FISCAL POLICY EFFECTIVENESS AND INFLATION DYNAMICS: EVIDENCE FROM EMERGING ASIAN ECONOMIES
DOI:
https://doi.org/10.66795/jafep42Keywords:
fiscal policy effectiveness, inflation dynamics, emerging Asia, fiscal dominance, public debt, structural VARAbstract
This study examines how effective fiscal policy is in shaping inflation dynamics across emerging Asian economies, focusing on the channels through which government spending, taxation, deficits, and public debt interact with prices. Using a comparative macroeconomic framework grounded in fiscal theory, Phillips-curve mechanisms, and open-economy transmission, the paper synthesizes evidence showing that fiscal expansions can raise inflation when demand is near capacity, when exchange-rate pass-through is strong, or when monetary policy credibility is weakened by fiscal stress (“fiscal dominance”). We highlight heterogeneity across emerging Asia based on institutions, debt structure, subsidy regimes, and inflation-targeting strength. The findings suggest that fiscal policy can stabilize growth in downturns, but its inflation impact depends on financing composition (domestic vs. external), the credibility of fiscal rules, and coordination with monetary policy. Policy implications emphasize medium-term fiscal frameworks, targeted subsidies, improved revenue mobilization, and debt management strategies to preserve price stability
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Copyright (c) 2025 Hamza Qureshi , Sana Javed (Author)
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