Does the Effectiveness of Budget Deficit Vary between Welfare and Non-Welfare Countries?
, Norli Ali 1, Jamaliah Said 1,*, Farha Ghapar 2, Oleg Mariev 3, Norhayati Mohamed 1 and Hirnissa Mohd Tahir 2
Round 1
Reviewer 1 Report
Comments:
1. Abstract: What is QoG?
2. Page 2: line -3: Explain what is meant by a robust econometric model.
3. Section 3.1: Explain how the sample of countries is selected. The appendix is not missing from the paper.
4. The abbreviation should be provided for the first time it appears in the text.
5. Section 3.2: The empirical models with some symbols are undefined.
6. Section 3.3: The authors should rewrite this section as those equations are unclear and symbols are undefined. Hence, the results may be incorrect due to improper methodology.
7. Section 4.1: i) Explain what is meant by “the standard deviation of our variables within and between measures to reveal…” ii) What information can be obtained through descriptive statistics such as mean, min and max?
8. Section 4.2, line 3: the symbols delta, z and gamma are undefined. Hence, the equation does not provide meaningful information.
9. Tables 3-11: The values and variables of these are unknown. For example, what are the i) -0.0976, ii) location, scale and q(*) as shown in the third row and second column of Table 3? Similar comments were applied to other tables.
10. Figures 1-9: These figures with the unlabeled y-axis.
11. Some references with missing information.
12. The format of all cited papers is incorrect or inconsistent.
13. The authors should rewrite and recheck the paper thoroughly.
Author Response
Comment 1.1: Abstract: What is QoG?
Response 1.1: The full form of QoG has been provided in the abstract
Comment 1.2: Page 2: line -3: Explain what is meant by a robust econometric model.
Response 1.2: We meant by robust as novel method which is robust with abnormality with data, cross-sectional heterogeneity, and potential endogeneity issues. Nevertheless, we toned down our language in the revised version as follows
“Second, we apply a newly developed econometric model namely Quantile via Moment that considers the quantile in both scale and location due to highly heterogeneous panel data. Quantile via Moment approach is robust in the presence of abnormality with data, cross-sectional heterogeneity, and potential endogeneity issues. Moreover, this approach allows us to measure the impact of the budget deficit and QoG on economic growth in different quantiles”
Comment 1.3: Section 3.1: Explain how the sample of countries is selected. The appendix is not missing from the paper.
Response 1.3: We provided the list of the sample countries in the Appendix A & B. Besides, we provided the parameter of classifying welfare and non-welfare countries.
Comment 1.4: The abbreviation should be provided for the first time it appears in the text.
Response 1.4: We are sorry for our reckless typos. We provide the full form for the time using the term
Comment 1.5: Section 3.2: The empirical models with some symbols are undefined.
Response 1.5: We provided the explanation of every single symbol in the model.
Comment 1.6: Section 3.3: The authors should rewrite this section as those equations are unclear and symbols are undefined. Hence, the results may be incorrect due to improper methodology.
Response 1.6: We have greatly improved the methodology sections. However, we don't believe that due to explaining lack of explanation of methodology can somewhat influence the result. we also provided the basic features of this method and how those features are in line with the properties of our variables.
Comment 1.7: Section 4.1: i) Explain what is meant by “the standard deviation of our variables within and between measures to reveal…” ii) What information can be obtained through descriptive statistics such as mean, min and max?
Response 1.7: Since we are using panel data it has two dimensions first is over the cross section or country and second dimension is over the time. Therefore, the between measures indicate the deviation from the mean across countries while within measure indicate the deviation from mean over the years.
Comment 1.8: Section 4.2, line 3: the symbols delta, z and gamma are undefined. Hence, the equation does not provide meaningful information.
Response 1.8: We have provided the interpretation of delta set and gamma. Thank you for the thorough review.
Comment 1.9: Tables 3-11: The values and variables of these are unknown. For example, what are the i) -0.0976, ii) location, scale and q(*) as shown in the third row and second column of Table 3? Similar comments were applied to other tables.
