 2017-International Journal of Social Economics (Emerald Publishing Limited)-Vol. 44, Iss: 9, pp 1154-1165
TL;DR: In this paper, the authors examined the cyclical pattern of social expenditure during 1980-2012 for a set of Asian countries and found that government social expenditure is procyclical across Asian countries during 1980 to 2012.
Abstract: Purpose
The purpose of this study is to examine the cyclical pattern of social expenditure during 1980-2012 for a set of Asian countries. The extant literature available so far has captured the cyclicality of fiscal policy only for member countries of the Organization for Economic Co-operation and Development and for Latin American countries. Moreover, previous studies have largely ignored Asian countries.
Design/methodology/approach
The analysis used panel data from global macro-databases of the International Monetary Fund, Statistics of public expenditure for economic development and Asian Development Bank. The cyclical components of social spending (health, education, and social protection) and GDP were determined by using the Hodrick-Prescott Filter. A positive (negative) correlation indicates procyclical (countercyclical) fiscal policy. In line with the existing literature on fiscal cyclicality (Gavin and Perotti, 1997; Lane, 2003; Frankel et al., 2013) that has examined the behavior of fiscal policy over the business cycle, regression analysis is used to examine the impact of political and institutional factors on the behavior of social spending.
Findings
It was found that government social expenditure is procyclical across Asian countries during 1980-2012. However, during the past decade, emerging Asian countries have been able to shift from procyclical to countercyclical social spending. This shows that they had taken several initiatives to boost expenditure in the social sector – be it in social protection, health, or education services. The significant determinant of social cyclicality is the quality of institutions, which could help the government to increase fiscal deficit during recessions and repay the debt during economic booms. However, to some extent, their countercyclical action is restrained by the high accumulated level of public debt.
Originality/value
In the context of the Asian region, it is important to understand the cyclical pattern of social policy for several reasons. It has been said that crises offer an opportunity for countries to rethink their social policy to achieve more sustained and equitable development. By studying the social spending behavior, the authors can see whether Asian countries were able to grab the opportunity for reshaping their social and economic agenda after the Asian financial crisis.
Citations
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15 Jul 2019
TL;DR: In this article, an interaction model of economic and institutional cycles in the dynamics of development of national economies is presented, based on the analysis of the cost indicators, and an interaction approach is proposed for developing and developed countries, where the theoretical and applied significance of the research is accumulation of scientific knowledge and revealing the methods of policy correction.
Abstract: The objective is to build an interaction model of economic and institutional cycles in the dynamics of development of national economies. Basing upon the analysis of the cost indicators, an interaction model of economic and institutional cycles in the developing and developed countries was offered.The theoretical and applied significance of the research is accumulation of scientific knowledge and revealing the methods of policy correction of developing countries.
3 citations
TL;DR: In this article , the authors propose the use of dynamic factor analysis and recursive models to estimate synchronization and cyclicality of social policies within a broad perspective, and find that synchronization of social spending was only possible for advanced economies, achieving the highest countercyclical stabilization effect during the Global Financial Crisis.
Abstract: This paper expands the analysis of the cyclical characteristics of social spending by providing information on its joint behaviour across OECD countries. With this aim we propose the use of dynamic factor analysis and recursive models to estimate synchronization and cyclicality of social policies within a broad perspective. By considering the synchronization of social spending it is possible to assess the short-run characteristics of the joint response to changes in the economic cycle. We find that synchronization of social spending was only possible for advanced economies, achieving the highest countercyclical stabilization effect during the Global Financial Crisis. Emerging market economies are not able to join the synchronized response, maintaining independent and, in most cases, procyclical stances in the behaviour of their social policies.The online version contains supplementary material available at 10.1007/s10663-022-09545-w.
1 citations
DOI•
01 Aug 2021TL;DR: In this article, the authors analyzed how banking policy can cause multiplier effects for the macroeconomic sector and be able to reduce the procyclicality of the banking sector with economic growth that touches the aspect of reverse causality.
Abstract: Economic development leads to the evolution and improvement of the financial system. In particular, banks grew relatively larger than national output in line with economic developments. This study aims to analyze how banking policy can cause multiplier effects for the macroeconomic sector and be able to reduce the procyclicality of the banking sector with economic growth that touches the aspect of reverse causality. To answer this concern, many international forums approved the formation of documents one of which includes macroprudential aspects by developing countercyclical capital buffer (CCB) indicators that function to monitor the level of procyclicality of the financial system. The research period used is quarterly data from 2010Q1 to 2019Q4. The analytical tool used is structural vector autoregression (SVAR). Based on the results of the impulse response function, all macroeconomic variables used in this study, namely real GDP, inflation, investment, and the exchange rate respond negatively to CCB policies in conventional banks, Islamic banks, and both. The biggest contribution of the three bank models is to the investment variable. Based on the results of sector mapping, it was found that the direction of the development of Indonesia's priority sectors was in the secondary sector or business fields related to the processing industry, such as both food and beverage, clothing and textiles, and chemicals. Public and foreign public confidence in the products of the processing industry in Indonesia is certainly inseparable from the guarantee of certainty in doing business and investment security that will increase the flow of private capital, especially foreign direct investment. This investment security guarantee is an effect of good financial capital liquidity .
1 citations
Cites background from "Social cyclicality in Asian countri..."
...This caused countries in Asia to escape the procyclicality trap during the 2008 economic crisis (Ahuja & Murthy, 2017)....
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TL;DR: In this article, the authors tried to determine if the social transfers of the Government in Costa Rica have been procyclical or counter-cyclical, and they found that the contemporary transfers do not respond strongly to the cycle; however, they do respond to the lag (previous quarter), where there is a strong countercyclical relationship.
Abstract: In this article, we try to determine if the social transfers of the Government in Costa Rica have been pro-cyclical or counter-cyclical. To examine the presence of cyclicity, correlations were used between the production and transfer series, after the variables were filtered using the Hodrick-Prescott method. Regression methods are also used to explain the growth of transfers with the growth of production, both contemporaneously and lagging behind. Quarterly data were used for the estimates and it was found that the contemporary transfers do not respond strongly to the cycle; however, they do respond to the lag (previous quarter), where there is a strong counter-cyclical relationship. On the other hand, it is determined that most of the important social programs have a negative relationship with the lagged quarterly production. This implies that, when production slows down, there is an increase in spending on social programs in the following quarter. We conclude that, in Costa Rica, social programs, due to their cyclicality, have had the potential to reduce the negative impacts of economic shocks on the most vulnerable populations.
1 citations
Cites background from "Social cyclicality in Asian countri..."
...En países asiáticos, los gastos en seguridad social muestran patrones procíclicos (Ahuja & Murthy, 2017)....
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...Solo ha sido hasta recientemente, que la literatura ha empezado a enfocarse en países en vías de desarrollo (Ahuja & Murthy, 2017; Bello & Ruiz, 2009; Prasad & Gerecke, 2010)....
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