Fiscal policy is one of the macroeconomic policies which play a decisive role on economic growth; especially in developing economies which have many economic and social bottlenecks. This study examines the impacts of fiscal policy shock on Ethiopian economy; through applying static compatible general equilibrium (Stage CGE) model which allows quantifying the impacts of fiscal instrument shock on the economy and welfare of households. Fiscal problems like small tax revenue and consistent fiscal deficit put its own major influences on developing economies performance.
The study uses 2009/10 Ethiopian SAM as an input for the model and applies three simulation scenarios. In the first simulation, tariff cut affects GDP and household welfare negatively. In the second simulation increasing direct tax has negative impact on total GDP. The other alternative simulation scenario is reducing direct tax and which give a positive change on the total GDP. In general, the government should reduce direct tax to improve economic performance. In addition, liberalizing tariff is not advisable for Ethiopian economy.
Inhaltsverzeichnis (Table of Contents)
- CHAPTER ONE: INTRODUCTION
- 1.1. Background of the Study
- 1.2. Statement of the Problem
- 1.3. Objective of the Study
- 1.4. Hypothesis
- 1.5. Justification
- 1.6. Significance of the Study
- 1.7. Scope of the Study
- 1.8. Organization of the Paper
- CHAPTER TWO: REVIEW OF THEORETICAL AND EMPIRICAL LITERATURE
- 2.1. Review of Theoretical Literature
- 2.2. Review of Empirical evidences
- 2.3. Fiscal Policy in The Context of Developing economy and Its Role
- 2.4. Conceptual Framework
- CHAPTER THREE: OVERVIEW OF ETHIOPIAN ECONOMY
- 3.1. Government Revenues, expenditure and Economic performance
- 3.2. SAM based description of Ethiopian economy
- CHAPTER FOUR: DATA AND METHODOLOGY
- 4.1. Specification of CGE Model
- 4.2. Model closure and scenarios
- CHAPTER FIVE: RESULT AND DISCUSSION
- 5.1. The impacts of tariff cut on factor income
- 5.2. The impact of tariff cut on households income and expenditure
- 5.3. The impacts of tariff cut on macro variables
- 5.4. The impact of increasing direct tax on household income
- 5.5. The impacts of increasing direct tax on macro variables
- 5.6. The impact of reducing direct tax on factors and households income
- 5.7. The impacts of reducing direct tax on macro variables
- 5.8. Welfare effects of tariff cut and direct tax policy change
Zielsetzung und Themenschwerpunkte (Objectives and Key Themes)
This thesis aims to analyze the impact of fiscal policy shocks, specifically import tariff and direct tax changes, on the Ethiopian economy using a Stage CGE modeling approach. The study seeks to understand how these policy changes affect various economic indicators, including factor income, household income and expenditure, and macroeconomic variables.
- Impact of tariff cuts on the Ethiopian economy
- Effects of direct tax changes on the Ethiopian economy
- Analysis using a Computable General Equilibrium (CGE) model
- Assessment of welfare effects of fiscal policy changes
- Contribution to understanding fiscal policy in a developing economy context
Zusammenfassung der Kapitel (Chapter Summaries)
CHAPTER ONE: INTRODUCTION: This chapter sets the stage for the thesis, introducing the background of the study by focusing on the Ethiopian economy and its susceptibility to fiscal policy shocks. It clearly states the problem of understanding the complex impacts of tariff and direct tax adjustments. The objectives are defined, outlining the research's intent to analyze these impacts using a CGE model. Hypotheses are proposed, and the justification for the study is presented, emphasizing the significance and scope of the research within the context of development economics in Ethiopia. Finally, the chapter details the organization of the subsequent chapters.
CHAPTER TWO: REVIEW OF THEORETICAL AND EMPIRICAL LITERATURE: This chapter provides a comprehensive review of existing theoretical and empirical literature related to fiscal policy, particularly within the context of developing economies. It examines existing theoretical frameworks for understanding how fiscal policy instruments affect various economic actors and aggregates. The chapter delves into empirical studies that have explored similar issues, analyzing their methodologies and findings. A crucial part of this chapter is a discussion of the role and impact of fiscal policy in developing countries, setting the stage for the subsequent application of the chosen modeling approach.
