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Full-Text Articles in Macroeconomics

Why Do Countries Adopt Fiscal Rules?, John Thornton, Yener Altunbas Jan 2015

Why Do Countries Adopt Fiscal Rules?, John Thornton, Yener Altunbas

John Thornton

This paper examines which economic, institutional and political charac- teristics of countries affect the likelihood that a numeral rule will be adopted as part of a fiscal strategy to limit the level of public debt. We estimate a panel binary response model over the period 1970–2012 for 110 countries, of which 58 opted to adopt such a rule. Our results suggest that the probability such a rule will be adopted is greater if a country has a high level of public debt, a relatively inflexible exchange rate regime, has already adopted inflation targeting, has deep credit markets and if ...


Deposit Insurance And Private Capital Inflows: Further Evidence, John Thornton, Yener Altunbaş Dec 2013

Deposit Insurance And Private Capital Inflows: Further Evidence, John Thornton, Yener Altunbaş

John Thornton

We use a simple differences-in-differences technique to exam- ine whether adopting explicit deposit insurance impacts on the scale of private capital inflows to developing economies. We present evidence suggesting that these inflows improved more in countries that adopted deposit insurance than in countries that did not adopt it.


Knowledge Spillovers And The Growth Of British Cities, John Thornton, Yener Altunbas Jan 2012

Knowledge Spillovers And The Growth Of British Cities, John Thornton, Yener Altunbas

John Thornton

The relative importance of intra-industry or inter-industry knowledge spillovers for the growth of cities remains an open question. Using a unique data set on the growth of 109 British cities during 1951–1991, we find evidence suggesting that the most important knowledge spillovers occur between rather than within industries, which is consistent with Jacobs (1969, 1985).


Fiscal Decentralization And Governance, John Thornton Jan 2012

Fiscal Decentralization And Governance, John Thornton

John Thornton

The literature on the economics of fiscal decentralization stresses the potential for both positive and negative effects on governance in a country. Using a data set comprising sixty-four developed and developing economies and several different measures of fiscal decentralization, the authors find that countries in which a larger share of fiscal revenues and expenditures are located at the level of subnational governments appear to be less corrupt. The authors also find that the beneficial impact of fiscal decentralization on corruption is mitigated in the presence of mechanisms enforcing vertical administrative decentralization. The results indicate that fiscal decentraliza- tion appears to ...


Are Homegrown Islamic Terrorists Different? Some Uk Evidence, John Thornton Sep 2011

Are Homegrown Islamic Terrorists Different? Some Uk Evidence, John Thornton

John Thornton

We compare the characteristics of 77 homegrown Islamic terrorists in the UK to a representative sample of 1363 UK Muslims. UK Muslims are more likely to participate in terrorist acts if they are better educated and young. Other predictors of UK Muslims being involved in terrorism are employment status, UK citizenship, and ethnic origin.


The Intertemporal Relation Between Government Revenue And Expenditure In The United Kingdom, 1750 To 2004, John Thornton, Lusine Lusinyan Jan 2011

The Intertemporal Relation Between Government Revenue And Expenditure In The United Kingdom, 1750 To 2004, John Thornton, Lusine Lusinyan

John Thornton

We examine the intertemporal relation between government revenue and expenditure in the UK during 1750 to 2004. We pay particular attention to long run trends by applying a battery of unit root and cointegration techniques to the data, and we use a modified Granger causality test on data spans organized around structural breaks in the series. The results suggest that, allowing for structural breaks, UK real revenue and spending are I(1) series and cointegrated and that Granger causality runs from government spending to revenue. As such, the ‘spend-tax’ hypothesis appears to best characterize the long run intertemporal relation between ...


Does Financial Development Reduce Corruption?, John Thornton, Yener Altunbas Jan 2011

Does Financial Development Reduce Corruption?, John Thornton, Yener Altunbas

John Thornton

We estimate the impact of bank credit to the private sector on corruption using indicators of a country’s legal origin as instrumental variables to assess causality. We find that bank credit to the private sector reduces corruption, with the result robust to instrumenting for bank credit and for many different controls.


Post-Crisis Financial Reform: Where Do We Stand?, John Thornton, Alessandro Giustiniani Jan 2011

Post-Crisis Financial Reform: Where Do We Stand?, John Thornton, Alessandro Giustiniani

John Thornton

The financial reform agenda is broad, ranging from strengthening prudential regulation; to enhancing supervision; from mitigating pro-cyclicality to integrating micro- and macro-prudential oversight; from reducing the systemic risk associated with large and complex financial institutions to expanding resolution process and fortifying financial market structure. Reforms are proceeding slowly but important building blocks have been laid down, such as Basel III; other difficult reforms are in the making, such as the resolution framework for cross-border financial institutions or how to deal with systemically important financial institutions. This paper presents an analytical survey of recent developments.


