João Tovar Jalles

University of Lisbon | UL · ISEG Lisbon School of Economics and Management

This paper examines the impact of government spending on inclusive growth in developing Asia, focusing on fiscal redistribution through education, health, and social benefits. Using panel data from 16 countries over the period 1970–2017, we apply a fixed-effects logistic regression model to assess the likelihood of inclusive growth episodes. Our fi...

We analyze the role of international reserves and sovereign debt in the determination and international transmission of interest rates. We develop a model that describes the money market equilibrium with capital account openness. It predicts that higher levels of international reserves lead to lower interest rates whereas the effect of higher gover...

This paper empirically links the efficiency and performance assessment of the general government, proxied by efficiency scores, to the trust in government. Government spending efficiency scores are first computed via data envelopment analysis (DEA). Then, relying on panel data and instrumental variable approaches, we estimate the effect of public s...

Policymakers across the world are striving to tackle the century-defining challenge of climate change without undermining potential growth. This paper examines the impact of structural reforms in the energy sector (electricity and gas) on environmental outcomes and green growth indicators in a panel of 25 advanced economies during the period 1970-2...

This paper provides a novel dataset of time-varying measures on the degree of countercyclicality of fiscal policies for advanced and developing economies between 1980 and 2021. The use of time-varying measures of fiscal stabilization, with special attention to potential endogeneity issues, overcomes the major limitation of previous studies and allo...

This article examines the impact of labour market and product market reforms on income inequality for 25 OECD countries between 1970 and 2020, using the local projections approach and an updated narrative-based dataset of the reform indicators. Our results suggest that both types of (endogenized) market-oriented reforms increase income inequality,...

Climate change is an existential threat to the world economy like no other, with complex, evolving and nonlinear dynamics that remain a source of great uncertainty. There is a bourgeoning literature on the economic impact of climate change, but research on how climate change affects sovereign credit ratings is limited. Building on our previous rese...

Using discrete choice models, this paper examines the macroeconomic and political factors motivating more than 450 fiscal consolidation episodes in 185 countries during the period 1979–2019. In emerging and developing countries, consolidations are more likely during “good times”: when growth is high, and countries experience positive terms of trade...

This paper empirically examines the effectiveness of announced government fiscal measures in the context of the COVID-19 pandemic. First, we build a new panel dataset of fiscal announcements by type, such as above-the line, below-the-line, and contingent liabilities for a wide sample of 136 advanced and developing countries between January 2020 and...

Climate change poses a systemic risk to the global economy and financial markets. This article synthesizes three papers that empirically investigate the impact of climate change on sovereign risks, as measured by government bond yields and spreads, the probability of sovereign debt defaults and sovereign credit ratings. The focus is a large panel o...

Natural disasters are inevitable, but humanitarian and economic losses are determined largely by policy preferences and institutional underpinnings that shape the quality of public infrastructure (including emergency responses and healthcare services) and govern business practices and the adherence to building codes. In this paper, we empirically i...

This paper computes a new measure of capacity utilization‐adjusted Total Factor Productivity (TFP) using sector‐level data from a sample of 18 Advanced Economies and 24 industries between 1970 and 2014. We then empirically examine the impact of structural reforms (labor and product market) on TFP by means of the local projection method. Structural...

We estimate, by means of the local projection method, the short to medium‐term economic impact of previous pandemics in a sample of 170 countries during the 2000–2018 period. We find that the output effect has been significant (reaching over −2 percent after 5 years) and persistent. The impact has varied across income groups, with pandemics affecti...

This paper discusses the evolution of key taxes during the past 20 years in developing Asia and the fiscal challenges that the region’s economies face in light of the coronavirus disease (COVID-19) pandemic. It presents estimates of tax capacity and tax potential, and discusses the productivity of key taxes in the region. The paper finds that devel...

This paper presents and describes a new database of major minimum wage and collective bargaining (CB) shocks covering 26 advanced economies over the period 1970–2020. The main advantage of this dataset is the precise identification of the nature and date of major shocks, which is valuable in many empirical applications. Based on the dataset, we obs...

Policymakers across the world are striving to tackle the century-defining challenge of climate change without undermining potential growth. This paper examines the impact of structural reforms in the energy sector (electricity and gas) on environmental outcomes and green growth indicators in a panel of 25 advanced economies during the period 1970-2...

Policymakers across the world are striving to tackle the century-defining challenge of climate change without undermining potential growth. This paper examines the impact of structural reforms in the energy sector (electricity and gas) on environmental outcomes and green growth indicators in a panel of 25 advanced economies during the period 1970-2...

