1. This questions is based on the article, “After its 16th bail-out, Ghana hopes to put the IMF behind it,” published by The Economist on June 22, 2019. you can find this article at: https://www.economist.com/middle-east-and-africa/2019/06/22/after-its-16th-bail-out-ghana-hopes-to-put-the-imf-behind-it
The article discusses the political economy of fiscal expenditure in Ghana.
(a) As mentioned in the article, soon after oil revenues increased in Ghana in 2011, John Mahama took over as the country’s president and was in office till 2016. Did the Mahama administration manage the government’s budget effectively to promote the economic growth of the country? What impact that administration’s fiscal policies must have had on Ghana’s real exchange rate? Please explain and provide examples or quotations from the article to back up your argument.
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(b) Based on the discussion in the article, has the government of Ghana been spending its budget effectively to promote the economic growth of the country since 2017 when Nana Akufo-Addo became president? How does the Akufo-Addo administration compare with its predecessor in terms of fiscal policy efficiency? Please explain and provide examples or quotations from the article to back up your argument.
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(c) What does the pattern of the budget deficits of Ghanaian governments since 1990, as described in the article, imply for the optimality of the country’s fiscal policy over time? What roles do politics and elections seem to have played in the government’s expenditure policies? Does the deficit pattern indicate the use of an optimal or an inefficient (suboptimal) fiscal policy? Why? Please support your explanation with appropriate examples or quotations from the article.
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2. This question is based on the article, “Democracies and debt” published by The Economist on September 1, 2012.
(a) According to the article, what are the two main factors that tend to raise public debt levels in democracies?
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(b) The article mentions three mechanisms that can curb excessive government borrowing in democracies. What are those mechanisms? How do they work?
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3. Extra Points Question: What are macroeconomic automatic stabilizers? What are the main types of automatic stabilizers? (Please name and explain the mechanisms of at least three types of such stabilizers). How do they work? Could they be helpful tools of macroeconomic policy? Please explain.
