THE IMPACT OF FISCAL SPACE ON INDONESIA’S FISCAL BEHAVIOR

Marcella Alifia Kuswana Putri (), Chandra Utama () and Ivantia Savitri Mokoginta ()
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Marcella Alifia Kuswana Putri: Universitas Katolik Parahyangan, Indonesia
Chandra Utama: Universitas Katolik Parahyangan, Indonesia
Ivantia Savitri Mokoginta: Universitas Katolik Parahyangan, Indonesia

Bulletin of Monetary Economics and Banking, 2022, vol. 25, issue 2, 235-256

Abstract: This study investigates the impact of fiscal space on the probability that the government of Indonesia will be able to implement counter-cyclical fiscal behavior. We use ordinary least squares and probit methods to estimate the fiscal policy reaction function. This study confirms that increasing fiscal space can increase the probability of the government to execute its counter-cyclical behavior policy. A proposal to increase the space includes generating alternative sources of government revenues from taxes and non-taxes and redesigning subsidies toward selected targeting recipients to reduce the non-discretionary part of the government budget.

Keywords: Fiscal policy; Fiscal space; Fiscal deficit; Business cycle; Macroeconomic stabilization (search for similar items in EconPapers)
JEL-codes: E32 E63 H30 H62 (search for similar items in EconPapers)
Date: 2022
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Persistent link: https://EconPapers.repec.org/RePEc:idn:journl:v:25:y:2022:i:2f:p:235-256

DOI: 10.21098/bemp.v25i2.1845

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