Government Size And The Stability Of Output: Evidence From Emerging Market Economies, John Thornton Jan 2010

Government Size And The Stability Of Output: Evidence From Emerging Market Economies, John Thornton

John Thornton

Fata ́ s and Mihov (2001a, b) reported a negative and statistically significant relation between government size and output variability in a cross-section of 20 Organization for Economic Cooperation and Development (OECD) countries and concluded that large governments stabilize output. This conclusion does not appear to be valid for Emerging Market Economies (EMEs). Results from cross-section and combined cross-section and time series regressions for a sample of 21 EMEs for the period 1970 to 2001 indicate that the relation between government size and output volatility is statistically significant and positive.


Fiscal Sustainability In A Panel Of Asian Countries, John Thornton Jan 2010

Fiscal Sustainability In A Panel Of Asian Countries, John Thornton

John Thornton

Panel cointegration techniques indicate that government revenue (REV) and expenditure (EXP) in a panel of five Asian economies for the period 1974 to 2001 were nonstationary and cointegrated series. However, the cointegration coefficient was significantly less than unity, indicating ‘weak’ fiscal sustainability and the likelihood that policy measures would be needed to put the public finances on a more sustainable basis


Who Chooses To Adopt Fiscal Responsibility Laws? Evidence From Emerging Market Economies, John Thornton Jan 2010

Who Chooses To Adopt Fiscal Responsibility Laws? Evidence From Emerging Market Economies, John Thornton

John Thornton

In recent years, at least 10 emerging market economies have sought to anchor their fiscal frameworks in fiscal responsibility laws. Key factors in the decision appear to include a prior improvement in fiscal discipline, particularly in the context of a federal fiscal system, substantial ethnic fractionalization and vulnerability to adverse shocks, such as real exchange rate volatility and inflation.


Fiscal Decentralization And Fiscal Consolidations In Emerging Market Economies, John Thornton Jan 2010

Fiscal Decentralization And Fiscal Consolidations In Emerging Market Economies, John Thornton

John Thornton

Results using event study analysis based on a data panel of expenditure and revenue developments in emerging market economies during 1972–2001 indicate that subnational governments supported fiscal consolidation efforts by cutting their capital expenditure and increasing their revenues.


Do Fiscal Responsibility Laws Matter? Evidence From Emerging Markets Suggests Not, John Thornton Jun 2009

Do Fiscal Responsibility Laws Matter? Evidence From Emerging Markets Suggests Not, John Thornton

John Thornton

This paper asks whether the adoption of fiscal responsibility laws (FRLs) has improved fiscal performance in nine emerging market economies, as measured by developments in their key fiscal balances. Examining these economies alone, their fiscal performance improved on average between the period before FLRs were adopted and the period after they were adopted. However, emerging market economies that did not adopt FLRs also experienced improvements in their fiscal performance around the same time. The finding suggests that the better fiscal performance in the nine emerging market economies resulted from something other than the adoption of FLRs.


The Sustainability Of South African Fiscal Policy: An Historical Perspective, John Thornton, Lusine Lusinyan Mar 2009

The Sustainability Of South African Fiscal Policy: An Historical Perspective, John Thornton, Lusine Lusinyan

John Thornton

This article examines the issue of long-term fiscal sustainability in South Africa by applying a battery of recently developed unit root and cointegration tests to real revenue and spending data the period 1895 to 2005. The results provide evidence that, allowing for structural breaks, South African revenue and spending during this period were I(1) series and cointegrated, with the estimated long-run equilibrium relation supporting the presence of a weak deficit sustainability condition.


Natural Resource Endowments And The Domestic Revenue Effort, John Thornton, Fabian Bornhorst, Sanjeev Gupta Jan 2009

Natural Resource Endowments And The Domestic Revenue Effort, John Thornton, Fabian Bornhorst, Sanjeev Gupta

John Thornton

We examine whether there is evidence of an offset between government revenues from hydrocarbon (oil and gas) related activities and revenues from other domestic sources in a panel of 30 hydrocarbon producing countries. Our main finding is that there is an offset of about 20%, which is robust to the inclusion of control variables, the exclusion of outliers, and alternate estimation methodologies. While the impact of the offset on long-term development prospects is not clear, there is a risk of significant adjustment costs in moving to a higher level of domestic taxation once natural resources are depleted.


The Exchange Rate And Fiscal Consolidation Episodes In Emerging Market Economies, John Thornton, Amine Mati Jul 2008

The Exchange Rate And Fiscal Consolidation Episodes In Emerging Market Economies, John Thornton, Amine Mati

John Thornton

An analysis of fiscal consolidations in emerging market economies during 1970–2004 suggests that exchange rate depreciation raises the probability of a fiscal consolidation being successful, including when controlling for debt, growth, the composition of the consolidation, and degree of democracy.


