Fiscal policy

Fiscal Federalism Explained Fiscal federalism divides taxing and spending across government levels. Learn how intergovernmental transfers shape local fiscal capacity and budget autonomy.

Fiscal Multiplier The fiscal multiplier is the ratio of output change to fiscal stimulus. It measures how much GDP increases for each dollar of government spending or tax cut, accounting for the cascading effects through the economy.

Fiscal Multiplier During Recession vs Expansion Fiscal multiplier during recession vs expansion: why the same government spending produces larger GDP gains when slack resources are available than when the economy is booming.

Fiscal Multiplier Explained With Examples The fiscal multiplier shows how a dollar of government spending or tax cuts generates more or less than a dollar of GDP change. Learn to calculate it with worked examples.

Fiscal Multiplier for Social Transfers vs Public Goods The fiscal multiplier for social transfers versus public goods differs because transfers stimulate demand via spending propensity, while public goods provide productive capacity.

Fiscal Multiplier for Targeted Low-Income Transfers Cash transfers to low-income households generate higher fiscal multipliers than broad tax cuts because recipients spend rather than save marginal income.

Fiscal Multiplier in a Currency Union How a fiscal multiplier works in a currency union, and why sharing a currency changes crowding-out dynamics and limits central bank independence.

Fiscal Multiplier in a High-Debt Country Fiscal multiplier in a high-debt country tends to be smaller than in low-debt settings. Learn how sovereign risk, confidence effects, and crowding-out reduce stimulus impact.

Fiscal Multiplier in a Recession vs. an Expansion Why government spending produces a larger output effect during recessions than during expansions, reflecting idle resources and differences in monetary policy response.

Fiscal Multiplier in a Small Open Economy How import propensity and exchange-rate pass-through compress output multipliers when small countries run fiscal stimulus, and why size matters.

Fiscal Multiplier in Wartime vs Peacetime Why government spending multipliers differ between wartime mobilisation and peacetime stimulus, shaped by resource use and conscription.

Fiscal Multiplier: Federal vs State-Level Spending Federal spending multipliers typically exceed state and local multipliers; differences stem from balanced-budget constraints, interstate leakage, and scale. Compare the mechanisms and empirical estimates.

Fiscal Multipliers in Developing vs Advanced Economies Why fiscal multiplier estimates differ between developing and advanced economies: financial depth, trade openness, credibility, and supply constraints.

Fiscal Policy Contractionary A contractionary fiscal policy is when government reduces spending or raises taxes to cool the economy and reduce inflation. It narrows the budget deficit but can slow growth and raise unemployment.

Fiscal Policy Expansionary An expansionary fiscal policy is when government increases spending or cuts taxes to boost aggregate demand and economic growth. It widens the budget deficit in the short run to stimulate the economy.

Fiscal Rules: Country Examples and How They Work Survey of fiscal rules by country: debt brakes, balanced-budget rules, expenditure limits. How design affects outcomes.

Fiscal Space The budgetary room a government has to increase spending or cut taxes without destabilising debt or breaching sustainable borrowing limits.

Fiscal Space: Definition and How It Is Measured Fiscal space definition: a government's capacity to increase spending or cut taxes without harming debt sustainability; key measurement approaches.

Fiscal Space: Definition and Limits Fiscal space is a government's capacity to increase spending or cut taxes without jeopardizing debt sustainability; expanding it requires revenue growth, cost control, or creditor confidence.

Fiscal Stimulus Timing How recognition, legislative, and implementation delays reduce the effectiveness of discretionary fiscal stimulus.

Fiscal Sustainability Whether a government can maintain its current spending and tax policies long-term without triggering default or crisis.

Fiscal Year The twelve-month accounting period used by governments for budgeting, revenue collection, and financial reporting, often differing from the calendar year.

Flat Tax An income tax system applying the same percentage rate to all earners regardless of income level, trading simplicity for progressivity.

Formulary Apportionment in Corporate Taxation Formulary apportionment allocates multinational corporate profits across jurisdictions using a simple formula based on sales, payroll, and assets rather than arm's-length transfer pricing. It simplifies tax administration but raises allocation disputes.

Forward-Looking Expectations and the Fiscal Multiplier How rational household and business expectations about future taxes and spending reversals change the fiscal multiplier—and may either suppress or amplify economic stimulus.

Full Employment Output The level of GDP at which the economy is operating at full employment, anchoring fiscal policy targets.

GDP-Linked Bonds Sovereign debt securities whose coupons or principal are indexed to the issuer's economic output, aligning creditor and debtor interests during downturns.

Gift Tax Federal tax on transfers of property without adequate consideration; integrated with estate tax under a unified framework.

Global Minimum Corporate Tax: How Pillar Two Works The OECD's Pillar Two framework establishes a 15% global minimum corporate tax rate through an income-inclusion rule, affecting large multinational enterprises worldwide.

