The consistency of government deficits with macroeconomic adjustment : an application to Kenya and Ghana

Sustainable medium-term debt strategies are essential to adjustment programs committed to high growth and should be integrated into a consistent macroeconomic framework that encompasses debt, growth and strategies. This paper develops an analytical model that takes 2 steps. Its purpose is to analyze the relationship between the fiscal deficit, the real interest rate, the real growth rate and the real exchange rate - and to indicate what conditions would be necessary to stabilize a country's debt-to-GDP ratio in the long run. The authors analyze three fundamental concepts of deficit: cash (or observed), primary and operational. Applying the model to the empirical data for Kenya and Ghana, the author's reach the following conclusions. First, the fiscal effort in Kenya should have been somewhat stronger between 1980 and 1987. For the period 1988-91, the projected fiscal balance is broadly consistent with stabilization, and the same goal can be achieved with a lower inflation or growth rate. Secondly, in Ghana the average fiscal performance between 1980 and 1987 was only slightly weaker than it should have been. Projections for 1988-91 suggest that the government has substantial room to maneuver in its stabilization.Economic Stabilization,Economic Theory&Research,Environmental Economics&Policies,Macroeconomic Management,Banks&Banking Reform

Federal receipts and expenditures for fiscal year 1951

Budget ; Expenditures, Public

Fiscal policy and debt management

Fiscal policy ; Debt management

KEPUTUSAN PENDANAAN : PENDEKATAN TRADE-OFF THEORY DAN PECKING ORDER THEORY

The purpose of this study is to analyze what Trade-off Theory and Pecking Order Theory ableto explain the financing decision in Indonesian Capital Market. In this study, determinant ofTrade-off theory are non-debt tax shields, size, and liquidity. The determinant of Pecking Ordertheory are profitability, cash deficit, and investment. Sample in this study are 40 manufacturingcompanies that active and liquid at Indonesian capital market over two years, from 2005 to2006. Thus, this study have 80 observations. Sample used the method of purposive sampling.Multiple regression model is used to test this hypothesis. The result of this Trade-off theoryapproach is found that partially all proxy aren’t statistically significant. But simultaniously nondebt tax shields, size, and liquidity variable give statistically significant. While Pecking Ordertheory approach is found that partially only cash deficit and investment variable statisticallysignificant. But simultaneously profitability, cash deficit, and investment variable have statisticallysignificant. So, firms that go public at Indonesian capital market tend to follow peckingorder theory than trade-off theory in their financing decision.Keyword : trade-off theory and pecking order theor

Failing by a Wide Margin: Methods and Findings in the 2003 Social Security Trustees Report

On March 17, 2003, the trustees of the Social Security program released their annual report on the system's financial status. Many observers took the report's extension of the trust fund's solvency one year to 2042 to mean that Social Security's financial health had improved. In fact, Social Security's actuarial balance declined and its cash flow deficits over the next 75 years increased to $25.33 trillion (in 2003 dollars). More important, the report contained significant new methodologies that are central to the debate over personal retirement accounts. The trustees now measure Social Security's deficits over the infinite horizon, providing remedies to the previous 75-year scoring window that substantially understates the costs of the current program and overstates the costs of personal account plans. Under this new perpetuity benchmark, the present value of Social Security's cash flow shortfalls totals$11.9 trillion, versus only $4.9 trillion over 75 years. To cover Social Security's cash deficits permanently would demand an immediate tax increase equal to 4.47 percent of payroll. The 2003 report also includes a "stochastic analysis" accounting for the variability of the economic and demographic factors affecting Social Security's finances, finding there is less than a 1-in-40 chance of Social Security remaining solvent for even 75 years without reform. The 2003 Trustees Report shows that Social Security's cash deficits are large, growing, and unlikely to fix themselves without action. Only personal account proposals have been certified to eliminate Social Security's multitrillion dollar cash shortfalls

Lending to local governments: Risks and behaviour of Hungarian banks

Over the past one and a half years, the amount of credit granted by banks to Hungarian local governments has doubled, and the gap between their cash deficit and net additional indebtness has increased. This borrowing boom is not the result of a drastic change in the financial management of local governments, but stems primarily of the fear of statutory tightening of borrowing conditions and their propensity to hold reserves. As the current statutory regulation does not represent an effective restriction on debt, indebtedness in the sector is limited only by the market – i.e. banks’ lending propensity. Although it is not unprecedented in international practice that this kind of market coordination may – with minor fluctuations – be able to keep indebtedness at an acceptable level, the uncertainties in the financial management of local governments and the weak transparency related to their long-term or contingent liabilities mean that the conditions for this kind of coordination are not fully in place in Hungary. Our survey of banks underpins this assumption, revealing that due to the sharp competition between banks, local governments are in a strong bargaining position vis-a-vis credit institutions, as – due to the lack of information and a high level of uncertainty – credit institutions are limited in the use of more sophisticated risk assessment techniques generally used in the corporate sector, and thus their lending is based on the expected continuity of local government operations.banks, state and local borrowing, bankruptcy; liquidation.

The federal budget for 1956

Budget ; Federal government

Do Taxes Affect Corporate Financing Decisions?

A new empirical method and data set are used to study the effects of tax policy on corporate financing choices. Clear evidence emerges that non-debt tax shields "crowd out" interest deductibility, thus decreasing the desirability of debt issues at the margin. Previous studies which failed to find tax effects examined debt-equity ratios rather than individual, well-specified financing choices. This paper also demonstrates the importance of controlling for confounding effects which other papers ignored. Results on other (asymmetric information) effects on financing decisions are also presented.

BORROWING BEHAVIOR UNDER FINANCIAL STRESS BY THE PROPRIETARY FIRM: A THEORETICAL ANALYSIS

This paper extends finance theory under risk to account for borrowing behavior under financial stress conditions. As the financial stress level for the firm increases, the role of credit or unused borrowing capacity changes. With a strong equity position, credit is valued as a reserve to avoid liquidation costs resulting from the sale of fixed assets to meet cash flow obligations. As the financial stress on the firm increases the model demonstrates the firmÂ’s willingness to reduce credit reserves and increase its financial leverage in order to increase its probability of survival. These results are derived in a tractable framework by describing risky alternatives in terms of expected values and variances.Financial Economics,