International Capital Mobility: Evidence From Panel Cointegration Tests, John Thornton, Olumuyiwa S. Adedeji May 2008

International Capital Mobility: Evidence From Panel Cointegration Tests, John Thornton, Olumuyiwa S. Adedeji

John Thornton

Panel cointegration techniques applied to pooled data for 50 developed and developing economies for the period 1970–2000 indicate that savings and investment are non-stationary and cointegrated, that there are marked differences in saving–retention ratios between different country groups, and that retention ratios have fallen.


Inflation And Inflation Uncertainty In Argentina, 1810–2005, John Thornton Mar 2008

Inflation And Inflation Uncertainty In Argentina, 1810–2005, John Thornton

John Thornton

Unit root tests results suggest that inflation in Argentina for the period 1810–2005 is a stationary series when account is taken of structural breaks that coincide with bouts of hyperinflation. A GARCH (1,1) model of annual inflation suggests a positive short-run relation between the mean and variance of inflation, supporting Friedman's hypothesis that high inflation is associated with more variable inflation.


Fiscal Institutions And The Relation Between Central And Sub-National Government Fiscal Balances, John Thornton Mar 2008

Fiscal Institutions And The Relation Between Central And Sub-National Government Fiscal Balances, John Thornton

John Thornton

Skeptics of fiscal decentralization argue that it can complicate fiscal stabilization policies at the level of the central government because of uncoordinated fiscal actions by the national and sub-national tiers of government. However, panel data estimates for OECD economies suggest that this danger has been overstated in that changes in the fiscal balances of central and sub-national governments are highly positively correlated. This result partly reflects the success of institutional arrangements that govern intergovernmental fiscal relations and appears unrelated to the extent of fiscal decentralization.


Explaining Pro-Cyclical Fiscal Policy In African Countries, John Thornton Jan 2008

Explaining Pro-Cyclical Fiscal Policy In African Countries, John Thornton

John Thornton

Simple time series regressions for 37 low-income African countries during 1960–2004 suggest that government consumption is highly pro-cyclical,with consumption responding more than proportionately to fluctuations in output in many cases. The results from a cross-country specification suggest that government consumption is more procyclical in those African countries that are more reliant on foreign aid inflows and that are less corrupt, and that it is less procyclical in countries with unequal income distribution and that are more democratic. These results contrast with those from recent research using data sets that comprise a more diverse groups of countries in terms ...


Further Evidence On Revenue Decentralization And Inflation, John Thornton Apr 2007

Further Evidence On Revenue Decentralization And Inflation, John Thornton

John Thornton

Results from a panel regression study of 19 OECD member countries suggest that when the measure of revenue decentralization is limited to the revenues over which sub-national governments have full autonomy, its impact on inflation is not statistically significant.


Saving, Investment And Capital Mobility In African Countries, John Thornton, Olumuyiwa S. Adedeji Jan 2007

Saving, Investment And Capital Mobility In African Countries, John Thornton, Olumuyiwa S. Adedeji

John Thornton

Recently developed panel co-integration techniques are applied to data for six African countries to test the Feldstein–Horioka approach to measuring capital mobility. The results suggest three conclusions: savings and investment in panel data are non-stationary series and they are co-integrated; capital was relatively mobile in the African countries during 1970–2000, with estimated savings–retention ratios of 0.73 (FMOLS), 0.45 (DOLS), 0.51 (DOLS with heterogeneity) and 0.39 (DOLS with cross-sectional dependence effects); and there was a marked drop in the savings–retention ratio from 1970–85 to 1986–2000. The results could be interpreted as ...


Fiscal Decentralization And Economic Growth Reconsidered, John Thornton Jan 2007

Fiscal Decentralization And Economic Growth Reconsidered, John Thornton

John Thornton

Recent studies examining the relation between fiscal decentralization and economic growth have failed to take account of the extent of the independent taxing powers available to sub-national governments and thus have substantially overstated the degree of effective decentralization. Results from a cross section study of 19 OECD member countries suggest that when the measure of fiscal decentralization is limited to the revenues over which sub-national governments have full autonomy, its impact on economic growth is not statistically significant.


The Relationship Between Inflation And Inflation Uncertainty In Emerging Market Economies, John Thornton Jan 2007

The Relationship Between Inflation And Inflation Uncertainty In Emerging Market Economies, John Thornton

John Thornton

A standard Generalized Autoregressive Conditional Heteroskedastic (q,v) model is employed to construct a measure of monthly intlation uncertainty in 12 emerging market economies, and the relationship between inflation and inflation uncertainty is examined using Granger causality tests. The results suggest that higher inflation rates increased inflation uncertainty in all the economies, providing strong support for the Friedman hypothesis. The evidence on the effect of inflation uncertainty on average monthly inflation is more mixed, with increased inflation uncertainty leading to lower average inflation in Colombia. Israel. Mexico, and Turkey, consistent with the Holland hypothesis, but to higher average intlation in ...