Response 1.9: The location and scale are the two important features of this methodology. We provided the explanation of our findings in the revised version.
Comment 1.10: Figures 1-9: These figures with the unlabeled y-axis.
Response 1.10: the figures are autogenerated in the software is Sata. The Y axis indicate how the coefficient varies over quantile. we provided the explanation in the note below the diagram.
Comment 1.11: Some references with missing information.
Response 1.11: why did all the missing information in the revised version.
Comment 1.12: The format of all cited papers is incorrect or inconsistent.
Response 1.12: Throughout the paper we followed APA style.
Comment 1.13: The authors should rewrite and recheck the paper thoroughly.
Response 1.13: the revised version has been in improved greatly we import incorporated every single comment from the referee. Thank you for your thorough review once again
Reviewer 2 Report
The authors evaluate the a new econometric model, in order to demonstrate that budget deficit in countries, provokes sustainable economic grow. The authors also investigate other interesting economic facts. The paper is interesting but I suggest to mention the gravity equation for trade, which is basically the same equation (2) and (3) mentioned within the paper. The gravity equation for trade evaluates the volume of trading between cities or countries. It would be interesting to mention something about it. Finally, I have noticed that inside the conclusions, the authors mentioned the following:
"Our analyses demonstrate that budget deficit benefits welfare countries while hurting non-welfare countries in terms of sustainable economic growth."
Are the authors talking about "welfare countries" or "wealthy countries"? Is the word "Welfare" or "Wealthy"?
Please revise the paper in agreement with these comments. After then, I would happily revise the paper again.
Author Response
Comment 2.1: The authors evaluate a new econometric model, in order to demonstrate that budget deficit in countries, provokes sustainable economic grow. The authors also investigate other interesting economic facts. The paper is interesting but I suggest to mention the gravity equation for trade, which is basically the same equation (2) and (3) mentioned within the paper. The gravity equation for trade evaluates the volume of trading between cities or countries. It would be interesting to mention something about it. Finally, I have noticed that inside the conclusions, the authors mentioned the following: "Our analyses demonstrate that budget deficit benefits welfare countries while hurting non-welfare countries in terms of sustainable economic growth." Are the authors talking about "welfare countries" or "wealthy countries"? Is the word "Welfare" or "Wealthy"?
Response 2.1: Thank you for acknowledging that our study is an interesting one. We also appreciate for the insightful comments, we have taken all of the comments very seriously. Regarding the gravity model, we could do it if bi-literal trade would be our dependent variable. However, the main concern of this study is that how economic growth responds to budget deficit in welfare and non-welfare countries controlling the role of quality of governance. In this study we classified welfare and non-welfare countries based on a few parameters including “subsidy and other transfer, human development index and institutional quality”. Please see the Appendix A
Comment 2.2: Please revise the paper in agreement with these comments. After then, I would happily revise the paper again.
Response 2.3: We address all the comment very precisely.
Reviewer 3 Report
The title of the article needs to be rephrased and the research sample needs to be specified in the title of the article.
The abstract of the article is very general. The abstract should contain a summarized summary of information about the article - Background, Methods, Results and Conclusions.
The introduction of the article must contain a summarized view of the issue under study and a definition of the research problem. The research gap must also be specified.
The literature review needs to be reworked and deepen the current sources as it is very short. It is necessary to create clear tables and summarise the knowledge base.
The methodology needs to be made clearer and simplified and disaggregated. The authors immediately link the methodology to the results of the article. It is cluttered and messy.
The issue calls for developing research questions and hypotheses based on the literature review and then verifying or falsifying them through parametric and non-parametric tests. The issue treated has no added value.
Research results need to be clarified and simplified. In its current form, the meaning and rationale of the research is lost.
The Conclusion section of the article is very short and opaque. The international context of the article is missing in this section. It also lacks mentioning other similar researches and studies that have been conducted on the topic. Also, this section of the article does not talk about the future direction of the issue. Also, the Discussion section of the article is missing where the authors highlight the importance of the issue under study and present the most important results of the research. Also the limits of the research are missing.
The references in the article are not handled according to the prescribed template of the paper.
