Journal of Economics and Political Economy

Front Matter

EconSciences Editorial — 2024-01-21

Front Matter

The impact of lending on economic growth, the case of Albania

Glediana ZENELI (FOTO) — 2024-01-21

Abstract. Lending is an important element for the economy of a country. Credit leads to an increase in spending, thus increasing revenue levels in the economy. This revenue growth brings a higher GDP (gross domestic product) and thus increases productivity. This paper aims to analyze whether there is a correlation between private sector credit and economic growth for the period 1996-2021 in the case of Albania using econometric models. We have to say that credit is one of the important elements of the financial system. Financial development over the years has brought a variety of products offered by the banking sector. But we must remember that lending, which is one of the main elements of this system, was one of the factors that caused the global crisis in 2008-2011. Hence, this study aims to discern whether lending has positively impacted the Albanian economy or not, considering its potential negative effects. It is a widely held belief that the absence of credit prevents a country's economic development, and this paper seeks to determine the accuracy of this claim. Due to the negative impact of credits on the economy in this paper we intend to survey how the loan has really affected the Albanian economy.

Keywords. Bank lending; Financial development; Economic growth.

JEL. E43; E51; G38.

Intergovernmental coordination and fiscal performance

Leonardo Cezar RIBEIRO — 2024-01-21

Abstract. This article evaluates the intergovernmental coordination of fiscal policy in Brazil, measured in terms of the synchronisation of fiscal responses adopted by the central and state governments between 2004 and 2016. An econometric analysis of Brazilian states' responses to central government fiscal impulses is conducted, controlling for variables that can affect states' fiscal performance, such as output gap, solvency, Dependency on intergovernmental transfers, expenditure decentralisation, and budget rigidity. The results show signs of a pro-cyclical nature in Brazilian states' fiscal outcomes, whereby a 1% increase/decrease in the central government's fiscal impulse leads to a 0.13% increase/decrease in the states' fiscal impulse. Evidence also found that greater dependency on intergovernmental transfers impairs states' fiscal performance. On the other hand, decentralisation of spending, high indebtedness, and greater budget rigidity are factors that lead to better fiscal discipline. The importance of this study consists in highlighting intergovernmental coordination as a strategy to ensure better efficiency of fiscal policy in the stabilizing and allocative functions of the budget.

Keywords. Fiscal federalism, Fiscal coordination, Decentralisation, Public finance.

JEL. H77, H68, E60.

The Covid Pandemic Federal Reserve

Thomas R. SAVING — 2024-01-23

Abstract. The major tool of Federal Reserve monetary policy in non-crises has historically been open-market operations in securities markets. To stimulate the economy, the Federal Reserve injects monetary wealth into the economy by buying securities with what could be termed “freshly printed” money. To cool an overheated economy, the Federal Reserve withdraws monetary wealth from the economy by selling securities and, in effect, destroys its newly acquired money. At almost the onset of the effects of the pandemic, the Federal Reserve engaged in a massive asset expansion that was truly unprecedented. In just the first three months of the pandemic, March, April and May of 2020, the Federal Reserve bought $2.13 trillion in securities. But they didn’t stop there so that by April of 2022 the money injection reached $4.76 trillion, almost 20% of 2022 GDP! What is more astounding is that unlike the Great Recession interventions, there were no undergoing financial crises that triggered this massive expansion. The massive expansion was not only unprecedented and harmful as it has resulted in the end of the Federal Reserve’s annual transfers to the U. S. Treasury that in 2022 equaled 30.5 % of the net interest cost of the federal debt. The Covid-19 Federal Reserve actions will go down in monetary history as the worst Federal Reserve policy in the more than 100-year history of the Federal Reserve.

Keywords. Covid pandemi; Federeal reserve; Economic growth.

JEL. E43; E51; G38.