IWhat is the impact of climate change on inflation and growth dynamics? This is not a simple question to answer as climate shocks tend to be ubiquitous, but with opposing effects simultaneously on demand and supply. The extent of which climate-related shocks affect inflation and economic growth also depends on long-run scarring in the economy and t...

Purpose Early evidence suggests that coronavirus disease 2019 (COVID-19) caused a sharp deterioration in fiscal accounts worldwide. This paper empirically assesses the fiscal impact of previous pandemics and epidemics. Design/methodology/approach Using a large sample of 170 countries from 2000 to 2018, this study relies on Jordà's (2005) local pro...

Climate change is a big challenge of our time. While there is a bourgeoning literature on the economic impact of climate change, research on how financial crises affect climate change is limited. We empirically use the local projection method to empirically study the impact of past financial crises on climate change vulnerability and resilience ind...

Climate change is the defining challenge of our time with complex and evolving dynamics. The effects of climate change on economic output and financial stability have received considerable attention, but there has been much less focus on the relationship between climate change and income inequality. In this paper, we provide new evidence on the ass...

We construct a novel database covering more than 450 fiscal consolidation episodes in 185 countries during the period 1979-2019. Using discrete choice models, we then examine the (broader macroeconomic and political) factors motivating these fiscal consolidation episodes. In emerging and developing countries, consolidations are more likely during "...

Early evidence suggests that COVID-19 caused a sharp decrease in international trade and a widening of current account imbalances. This paper shows that (qualitatively) similar responses have characterized the effects of previous pandemics. Using data from a sample of 170 countries, we find that a pandemic shock is typically followed by a sizable d...

We assess the specific need (or its absence) of a country to implement a fiscal consolidation programme by focusing specifically on their degree of success, notably in terms of fiscal sustainability. The “need” to consolidate is based on having a primary balance above or below the debt-stabilizing primary balance (provided by the IMF's Debt Sustain...

The subnational governments, at the regional and local levels, play an important role in the prevention, management and recovery from natural disasters and pandemics/epidemics. These jurisdictions are responsible for issuing and monitoring compliance with several aspects of regulation that are essential for risk prevention, including land use and c...

In this paper, we estimate short- and long-term tax buoyancy for 44 sub-Saharan African (SSA) countries during 1980–2017 using time series and panel techniques. We find that the long-term tax buoyancy is either one or slightly above one for most SSA countries. Fragile states have a lower short-term tax buoyancy reflecting their institutional weakne...

Climate change is the defining challenge of our time with complex and evolving dynamics. The effects of climate change on economic output and financial stability have received considerable attention, but there has been much less focus on the relationship between climate change and income inequality. In this paper, we provide new evidence on the ass...

We empirically assess whether the negative response of private consumption and private investment to fiscal consolidation usually expected is reversed. We focus on a sample of 174 countries between 1970 and 2018 to determine episodes of fiscal consolidations using three alternative measures of the cyclically adjusted primary balance: (1) an Interna...

How can governments reduce the prevalence of cross-border tax fraud? This paper argues that the use of digital technologies offers an opportunity to reduce fraud and increase government revenue. Using data on intra-EU and world trade transactions, we present evidence that (i) cross-border trade tax fraud is non-trivial and prevalent in many countri...

Attitudes towards the environment have evolved over the years around the world, in part due to growing awareness among the population of the challenges posed by climate change. The decentralisation of policymaking, administrative and political responsibilities to the subnational levels of administration may also have played a part to the extent tha...

This paper assesses the drivers of tax effort in a sample of 122 countries from 1980 to 2017, using both the Bird and Frank indices to measure tax effort. Our focus is on five blocks of determinants—namely, economic, fiscal, openness, structural, and political. We find that tax effort is influenced by all blocks, although results differ per income...

Climate change is already a systemic risk to the global economy. While there is a large body of literature documenting potential economic consequences, there is scarce research on the link between climate change and sovereign risk. This paper therefore investigates the impact of climate change vulnerability and resilience on sovereign bond yields a...

Climate change poses an existential threat to the global economy. While there is a growing body of literature on the economic consequences of climate change, research on the link between climate change and sovereign default risk is nonexistent. We aim to fill this gap in the literature by estimating the impact of climate change vulnerability and re...

We empirically assess the impact of tax reforms on income distribution in developing countries. We apply the local projection method to a new “narrative” database of tax reforms covering 45 emerging and low-income countries. Reforms of the personal income or strengthening of the revenue administration lower the disposable Gini and increase the bott...

