Does the sustainable fiscal policy foster its credibility?
This paper examines the credibility and sustainability of fiscal policy in the case of Indonesia. The standard model of fiscal sustainability is modified to accommodate the credibility aspect. The empirical estimates are done by employing several aspects of the time series econometric literature in...
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| Format: | Article |
| Language: | English |
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Universitas Islam Indonesia
2017-03-01
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| Series: | Economic Journal of Emerging Markets |
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| Online Access: | https://journal.uii.ac.id/JEP/article/view/6178 |
| _version_ | 1797201970617909248 |
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| author | Haryo Kuncoro |
| author_facet | Haryo Kuncoro |
| author_sort | Haryo Kuncoro |
| collection | DOAJ |
| description |
This paper examines the credibility and sustainability of fiscal policy in the case of Indonesia. The standard model of fiscal sustainability is modified to accommodate the credibility aspect. The empirical estimates are done by employing several aspects of the time series econometric literature including unit roots, degree of integration, co-integration, and stability tests. Based on the deficit forecast error reaction function, we estimate the quarterly data over the period 2001-2013 relying on the autoregressive distributed lag model. The results present that the deficit rule policy is not credible while central government's debt is unsustainable. The coexistence of non-credibility and unsustainability of fiscal policy in Indonesia is also closely related to the world oil prices and trade openness fluctuations. Under these strong external circumstances instability, the fiscal authority credibility plays an important role in conducting fiscal rule policy which operates primarily through a signalling effect.
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| first_indexed | 2024-03-08T01:58:47Z |
| format | Article |
| id | doaj.art-5aeecd99732840bca42e4c45ea48499f |
| institution | Directory Open Access Journal |
| issn | 2086-3128 2502-180X |
| language | English |
| last_indexed | 2024-04-24T07:56:00Z |
| publishDate | 2017-03-01 |
| publisher | Universitas Islam Indonesia |
| record_format | Article |
| series | Economic Journal of Emerging Markets |
| spelling | doaj.art-5aeecd99732840bca42e4c45ea48499f2024-04-18T06:58:54ZengUniversitas Islam IndonesiaEconomic Journal of Emerging Markets2086-31282502-180X2017-03-0191Does the sustainable fiscal policy foster its credibility?Haryo Kuncoro0Faculty of Economics State University of Jakarta This paper examines the credibility and sustainability of fiscal policy in the case of Indonesia. The standard model of fiscal sustainability is modified to accommodate the credibility aspect. The empirical estimates are done by employing several aspects of the time series econometric literature including unit roots, degree of integration, co-integration, and stability tests. Based on the deficit forecast error reaction function, we estimate the quarterly data over the period 2001-2013 relying on the autoregressive distributed lag model. The results present that the deficit rule policy is not credible while central government's debt is unsustainable. The coexistence of non-credibility and unsustainability of fiscal policy in Indonesia is also closely related to the world oil prices and trade openness fluctuations. Under these strong external circumstances instability, the fiscal authority credibility plays an important role in conducting fiscal rule policy which operates primarily through a signalling effect. https://journal.uii.ac.id/JEP/article/view/6178DeficitFiscal RulesCredibilityDebt SustainabilityARDL |
| spellingShingle | Haryo Kuncoro Does the sustainable fiscal policy foster its credibility? Economic Journal of Emerging Markets Deficit Fiscal Rules Credibility Debt Sustainability ARDL |
| title | Does the sustainable fiscal policy foster its credibility? |
| title_full | Does the sustainable fiscal policy foster its credibility? |
| title_fullStr | Does the sustainable fiscal policy foster its credibility? |
| title_full_unstemmed | Does the sustainable fiscal policy foster its credibility? |
| title_short | Does the sustainable fiscal policy foster its credibility? |
| title_sort | does the sustainable fiscal policy foster its credibility |
| topic | Deficit Fiscal Rules Credibility Debt Sustainability ARDL |
| url | https://journal.uii.ac.id/JEP/article/view/6178 |
| work_keys_str_mv | AT haryokuncoro doesthesustainablefiscalpolicyfosteritscredibility |