Author Response
Comment 3.1: The title of the article needs to be rephrased and the research sample needs to be specified in the title of the article.
Response 3.1: Thank you for very constructive comments to improve our manuscript. We rephrased our title as follows “The Relative Response of Economic Growth to Budget Deficit in Welfare and Non-Welfare Countries”
Comment 3.2: The abstract of the article is very general. The abstract should contain a summarized summary of information about the article - Background, Methods, Results and Conclusions.
Response 3.2: The abstract of the study has been improved accordingly.
Comment 3.3: The introduction of the article must contain a summarized view of the issue under study and a definition of the research problem. The research gap must also be specified.
Response 3.3: The issues and gaps has been provided in the 6th para of the introduction.
Comment 3.4: The literature review needs to be reworked and deepen the current sources as it is very short. It is necessary to create clear tables and summaries the knowledge base.
Response 3.4: As per the comment, we highlight the relevant prior literature on table.
Comment 3.5: The methodology needs to be made clearer and simplified and disaggregated. The authors immediately link the methodology to the results of the article. It is cluttered and messy.
Response 3.5: The methodology section has been updated with detail explanations.
Comment 3.6: The issue calls for developing research questions and hypotheses based on the literature review and then verifying or falsifying them through parametric and non-parametric tests. The issue treated has no added value.
Response 3.6: We have highlighted our research question and hypothesis as well as their uniqueness. Thank you
Comment 3.7: Research results need to be clarified and simplified. In its current form, the meaning and rationale of the research is lost.
Response 3.7: The result and discussion section have been improved with proper justification from the existing studies and connected with the objectives.
Comment 3.8: The Conclusion section of the article is very short and opaque. The international context of the article is missing in this section. It also lacks mentioning other similar researches and studies that have been conducted on the topic. Also, this section of the article does not talk about the future direction of the issue. Also, the Discussion section of the article is missing where the authors highlight the importance of the issue under study and present the most important results of the research. Also the limits of the research are missing.
Response 3.8: we have thoroughly improved the conclusion section by highlighting limitation and future direction of the study.
Comment 3.9: The references in the article are not handled according to the prescribed template of the paper.
Response 3.9: All the references of the study has been updated followed by the journal’s guideline.
Reviewer 4 Report
Didn't find ICT technologies
Author Response
Comment 4.1: Didn't find ICT technologies
Response 4.1: Thank you for your time to review our paper. However, the study focuses on budget deficit, quality of governance (QoG) on economic growth, where ICT technologies also an important variable for the growth, which might be considered in the next papers.
Round 2
Reviewer 1 Report
1. The abbreviation should be provided for the first time it appears in the text such as CD.
2. Sections 3.2-3.3: Again, the methodology section should be improved. For example:
i) Lines 238, 408: Since the authors do not provide the results of the estimated model parameters, therefore, readers are unable to identify whether BD is included in the model (3) or Equation in Line 408. Provide a reason why BD is not included in the model (3).
ii) Line 242: What is epsilon_it, beta0, beta1,...,beta5?
iii) Line 251: What is q(tau) and gamma(tau)?
iv) “a_i(tau)+delta_i(tau) is the quantile- fixed effect for countries I” is incorrect.
3. Page 7, Line 271: The authors have removed the numbering of all cited papers. Therefore references [52]-[58] are unknown.
4. Tables 3-11: The values and variables are unknown. For example, (i) There is no explanation of the values in the second row of each variable. ii) location and scale are unknown. (iii) explain how to obtain the values of location and scale based on the equation in Line 285.
5. Tables 2-5: These variables with a different total number of observations ranging from 1943 to 2359. Explain how to perform analysis with 2261 observations. There are missing observations for variables BD and QoG.
6. Figures 1-9: "BD" is not equal to "bd". A similar comment applies to other variables.
7. There are many references with missing information such as the volume, issue and page number. For example, Asandului et al. (2021), Balcilar & Hicks (2021), Campi & Duenas (2019) etc.
