On the one hand the national bank of ethiopia does try to follow announced target before 200607 the national bank was focused up on the growth of money supply and the nominal exchange rate. Section three focuses on the methodology of the study and model used. Its difference lies on openly adopting a marketoriented economic policy. Addis fortune, bank borrowing, csa, ethiopian television, fiscal policy, food inflation, halfyear report on government performance, headline inflation, meles zenawi, monetary policy, monthly inflation data, narrow tax base, national bank of ethiopia, parliament. The effect of government expenditures, taxation, and debt on the aggregate economy is of immense importance, and therefore great con troversy, in economics. Fiscal federalism in theory and practice teresa ter. To argue that the ethiopian tax system developed within such a framework would be. The relative effectiveness of monetary and fiscal policies. Country financial accountability assessment ethiopia. Hence this study investigates the role of fiscal policy on economic growth in sudan during the period 19962012.
These channels include the macroeconomic for example, through the influence of the budget deficit on. Fiscal policy and longterm growth international monetary fund. The purpose of the paper is to examine the effectiveness of fiscal policy instruments in zimbabwe on economic growth as the major target variable in the period 19802010. Besides, monetary policy is found to be more important in the dynamics of inflation compared to fiscal policy. In fact, precisely this policy mix has been advocated by feldstein l980a and others and appears to have been put in place by the reagan administration. Fiscal federalism in the ethiopian ethnicbased federal system by solomon negussie, 9789058501899, available at book depository with free delivery worldwide. Financial and fiscal policy of ethiopia by ethiopia. A second example is the foreign exchange rate which is strongly in. Fallacies of neoliberal macroeconomic policy prescriptions for developing nations. International trade and investment, international finance and macroeconomics this paper examines the effects of fiscal policies in an open economy when international financial markets are well developed. In terms of macroeconomic policy 1991 witnessed a marked departure from the previous socialist system the derg regime.
Monetary policy and industrialization in an emerging open. Project muse an economic analysis of fiscal federalism. Monitory policy, external sector and financial system asmamawa. The distributional impact of fiscal policy in south africa. Rothenberg one of the most remarkable features of the american economy is its strongly enforced separation of fiscal and monetary policymaking powers. Monetary policy and inflation dynamics in ethiopia. Fiscal policy relates to a variety of measures which are broadly classified, as.
Fiscal deficits and the monetary sector in ethiopia. Ethiopia public finance the ethiopian fiscal year begins 8 july, in the ethiopian month of hamle. The monetaryfiscal policy mix empirical analysis and theoretical implications alexander d. Fiscal federalism in the ethiopian ethnicbased federal system.
The components of fiscal policy and investment were also treated in this section. Medium term expenditure and budgetary practices in ethiopia. Fiscal policies and international financial markets. Fiscal policy in ethiopia ethiopian economic association. To order copies of macroeconomic policy and structural transformation of african economies by the economic commission for africa, please contact.
The us central intelligence agency cia estimates that in 2002 ethiopias. Barriers to financial inclusion in ethiopia % adults source. To combat inflation and reduce the deficit, the government adopted a conservative fiscal management policy in the 1980s. Such analysis is important because the evolution of macroeconomic outcomes cannot be understood in a political vacuum. Fiscal policy, stabilization, and growth publications inter. The monetaryfiscal policy mix futures forex trading. Among the most important is the recognition that fiscal and monetary policies are linked through the government sectors budget constraint. W e find evidence that people should travel an average of 19km to access a bank branch o r atms.
Cecchetti, s 2011 fiscal policy and its implications for monetary and financial stability. Ethiopias public finances are under great budgetary pressure, as years of war and poverty have taken a heavy toll on the countryside, population, and infrastructure. Fiscal policies and international financial markets alan c. Medium term expenditure and budgetary practices in ethiopia mohammed yimer department of civic and ethical studies, college of social sciences and humanities, arba minch university. This project seeks to evaluate the effectiveness of the cbns monetary policy by assessing the extent to which the monetary policies have impacted on the growth process of nigeria using the major objectives of monetary policy as yardstick. Immediate activation of the treasury bill market for liquidity management and raising of interest rates is recommended for proactive. Fiscal policy is the use of government spending and taxation to influence the economy. This was the period where a shift from a controlled to market.
Fiscal policy promotes growth through macro and structural tax and expenditure. Fiscal policy, pricing frictions and monetary accommodation. The effectiveness of fiscal and monetary stimulus in. The design of national fiscal frameworks and their budgetary impact. Fiscal policy with reference to underdeveloped countries.
