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Penentuan Efek Dan Arah Kebijakan Fiskal Pemerintah Indonesia: Fiscal Impulse Measure
[Fiscal Policy Stance in Indonesia : Fiscal Impluse Measure]

Author

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  • Nizar, Muhammad Afdi

Abstract

The government overall budget (actual budget balance) is a one of indicators that could reveal the fiscal policies position responding to different economic situations. This indicator suggests that fiscal policy has been tightened or loosened, and in turn, reflects the impact of government policy to the economy is expansive or contractive. However, the analysis of this indicator is not include the impact of economic cycle nor other factors into consideration. Without inclusion of those factors, the analysis of overal budget would be biased and give mislead information about the impact and the direction of fiscal policy in certain period. Considering the above argument, this study is aimed to asses the impact and the fitness of fiscal policy direction in Indonesia during 2000-2009. The impact of fiscal policy to the economy (contractive, expansive, or neutral) would be assessed based on fiscal impulse measure, a methodolgy which already includes the impact of economic cycle in the analysis. The fitness of fiscal policy, countercyc-lical or procyclical to the economicy cycle, is determined by comparing the result of impulse measure with the economic cycle. This study has reached a several conlcusion: (1) expansive fiscal policy (loosen)—which is marked by increased of budget deficit—is not always give an expansionary impact to the economy. Similarly, contractive fiscal policy (tighten), also is not bring contration impact to the economy. (2) The government policies direction during this period, have been relatively in line to the economy cycle (procyclical) rather than a countercyclical. In other word, the government policy have been expansive during the economic boom period, and have been contractive during recesion. This study also concludes that there are three causes to this phenomenon, Firstly: the absence of automatic stabilizers, Secondly: the budget disbursement pattern was taken without considering the economic cycle, and thirdly: the existence of deviation between the budgeting process and the budget implementation. The study comes with recommendation that the government should reform the fiscal policy and implementation, by shifting from procyclical to the countercyclical policy. The government also should improve the effectiveness of tax and government expenditure instruments as an automatic stabilizers. This step would allow the effectiveness of fiscal policy in promoting economic stability.

Suggested Citation

  • Nizar, Muhammad Afdi, 2010. "Penentuan Efek Dan Arah Kebijakan Fiskal Pemerintah Indonesia: Fiscal Impulse Measure
    [Fiscal Policy Stance in Indonesia : Fiscal Impluse Measure]
    ," MPRA Paper 65603, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:65603
    as

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    File URL: https://mpra.ub.uni-muenchen.de/65603/1/MPRA_paper_65603.pdf
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    File URL: https://mpra.ub.uni-muenchen.de/65606/1/MPRA_paper_65603.pdf
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    References listed on IDEAS

    as
    1. Alberto Alesina & Filipe R. Campante & Guido Tabellini, 2008. "Why is Fiscal Policy Often Procyclical?," Journal of the European Economic Association, MIT Press, vol. 6(5), pages 1006-1036, September.
    2. Chakraborty, Pinaki & Chakraborty, Lekha S, 2006. "Is Fiscal Policy Contracyclical in India: An Empirical Analysis," MPRA Paper 7604, University Library of Munich, Germany.
    3. Alan J. Auerbach & Daniel R. Feenberg, 2000. "The Significance of Federal Taxes as Automatic Stabilizers," Journal of Economic Perspectives, American Economic Association, vol. 14(3), pages 37-56, Summer.
    4. Jean-Claude Chouraqui & Robert P. Hagemann & Nicola Sartor, 1990. "Indicators of Fiscal Policy: A Re-Examination," OECD Economics Department Working Papers 78, OECD Publishing.
    5. Braconier, Henrik & Holden, Steinar, 1999. "The Public Budget Balance - Fiscal Indicators and Cyclical Sensitivity in the Nordic Countries," Working Papers 67, National Institute of Economic Research.
    6. Sheetal K. Chand, 1992. "Fiscal Impulses and their Fiscal Impact," IMF Working Papers 92/38, International Monetary Fund.
    7. repec:hrv:faseco:34729976 is not listed on IDEAS
    8. Bouthevillain, C. & Van Den Dool, G. & Langenus, G. & Mohr, M. & Momigliano, S. & Tujula, M. & De Cos, P.H. & Cour-Thimann, Philippine, 2001. "Cyclically Adjusted Budget Balances: an Alternative Approach," Papers 77, Quebec a Montreal - Recherche en gestion.
    Full references (including those not matched with items on IDEAS)

    Citations

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    as


    Cited by:

    1. Nizar, Muhammad Afdi, 2013. "Fiscal Rigidities Dan Implikasinya Di Indonesia
      [The Implications of Fiscal Rigidities in Indonesia]
      ," MPRA Paper 65772, University Library of Munich, Germany.

    More about this item

    Keywords

    contractionary fiscal policy; countercyclical fiscal policy; economic cycles; expansionary fiscal policy; fiscal impluse; output gap; procyclical fiscal policy;

    JEL classification:

    • H3 - Public Economics - - Fiscal Policies and Behavior of Economic Agents
    • H30 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - General
    • H6 - Public Economics - - National Budget, Deficit, and Debt
    • H61 - Public Economics - - National Budget, Deficit, and Debt - - - Budget; Budget Systems
    • H62 - Public Economics - - National Budget, Deficit, and Debt - - - Deficit; Surplus

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