8. The format of some cited papers is inconsistent.
Author Response
Reviewer 1
Comment: 1.1 The abbreviation should be provided for the first time it appears in the text such as CD.
Response 1.1: we provided the full form. Thank you for your through review
Comment 1.2: Sections 3.2-3.3: Again, the methodology section should be improved.
For example:
Comment 1.2 (i): Lines 238, 408: Since the authors do not provide the results of the estimated model parameters, therefore, readers are unable to identify whether BD is included in the model (3) or Equation in Line 408. Provide a reason why BD is not included in the model (3).
Response1.2: we are sorry for typos. We corrected equation 3 by incorporating BD alone and the interaction term =integration of budget deficit and quality of governance
Comment 1.3 : ii) Line 242: What is epsilon_it, beta0, beta1,...,beta5?
Response1.3 : Where, LGDPC = logarithmic form of GDP (Gross Domestic Product), BD = budget deficit, TO = trade openness, LF = labour force, FCF = fixed capital formation, QoG = quality of governance, =integration of budget deficit and quality of governance, = degree of change in the outcome variable for every 1-unit of change in the predictor variable, = indicates the response of respective regressors, and ?_?? = error.
Comment 1.4 : iii) Line 251: What is q(tau) and gamma(tau)?
“a_i(tau)+delta_i(tau) is the quantile- fixed effect for countries I” is incorrect.
Response 1.4: we clarified as follows
(4)
where the is the quantile-t fixed effect for countries i, or the distributional effect (location effect), is scale effect, is quantile, is the quantile of the dependent variable, is the vector of the independent variables, Z is a vector of known differentiable (with probability 1) transformations of the components of X.
Comment 1.5: 1.3. Page 7, Line 271: The authors have removed the numbering of all cited papers. Therefore references [52]-[58] are unknown.
Response 1.5: We corrected entire referencing
Comment 1.6: Tables 3-11: The values and variables are unknown. For example, there is no explanation of the values in the second row of each variable, location and scale are unknown, explain how to obtain the values of location and scale based on the equation in Line 285.
Response 1.6: we provided explanation of location and scale effect on the result in Table 3. We didn’t repeat it over all Tables due to monotony and redundancy
Table 3 demonstrates the impact of budget deficit on the economic growth in welfare countries under different economic circumstances. The estimations take the form. Model 1 considers the economic growth of welfare countries as the dependent variable, where budget deficit (BD) is the independent variable and trade openness (TO), the labour force (LF) and fixed capital formation (FCF) are the control variables. The second and third column of Table 3 indicate location and scale effect. As for BD, both location and scale are significant, implying that Quantile via Moment dealt heterogeneity across countries as well as over time.
Comment 1.7: Tables 2-5: These variables with a different total number of observations ranging from 1943 to 2359. Explain how to perform analysis with 2261 observations. There are missing observations for variables BD and QoG. Figures 1-9: "BD" is not equal to "bd". A similar comment applies to other variables.
Response 1.7: Observation varies due to split sample, lag order and missing data. All are auto generated in Stata program. Sample goes to the label of figures.
Comment 1.8: There are many references with missing information such as the volume, issue and page number. For example, Asandului et al. (2021), Balcilar & Hicks (2021), Campi & Duenas (2019) etc. The format of some cited papers is inconsistent.
Response 1.8: those are recent publications, volume and issue numbers are not assigned. I guess proofreading services will take care of these editorial issues. Thank you for detail review.
Reviewer 2 Report
The paper looks better. The authors improved a lot with respect to the last version. The paper can be accepted for publication.
Author Response
Thank you for accepting our paper.
Reviewer 3 Report
The authors did not incorporate all comments in the review report.
The article needs to be improved both formally and in content.
The literature review is still weak, a deeper analysis is required.
The methodology is improved but has gaps, for example, section 3.2 needs more elaboration.
In the results, the authors should have emphasized and presented more the issues under study.
The conclusion is very general and has no added value, it does not include the direction of the issue, application in practice, use in other countries. It also lacks defined limits of research.