Governments are responsible for economic policy implementation, and their actions affect financial and capital market outcomes. Specifically, the way fiscal policy is conducted matters when credit agencies have to decide on how to rate a sovereign. This paper empirically assesses the effect of a new time‐varying measure of fiscal counter‐cyclicalit...

We provide a novel set of government spending efficiency scores for the OECD countries and then assess to what extent capital markets perceive government efficiency increases (decreases) as part of the determinants of sovereign rating decisions. Public efficiency scores are computed via data envelopment analysis. Then, we rely notably on ordered re...

This paper provides cross-country evidence on the relationship between growth in CO2 emissions and real GDP growth from 1960 to 2018. The focus is on distinguishing longer-run trends in this relationship from short-run cyclical fluctuations, and on documenting changes in these relationships over time. Using two filtering techniques for separating t...

We empirically assess fiscal responses for 28 EU countries over the 1995Q1-2021Q2 period. At the same time, we evaluate the importance, for fiscal stance reactions, of notably the difference between economic growth and long-term interest rates. We find a positive response of the primary balance to an increase in government debt for the EU panel, im...

We estimate that the short- to medium-term fiscal impact of previous pandemics has been significant in 170 countries (including low-income countries) during the 2000–2018 period. The impact has varied, with pandemics affecting government expenditures more than revenues in advanced economies, while the converse applies to developing countries. Using...

We empirically assess the effects of structural tax reforms on government spending efficiency in a sample of 18 OECD economies over the period 2006–2017. After calculating input spending efficiency scores, we evaluate in a panel setup the relevance for public sector efficiency of narrative tax changes. We find that: i) input efficiency scores avera...

This article investigates the degree to which government consumption expenditures substitute or complement private consumption, one of the most important (and most overlooked) determinants of the fiscal multiplier. Using panel datasets from a large number of heterogeneous economies over 1970–2016, we find that private and government consumption are...

Empirical evidence to date suggests a positive relationship between fiscal policy countercyclicality and growth. But do all industries gain equally from countercyclical fiscal policy? What are the channels through which countercyclical fiscal policy affects industry-level growth? We answer these questions by applying a difference-in-difference appr...

We explore the impact of major labor and product market reforms on current account dynamics using a new “narrative” database of major changes in employment protection for regular workers and product market regulation for non-manufacturing industries covering 26 advanced economies over the past four decades. Our main finding is that product market d...

We revisit the twin-deficits relationship for a sample of 65 countries with fiscal rules over the period 1985-2015, using a panel data estimation methods. Our analysis accounts for the role of various types of fiscal rules and institutions: expenditure rules, revenue rules, budget balance rules, debt rules, fiscal councils, and supporting procedure...

Using a large panel for 95 countries and the 1972–2014 period, this paper analyses the interactions among globalization, political & civil rights and economic convergence, through a simultaneous estimation technique. We use a multi-dimensional, de facto, and continuous measures of Freedoms and Globalization. We find a two-way positive relationship...

This paper evaluates the relevance of taxation for public spending efficiency in a sample of OECD economies for the period of 2003–2017. We start by computing the data envelopment analysis (DEA) scores, and then we evaluate the role of tax structure in explaining these public efficiency scores, using a reduced-form panel data regression specificati...

We explore the impact of major labor and product market reforms on current account dynamics using a new “narrative” database of major changes in employment protection for regular workers and product market regulation for non-manufacturing industries covering 26 advanced economies over the past four decades. Our main finding is that product market d...

The recent COVID-19 crisis has generated a concern that productivity (which was already at historically low levels) may further decline. From a theoretical standpoint, the recessions-total factor productivity (TFP) nexus is ambiguous à priori. This paper empirically examines the dynamic impact of recessions on TFP. We compute a new measure of utili...

Using a large panel for 95 countries and the 1972–2014 period, this paper analyses the interactions among globalization, political & civil rights and economic convergence, through a simultaneous estimation technique. We use a multi-dimensional, de facto, and continuous measures of Freedoms and Globalization. We find a two-way positive relationship...

Climate change is an existential threat to the world economy like no other, with complex, evolving and nonlinear dynamics that remain a source of great uncertainty. There is a bourgeoning literature on the economic impact of climate change, but research on how climate change affects sovereign risks is limited. Building on our previous research focu...

How can governments reduce the prevalence of cross-border tax fraud? This paper argues that the use of digital technologies offers an opportunity to reduce fraud and increase government revenue. Using data on intra-EU and world trade transactions, we present evidence that (i) cross-border trade tax fraud is non-trivial and prevalent in many countri...

