To study the effects of fiscal policy in different economic environments, the authors compile a novel dataset containing output, government spending, military spending, unemployment rates, trade shares, and many other variables for 129 advanced and developing countries during the period 1988–2013. 2. Decisions on fiscal policy, especially if properly synchronised with monetary policy, Fiscal policy plays an incr easingly important role in many developing countries. The second section surveys optimal fiscal policy in developing countries, by considering the role of the intertemporal government budget, and sustainability and solvency. Fiscal Policy and Unemployment. Therefore, fiscal policy in under-developed countries has a different objective to that of advanced countries. Fiscal policy plays a vital role in generating employment opportunities in the developing countries. Generally following are the objectives of a fiscal policy in a developing economy: 1. Monetary and fiscal policies are closely related, and both have profound impacts on economic development throughout the world. Fiscal policy plays an increasingly important role in many developing countries. Mobilisationm of resources: Developing economies are characterized by low levels of In fact, tax systems in such countries are often inelastic with respect to income. This inelasticity, combined with political pressures for public spending, causes budget deficits which are covered by inflationary (deficit) financing (spending). fiscal policy, with time series or with cross-sectional methods, and their applicability to developing countries. However, instead of stimulating growth fiscal policy in most developing countries have caused inflation. The role of fiscal policy in developed economies is to maintain full employment and tabilize growth. In contrast, in developing countries, fiscal policy is used to create an environment for rapid economic growth. 9 Since then, there has been growing interest in understanding the relationship between fiscal policy, growth, and poverty in these countries, particularly in low-income ones. It also reviews the fuzzy debate on “fiscal space” and “macroeconomic space” - and the usefulness (or lack thereof) of these terms for policy … The second section surveys optimal fiscal policy in developing countries, by considering the role of the intertemporal government budget, and sustainability and solvency. Fiscal policy deals with macroeconomic levers of power. Decisions on fiscal policy, especially if properly synchronised with monetary policy, can help smoothen business cycles, ensure adequate public investment and redistribute incomes. This concludes budgets, debts, deficits and state spending. 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