Is Fiscal Policy Pro-Cyclical or Counter-Cyclical ? Evidence from India

Mohanty, Asit; Mishra, Bibhuti Ranjan

doi:10.17010/aijer/2017/v6i2/114124

Cited by 4 publications

(2 citation statements)

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“…While the economy is thriving, a procyclical fiscal approach increases public spending and reduces taxes, but spending cuts and increased taxation characterise economic downturns. In contrast to a procyclical fiscal policy that cuts spending and increases taxes during periods of economic boom, a countercyclical fiscal policy increases spending and decreases taxes during periods of recession (Mohanty and Mishra, 2017). Vogiazas and Nikolaidou (2011) explain these competing theories in the context of bank credit risk.…”

Section: Literature Review and Hypotheses Development 21 Theoretical ...mentioning

confidence: 99%

“…Macroeconomic cycles may be categorised as procyclical or countercyclical. Thus, procyclical refers to both the growth and contraction of the economy (Mohanty and Mishra, 2017). Procyclical connotes fluctuations in the financial indicators throughout certain phases of the economic cycle (Arham et al ., 2020).…”

Section: Literature Review and Hypotheses Developmentmentioning

confidence: 99%

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Macroeconomic cyclical indicators and bank non-performing loans: does country governance matter in African countries?

Ahiase,

Andriana,

Agbemava

et al. 2023

IJSE

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PurposeThe purpose of this paper is to investigate the influence of macroeconomic cyclical indicators and country governance on bank non-performing loans in African countries.Design/methodology/approachData was collected from the 53 African countries covering 2005–2021. The paper develops an empirical model to examine the impact of country governance in reducing macroeconomic cycle-induced adverse effects on bank credit risk. This research estimates Random Effects models and the General Method of Moment to examine the link between microeconomic and governance factors on bank non-performing loans. Stata version 15.1 was used to conduct panel regression analysis.FindingsThe findings of the study revealed that the generalized method of moments findings contributes valuable insights into the persistence of NPLs over time and the specific effects of variables on NPL levels. The study findings highlight that the debt-to-GDP ratio, unemployment, regulatory quality, government effectiveness and inflation have significant relationships with NPLs, shedding light on their specific contributions to credit risk dynamics.Research limitations/implicationsThe focus on a specific set of determinants for NPLs, which may not capture all the factors that influence NPL levels. Thus, the study did not consider the impact of macroeconomic shocks, such as natural disasters or global economic crises, which can have a significant impact on NPLs.Practical implicationsPolicymakers should prioritize maintaining sustainable debt levels, promoting employment growth and controlling inflation rates to mitigate credit risk and reduce nonperforming loans. Also, enhancing regulatory quality and government effectiveness is crucial in ensuring financial stability and minimizing non-performing loans in Africa.Originality/valueThis paper provides a new possible solution to minimise bank non-performing loans risk by examining interactions of country governance regarding the macroeconomic cycle behaviour.Peer reviewThe peer review history for this article is available at: https://publons.com/publon/10.1108/IJSE-11-2022-0729

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Section: Literature Review and Hypotheses Development 21 Theoretical ...mentioning

confidence: 99%

Section: Literature Review and Hypotheses Developmentmentioning

confidence: 99%