Climate change poses an existential threat to the global economy. While there is a growing body of literature on the economic consequences of climate change, research on the link between climate change and sovereign default risk is nonexistent. We aim to fill this gap in the literature by estimating the impact of climate change vulnerability and re...

This paper analyzes the political economy causes of fiscal promise gaps, defined as the distance between planned fiscal objectives and actual realizations during planned fiscal expansions periods. Using a sample of 27 European Union countries between 1992 and 2015, we identify, by means of an “hybrid” narrative approach, 68 episodes of promised fis...

This paper provides a novel dataset of time-varying measures of cyclicality in social spending for an unbalanced panel of forty-five developing economies from 1982 to 2012. We focus on four categories of government social expenditure: health, social protection, pensions, and education. We find that in developing countries social spending has been a...

We look at the effect of exchange rate regimes on fiscal discipline, taking into account the effect of underlying political conditions. We present a model where strong politics (defined as policymakers facing longer political horizon and higher cohesion ) are associated with better fiscal performance, but fixed exchange rates may revert this result...

In this paper, we estimate short- and long-term tax buoyancy for 30 Asian-Pacific countries during 1980–2017 using recent panel techniques. Using Mean Group estimators, we found that the short-run buoyancy is statistically not different from one, while the long-run buoyancy is statistically larger than one. In 11 out of 30 countries, growth has imp...

Purpose This paper contributes to shed light on the quality and performance of US fiscal forecasts. Design/methodology/approach The first part inspects the causes of official fiscal forecasts revisions by Congressional Budget Office (CBO) between 1984 and 2016 that are due to technical, economic or policy reasons. Findings Both individual and cum...

This paper evaluates empirically the effect of financial crises on several types of pollutant emissions. We focus on a sample of 55 developing countries from 1980 until 2012 and rely on the local projection method to plot impulse response functions. Our results show that financial crises lead to a fall in CO2 emissions. Moreover, systemic crises in...

Climate change is already a systemic risk to the global economy. While there is a large body of literature documenting economic consequences, there is scarce research on the link between climate change and sovereign risk. This paper investigates the impact of climate change vulnerability and resilience on sovereign bond yields and spreads in 98 cou...

Climate change is already a systemic risk to the global economy. While there is a large body of literature documenting potential economic consequences, there is scarce research on the link between climate change and sovereign risk. This paper therefore investigates the impact of climate change vulnerability and resilience on sovereign bond yields a...

We assess the impact of announcements corresponding to different fiscal and monetary policy measures on 10-year sovereign bond yield spreads (relative to Germany) of 10 EMU countries during the period 01:1999-07:2016. Implementing country-fixed effects OLS regressions, we find that the European Commission’s (EC) releases of the excessive deficit pr...

Government spending policy has an important macroeconomic stabilization role. We empirically revisit the computation of fiscal cyclicality measures by employing a novel time-varying approach while explicitly dealing with endogeneity concerns. Analyzing a sample of 36 advanced economies from 1970 to 2015, the focus of the paper is on the spending si...

Economic Growth and Structural Reforms in Europe - edited by Nauro F. Campos April 2020

Cambridge Core - Economic Development and Growth - Economic Growth and Structural Reforms in Europe - edited by Nauro F. Campos

Using monthly data for 10 euro area countries between 1999:01 and 2015:12, we take a new three-step methodological approach: first, we inspect the key determinants of 10-year government bond yield spreads; second, we compute country-specific time-varying coefficient models of spreads’ determinants; third, we use these estimates as explanatory varia...

We present a new dataset of time-varying measures of social spending cyclicality in a sample of 26 advanced countries between 1982 and 2012. More specifically, we focus on five categories of government social expenditure: health, social protection, pensions, education and welfare. Results show that health and education spending is generally acyclic...

Climate change is an existential threat to the world economy like no other, with complex, evolving and nonlinear dynamics that remain a source of great uncertainty. There is a bourgeoning literature on the economic impact of climate change, but research on how climate change affects sovereign risks is limited. Building on our previous research focu...

Climate change poses an existential threat to the global economy. While there is a growing body of literature on the economic consequences of climate change, research on the link between climate change and sovereign default risk is nonexistent. We aim to fill this gap in the literature by estimating the impact of climate change vulnerability and re...

Climate change is already a systemic risk to the global economy. While there is a large body of literature documenting potential economic consequences, there is scarce research on the link between climate change and sovereign risk. This paper therefore investigates the impact of climate change vulnerability and resilience on sovereign bond yields a...