Golden Rule Fiscal The golden rule of fiscal policy states that governments should borrow only to finance investment, not consumption, and should balance their budgets over the business cycle so that surpluses in good years offset deficits in bad years.

Government Capital Budget A separate public-sector budget category for long-lived infrastructure investment, distinct from operating expenditure.

Government Debt Held by Central Bank vs the Public Why government debt held by a central bank is treated differently in fiscal analysis than public debt, and what it means for real debt burdens.

Government Shutdown A government shutdown is a temporary halt in non-essential government operations that occurs when Congress fails to authorize spending or raise the debt ceiling. Non-essential federal employees are furloughed while essential services continue.

Government Spending Multiplier The ratio by which an exogenous increase in government purchases amplifies total GDP; typically ranges from 0.8 to 2.0.

Government Spending Multiplier vs Tax Cut Effectiveness How government spending multipliers compare to tax cuts in economic stimulus, why effectiveness varies by cycle and financing method.

Gross Debt Gross debt is the total amount a government owes, including all borrowing and liabilities, without subtracting any financial assets it may hold. It is the broadest measure of government debt.

Haircut Agreement A negotiated reduction in the face value of sovereign debt owed to creditors.

Haircut in Sovereign Debt Restructuring The percentage reduction in net present value creditors accept during sovereign debt restructuring, calculated and negotiated to achieve debt sustainability.

HIPC Initiative The 1996 multilateral debt-relief programme that reduced the external debt of heavily indebted poor countries to sustainable levels.

History of the U.S. Debt Limit The history of the US debt limit traces its origin in World War I through repeated increases, showing how it shifted from administrative tool to political lever.

Holdout Creditor Problem How minority bondholders refusing debt restructuring can block relief for all other creditors and the sovereign debtor.

Holdout Creditors Bondholders who refuse to participate in a sovereign debt restructuring and pursue full repayment through legal action, complicating negotiations and limiting recovery for other creditors.

Housing Choice Voucher Rental subsidy program enabling low-income families to lease private-market housing while the government covers the gap between market rent and affordable payments.

How a Eurobond Default Works A Eurobond default unfolds through grace periods, cross-default triggers, trustee notification, and bondholder acceleration. The legal sequence determines recovery timing and creditor power.

How Exchange Rate Regime Affects the Fiscal Multiplier Under floating exchange rates, fiscal multipliers are near zero because spending raises interest rates, attracting inflows and appreciation. Fixed regimes amplify multipliers by preventing rate appreciation.

How Monetary Policy Interacts with the Fiscal Multiplier The fiscal multiplier's size depends on whether a central bank accommodates or tightens policy in response to fiscal stimulus, with the zero lower bound creating a special case.

How Sovereign Debt Renegotiation Works How sovereign debt renegotiation works: step-by-step mechanics of government negotiating new terms with creditors, from payment suspension to exchange offer.

How Sovereign Default Affects Domestic Bondholders Sovereign default impact on domestic bondholders often differs from foreign creditor treatment, with weaker legal recourse and currency devaluation risks.

How the Austerity Multiplier Works The output cost of fiscal consolidation, why the IMF revised its multiplier estimates downward after 2010, and what determines whether spending cuts or tax increases are more contractionary.

How the CBO Scores a Bill: A Step-by-Step Explanation The CBO's cost-estimation process: from bill text through baseline projections, dynamic scoring, and the published estimate of how legislation affects the federal budget.

How the Debt Ceiling Differs from the Government Budget Understand how the debt ceiling and government budget are separate decisions: the budget authorizes spending, while the debt ceiling allows borrowing to pay already-approved bills.

How the Fiscal Multiplier Is Calculated Learn how to calculate fiscal multiplier from marginal propensity to consume. Includes derivation, spending multiplier, tax multiplier, and worked examples.

IMF Bailout International Monetary Fund rescue financing provided to member countries facing external payment crises and debt unsustainability.

IMF Conditionality The mandatory policy reforms a sovereign borrower must implement to access International Monetary Fund lending and programme support.

IMF Debt Sustainability Analysis Framework The IMF's debt sustainability analysis projects a sovereign borrower's debt trajectory and stress-tests it against interest-rate, growth, and exchange-rate shocks to assess default risk.

Implicit Debt Unfunded government obligations like future Medicare or Social Security payments that are not counted as formal debt but represent real fiscal liabilities.

Implicit Marginal Tax Rate in Benefit Phase-Outs How overlapping transfer-program tapering stacks effective tax rates on low-income households, often exceeding 60–80 percent and discouraging work.

Import Leakage How increased imports in response to rising income reduce the domestic multiplier from fiscal stimulus.

Impoundment of Funds Presidential refusal or delay in spending funds appropriated by Congress, a practice largely prohibited since 1974.

In-Kind Transfer Government benefit delivered as goods or services (food, healthcare, housing) rather than cash, chosen to constrain how recipients spend.