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Merits and demerits of fiscal policy
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Data and Methodology This section will project the parameters of the economic models through its data sources, sample size, and evidently the estimation techniques. This chapter consists of two parts. The first part will introduce the variables together with the reasoning of their selection. The second part will test the variables through hypothesis testing to ensure a fair degree of adequacy for regression analysis. Model Specification The study adopts a comparative approach to examine the effectiveness of fiscal policy in stimulating economic growth under periods of high and/or low economic activity in Brazil. This analysis will initiate a Dicky-Fuller test and Augmented Dicky-Fuller test to ensure adequate data before performing the (OLS) regression. Secondary data will be collected from World Bank before being computed on E-views (Econometric software). Hypothesis testing will be validated through the tau test, to assert the significance of the regression coefficients. (Gujurati 2003), F-test for the overall significance of the model (Patterson and Okafor 2007); (R2) provides information about the goodness of fit of a model (Gujurati 2003) and (Adjusted R2) features the overall improvement in significance of the models when new terms are being introduced or removed. The empirical and theoretical literature review establishes the effective key fiscal and non-fiscal components of economic growth based on economic theories. All seven variables analysed in the literature review are assumed to be the contributors of Brazil’s economic growth. This study will therefore use all these explanatory variables to show their effectiveness to the economy, however in case of strong collinearity, one or two variables will be d... ... middle of paper ... ...drains, and so on); plant, machinery, and equipment purchases; and the construction of roads, railways, including schools, offices, hospitals, private residential dwellings, commercial, industrial buildings and net acquisitions of valuables are also considered capital formation. (Carvalho 2010) claims the “Growth Acceleration Plan” (refer to Appendix C) has been Brazil’s key contributors to economic growth. Urbanisation (% of Population) Urban population refers to people living in urban areas as defined by national statistical offices. It is calculated using World Bank population estimates and urban ratios from the United Nations World Urbanization Prospects. (Galor, Oded, and David N. Weil. 2000.) Develops a unified growth model that captures the historical evolution of population and technology producing output growth. This is thoroughly discussed in Appendix B.
The first reason why Brazil is a wealthy country on a national scale is because it has low national debt! (document B) Secondly, Brazil is a wealthy country because they have one-quarter of the world’s arable land which is great for growing crops! (document B) Lastly, Brazil is a wealthy country because Brazil was marked the eighth highest GDP in the world in 2013! The United States dollar equivalent in trillions in Brazil in 2013 was 2.5 trillion dollars! (document A) GDP stands for “Gross Domestic Product” and is an estimate of the total value of all the goods and services a country produces in a year! As a result, Brazil has many advantages that make it a wealthy country on a national
“Because of the rapid growth experienced by this country in terms of urban development, industrialization and population at the beginning of the 21st century, Brazil is facing a number of social, environmental and political challenges” (Meyer 2010). Over the years, Brazils infrastructure has been a topic of concern as the quality and quantity of growth seem to be lacking. One might be familiar with the recent 2016 Olympics in Rio and how many complaints were made about the unfinished quarters where people were staying and how the under developed the city
It is therefore necessary to look not just on the economy model but also on the way things are governed. Politics play an important role in the economic depression and it will also play an important role in the economic growth. Any long term growth will be dependent on the how the country is managed not just economically but also politically. It should be important to note that corruption in government is never good to the economy. In fact, history shows that corruption causes the economy to fall into crisis. Two things are needed to solve the problem of the economy, the right stimulation, as offered by the author, and the right policies and clean politics in Washington. With these, the country will be able to escape the depression that it is now in.
In the 1500s Pedro Alvares Cabral landed on Brazil, previously a inhabited by tribal nations, and claimed the land in the name of Portugal. Brazil remained a Portuguese colony until September 7, 1822 when it declared its independence becoming the Empire of Brazil making the nation a constitutional monarchy with a parliamentary system. In early 1964, a Military junta took control of the nation until it fell in 1985 further changing the structure of the nation, and finally in 1988 a formal constitution was created enacting 26 states encompassing its boarders. Throughout the history of Brazil, the nation was never able to fully immerse itself in the international market and expand its economy, until today. Latin America has not had the best of luck when it comes to economic development and many nations in Latin America have similar issues when it comes to economic and societal development, and many of these issues are cause by the same things. For example, before the military coup in 1964 Brazil was in massive amounts of debt to international partners, however, during the military rule the payment of this debt was halted so the trust and economic backing of countries stopped with the payments. Many plans have been enacted after the fall of the military control to reverse the economic downfall that occurred in the country and continent in the 20th century and especially in the 1980s, the lost decade. In Brazil alone, there have been at least seven economic plans to reverse the economic hardships of the country, from the Cruzado Plan to the Real Plan, none seemed to work. However, in the past decade the Brazilian economy has seen an amazing increase and the condition of life of the people in the nation has increased with it. The quest...