Author Response
Thank you for the comments. We have improved literature review with updated references concerning fiscal policy and growth nexus. Besides, we have improved methodology addressing all comment from Reviewer 1 and 3. Finally, we have improved conclusion and limitation
Round 3
Reviewer 1 Report
Comments:
1. Sections 3.2-3.3:
i) Line 232: What are the variables epsilon_ij and beta0?
ii) Line 240: What is q(tau) and gamma(tau)?
iii) Line 242: There is no delta_i(tau) in Eq. (4). Therefore, the scale effect is undefined.
iv) Lines 241, 364 and 399: Explain how to match the variables of these equations with Eq. (4), which are unclear. For example, alpha is a constant, but the location effect a_i(tau) depends on a specific value of quantile.
The authors should go through the paper by Machado and Silva (2019) and provide correct information on the methodology.
2. Tables 3-11: Explain how to interpret the values on the second row of the BD, i.e. “-0.0976, -0.0777…”. A similar comment applies to other variables.
3. Tables 2-5: These variables have different observations ranging from 1943 to 2359. Explain how to perform analysis with 2261 observations. There are missing observations for variables BD and QoG. The authors should be reported how to handle the missing values so that reader can reproduce the results.
4. Figures 1-9: BD bd. Therefore, the authors should redraw the figure by providing the correct variable names. A similar comment applies to other variables.
5. There are many references with missing information, such as the volume, issue and page number. The authors should at least provide DOI or source of these papers. This is the responsibility of the authors to provide complete information to readers and not the editorial office.
Author Response
Reviewer 1
Comments 1: Sections 3.2-3.3: Line 232: What are the variables epsilon_ij and beta0?
Response 1: = intercept, and ?_?? = error for country i over time t.
Comments 2: ii) Line 240: What is q(tau) and gamma(tau)?
Response 2: where the is the quantile-t fixed effect for countries i, or the distributional effect (location effect), is scale effect, is quantile, is the quantile of the dependent variables.
Comment 3: Line 242: There is no delta_i(tau) in Eq. (4). Therefore, the scale effect is undefined.
Response 3: There is delta in equation 4 (4)
Comment 4: Lines 241, 364 and 399: Explain how to match the variables of these equations with Eq. (4), which are unclear. For example, alpha is a constant, but the location effect a_i(tau) depends on a specific value of quantile. The authors should go through the paper by Machado and Silva (2019) and provide correct information on the methodology.
Response 4: Here, is the quantile-t fixed effect for countries i, or the distributional effect (location effect), is scale effect over time for all cross-section, is quantile, is the quantile of the dependent variable, is the vector of the independent variables, Z is a vector of known differentiable (with probability 1) transformations of the components of X.
Comment 5: Tables 3-11: Explain how to interpret the values on the second row of the BD, i.e. “-0.0976, -0.0777…”. A similar comment applies to other variables.
Response 5: Those are standard errors. We put those values within the parentheses.
Comment 6: Tables 2-5: These variables have different observations ranging from 1943 to 2359. Explain how to perform analysis with 2261 observations. There are missing observations for variables BD and QoG. The authors should be reported how to handle the missing values so that reader can reproduce the results.
Response 6: The full observation under each variable should be 2,418 (78x31). Our variables encountered some missing observations. We didn’t interpolate as our method still application with missing observations.
Comment 7: Figures 1-9: BD bd. Therefore, the authors should redraw the figure by providing the correct variable names. A similar comment applies to other variables.
Response 7: We make it small letters everywhere to harmonize.
Comment 8: There are many references with missing information, such as the volume, issue and page number. The authors should at least provide DOI or source of these papers. This is the responsibility of the authors to provide complete information to readers and not the editorial office.
Response 8: The references have been updated accordingly
We are thankful to the reviewer for such great comments which help us a lot to improve our paper. Thank you once again
Reviewer 3 Report
The authors have not cited the literature used according to the journal's prescribed requirements.
Author Response
Reviewer 3
Comment 1: The authors have not cited the literature used according to the journal's prescribed requirements.
Response 1: The citations have been updated accordingly
We are thankful to the reviewer for such great comments which help us a lot to improve our paper. Thank you once again