CHAPTER THREE: OVERVIEW OF ETHIOPIAN ECONOMY: This chapter presents a detailed overview of the Ethiopian economy, providing the necessary context for understanding the application of the CGE model. It thoroughly examines government revenue and expenditure patterns and their correlation with overall economic performance. A significant portion is dedicated to describing the Ethiopian economy using a Social Accounting Matrix (SAM) based approach. This provides a structured representation of the economy's inter-industry relationships and flows, which is essential for calibrating and running the CGE model accurately. This chapter essentially establishes the baseline economic conditions for the analysis.
CHAPTER FOUR: DATA AND METHODOLOGY: This chapter explains the data used in the study and details the methodological approach employed. The specific CGE model used is described, providing a thorough explanation of its structure, parameters, and assumptions. The chapter also explains the model's calibration process, which involves aligning the model's parameters to real-world economic data. Finally, it outlines the various scenarios simulated, which include different adjustments to import tariffs and direct taxes. This methodological transparency allows for a critical evaluation of the study's results.
Schlüsselwörter (Keywords)
Ethiopian economy, fiscal policy, import tariff, direct tax, Computable General Equilibrium (CGE) model, development economics, macroeconomic variables, household income, welfare effects, fiscal policy shocks.
Frequently Asked Questions: Analysis of Fiscal Policy Shocks on the Ethiopian Economy
What is the main topic of this document?
This document provides a comprehensive preview of a thesis analyzing the impact of fiscal policy shocks (specifically changes in import tariffs and direct taxes) on the Ethiopian economy using a Computable General Equilibrium (CGE) model. It includes a table of contents, objectives and key themes, chapter summaries, and keywords.
What are the key objectives of the study?
The study aims to analyze how changes in import tariffs and direct taxes affect various economic indicators in Ethiopia, including factor income, household income and expenditure, and macroeconomic variables. It seeks to understand the welfare effects of these policy changes and contribute to the broader understanding of fiscal policy in a developing economy context.
What methodology is used in this study?
The study employs a Computable General Equilibrium (CGE) modeling approach. A Social Accounting Matrix (SAM) is used to describe the Ethiopian economy, providing a structured representation for calibrating and running the CGE model. Different scenarios are simulated, including changes in import tariffs and direct taxes, to analyze their respective impacts.
What are the key themes explored in this thesis?
Key themes include the impact of tariff cuts on the Ethiopian economy, the effects of direct tax changes, the application of a CGE model for analysis, the assessment of welfare effects of fiscal policy changes, and the contribution to understanding fiscal policy in a developing economy context.
What data is used in this study?
The document does not explicitly list the specific datasets used, but it mentions that the study uses a Social Accounting Matrix (SAM) based approach to describe the Ethiopian economy. This suggests the use of macroeconomic data representing inter-industry relationships and economic flows within the country.
What are the main findings (as previewed in the chapter summaries)?
The chapter summaries preview an analysis of the impacts of tariff cuts and direct tax changes on factor income, household income and expenditure, and macroeconomic variables. The study will also assess the welfare effects of these policy changes.
What are the key chapters and their contents?
The thesis is structured as follows: Chapter 1 (Introduction), Chapter 2 (Review of Theoretical and Empirical Literature), Chapter 3 (Overview of Ethiopian Economy), Chapter 4 (Data and Methodology), and Chapter 5 (Results and Discussion).
What are the keywords associated with this research?
Keywords include Ethiopian economy, fiscal policy, import tariff, direct tax, Computable General Equilibrium (CGE) model, development economics, macroeconomic variables, household income, welfare effects, and fiscal policy shocks.
- Arbeit zitieren
- Asmare Workneh Alamrew (Autor:in), 2017, The Impact of Fiscal Policy Shocks on Ethiopian Economy, München, GRIN Verlag, https://www.grin.com/document/444906