Variations in the inflation rate can have implications for the fiscal authoritys. The appearance of the phrase fiscal policy in the title of the paper may also convey a false impression in another sense. Zimbabwe has given fiscal policy the biggest role in economic stimulus given the multicurrency regime which has limited the role of monetary policy. Mekonen tadesse editor, ethiopian economic associationeea, departments of economics of aau. As shown in table 1, domestic investment in ethiopia has increased rapidly since the. Rather, literatures are substantially deal with the determinants of private investment and the effectiveness of monetary policy in ethiopia separately.
In the 30 days period immediately following the end of each fiscal year, every public body shall pay all invoices received before the end of that year for. Fallacies of neoliberal macroeconomic policy prescriptions. The ethiopian economy is still largely on subsistence level, and in spite of some progress made, ethiopia has only taken the very first steps towards economic and social development. Fiscal policy, public debt and monetary policy in emerging. Within the governments mediumterm economic programme, fiscal policy stresses two main objectives. The effect of monetary policy on the private sector. A country financial accountability assessment cfaa is a diagnostic tool designed to enhance knowledge of financial accountability arrangements in the public and private sectors in client countries, to be used by the govemment of the country concerned, and other donors. The effectiveness of fiscal policy in stimulating economic activity. It derives its nature and characteristics from constitutional provisions as well as end page 112 the state of economic development, the pattern of income and resource.
The government limited the budget deficit to an average of about l4 percent of gdp in the five years ending in efy l98889 by borrowing from local sources. Inflation as an economic growth phenomenon from theoretical and empirical perspective, determining the direction of causality between economic growth and inflation in the developing countries is very controversial e. Public finance and taxation in ethiopia pdf in a moment of dismissive hubris, the ethiopian tax system may be. Over the past few decades, a clear trend has emerged worldwide toward the devolution of spending and, to a lesser extent, revenueraising responsibilities to state and local levels of government.
Performance and policy implications 99 theoretical and empirical researches in urban manag ement number 514 february 2010 resources from the central government and its agencies to subordinate units or. The course macroeconomic policy is intended to introduce firstyear mamsc students to the fundamentals of macroeconomic policy making in general and in the context of developing countries in particular. This study investigates econometrically, the relative effectiveness of monetary and fiscal policies, by focusing on the relative effectiveness of broad money supply and government fiscal deficits with respect to their influences on economic activity represented by the gross domestic product gdp. One view is that the decentralization of spending responsibilities can entail substantial gains in terms of distributed equity and macroeconomic management. The year 1992 marked a policy watershed in the ethiopian financial sector, as well as the countrys economic policy at large.
The course covers some of the basic elements of macroeconomic policy such as fiscal, monetary and exchange. Chapter two will introduce the students to the income tax in ethiopia. This paper explores how fiscal policy can affect medium to longterm growth. The theory of fiscal federalism fiscal federalism refers to a process of distribution and redistribution of fiscal decisionmaking power across multilevel governments. Interest groups, through policy and using institutions, do influence macroeconomic outcome so that it accords to their interest. Fiscal policy also called budgetary policy is a powerful instrument in the hands of the government to intervene in the economy. Pdf ethiopias new financial sector and its regulation. Interest groups, through policy and institutions, do influence macroeconomic outcome so that it accords to their interest.
Even though there is a belief that monetary policy can influence private sector investment, research works have not yet been conducted on the dynamic impact of monetary policy on private investment in ethiopia. The search for a descriptive rule is the case of ethiopia is of great interest. Section four entails the presentation of results and discussion of findings. Accordingly, the effectiveness of monetary policy on regulating the money supply depends to a large extent on government fiscal deficit. The detailed fiscal data is available to underpin the analysis. The distributional impact of fiscal policy in south africa1 gabriela inchauste, nora lustig. Furthermore, var granger causality test suggests the causation running from budget deficit to money supply. Issues in the coordination of monetary and fiscal policy 7 strong tax incentives for industrial capital formation. Ethiopian journal of economics african journals online. Critics of fiscal stimulus argue that government spending displaces private spending and reduces domestic competitiveness. The ultimate research objective centers on an empirical investigation of which policy tool has. An overview benedict clements, sanjeev gupta, and gabriela inchauste fiscal policy can foster growth and human development through a number of different channels. The role of fiscal policy in the longrun growth process has been central in macroeconomics especially since the appearance of endogenous growth models. While balanced budget rules affect almost every category of fiscal policy, debt rules seem to allow for intertem poral shifts and thus only have a pronounced effect.