Brazil is both the largest and most populous country in South America. It is the 5th largest country worldwide in terms of both area (more than 8.5 Mio. km2 ) and habitants (appr. 190 million). The largest city is Sao Paulo which is simultaneously the country's capital; official language is Portuguese. According to the WorldBank classification for countries, Brazil - with a GDP of 1,5 bn. US $ in 2005 and a per capita GPD of appr. 8.500 US - can be considered as an upper middle income country and therefore classified as an industrializing country, aligned with the classification as one of the big emerging markets (BEM) next to Argentina and Mexico. Per capita income is constantly increasing as well as literacy rate (current illiteracy rate 8%). Due to its high population rate (large labour pool), its vast natural resources and its geographical position in the centre of South America, it bears enormous growth potential in the near future. Aligned with an increasing currency stability, international companies have heavily invested in Brazil during the past decade. According to CIA World Factbook, Brazil has the 11th largest PPP in 2004 worldwide and today has a well established middle income economy with wide variations in levels of development. Thus, today Brazil is South America's leading economic power and a regional leader.
Stratmann, Thomas, and Gabriel Okolski. "Does Government Spending Affect Economic Growth? | Mercatus." Mercatus. 10 June 10. Web. 20 Nov. 2011. .
In the current economic times the development and growth of any economy has come to a near stop or at least to a drastic slow down. The face of the global economic environment has changed and many new countries are starting to change the way their country and the rest of the world does business. One such nation is Brazil, who has turned around their own economic troubles and is becoming one of the fastest growing economies in the world (World Factbook). Brazil has started developing its economy and using the opportunity to achieve a level of respect in the world.
After analyzing the data and the theory, we have provided our conclusion weather tax cut is better for the stimulation of growth or Government spending is? This report explains the big macroeconomic debates of the present times. It seeks to explore the debate within fiscal policy itself between tax cuts and government spending. We have tried to explain the argument through some theories and through some data collected from Indian econ...
In order to assess the current state of the economy, the examination of important economic indicators or variables has always played a vital role in the understanding of the complex economic systems we live in. The analysis of these economic variables studied by many, not only has served as a tool to evaluate the current economic performance of a country, but also has allowed experts to envisage and continue the pavement of an economy's road. Currently, some economic variables have had favorable improvements indicating a general good outlook for the economy for the following months, requiring a further individual analysis and comparisons in order to foresee crisis or successes.
The Gini coefficient, a measure of wealth distribution shows us the trend of inequality in Brazil in years 2001 to 2009. the Gini has fallen for past six years and is comparatively very low in 2009. It has decreased the gap between rich and poor by redistribution of income and declining social inequality. The decrease in inequality has led to improvement in the life of low income people and also the working population has increased due to which better quality life experienced by most Brazilians.
Inflation targeting helped Brazil fix many issues that affected their economy before. Due to extreme hyperinflation the best solution for them at the time was to focus on inflation and ways to keep inflation in check while expanding their economy during the commodity boom. Certain policies implemented by the government have held back their economy in the last few years after being one of the biggest emerging markets in the world. In order for Brazil to be able to control their inflation rate more needs to be done aside from raising interest rates to some of the highest levels in the world. The main thing that keeps inflation out of the target range is infrastructure struggles leading to increased demand which causes prices to rise. A plan of austerity may not be the best way for Brazil to combat this issue due to a freeze in government spending when a lot of spending needs to happen to fix this issue of high demand for consumer goods and also for exports. The private sector also is at a disadvantage when fixing the infrastructure due to the harsh government and world regulations on their environment. In order for Brazil to have complete control of their inflation and to improve their economic growth, a lot needs to be done to make it easier for their consumers and trading partners to receive their
Urbanization is the movement from a rural society to an urban society, and involves a growth in the number of people in urban areas. Urban growth is increasing in both the developed but mostly in the developing countries. Urbanization is associated with the problems of unemployment, poverty, bad health, poor cleanliness, urban slums environmental deprivation. This causes a very big problem for these developing countries and who are some of poorest countries. Africa urbanization is not as big as most developing countries but is on the rise for it outbursts in city growth lately. (Saundry, 2008).
Economic growth is one of the most important fields in economics. In current generation economic is developing well. Economic growth is really important to country and for the world as well. Economic are one of the identity for country because it shows a country development and attraction for other countries (F, Peter. 2014). For example well economic develop such as Singapore, Dubai, New York, and Japan. These countries are well develop and maintaining their economic growths. Economic growths are really important because higher average incomes enables consumers to enjoy more goods and services. Then, lower unemployment with higher output and positive economic growth firms tend to utilize more workers creating more employment. Enhanced public
An increase in human population can influence our economy. Some of the factors that are affected are unemployment, poverty and the restriction of economic expansion. When the population increases, the cost of health, education, and other areas of urban growth are affected. Unempl...
A general situation of urbanization trend in developing countries and developed countries is increasing. In 18th Century only 3% of the world total population lived in urban areas but as projected in 2000 this number will increase at above 50% (UN as cited in Elliot, 1999, p. 144). According to UN (as cited in Elliot, 1999, p.144), it is figured that the total urban population in developing countries has increased from approximately 400 millions people in 1950 to approximately 2000 millions people in 2000. At the same time, total urban population in developed countries is double...