To answer our research question, we rely on the datasets built by Devries et al. His research lies at the intersection of economics, finance, and accounting, with special attention to taxation-related topics. And compared to estimates given at February’s Unity Budget, the operating revenue will likely come in at S$12.3 billion or 16.1 per cent lower than what was initially calculated. Post was not sent - check your email addresses! Austerity measures help in reducing public sector debt and also control government budget deficits. The government must choose this autumn between more austerity and permanently higher spending, experts warn. New measures and extensions to several support initiatives were announced on Monday, and they fall within the S$8 billion spending stated in August, said the minister, as the extra expenditure will be funded by reallocating money from areas where spending went down, such as development projects that have been delayed due to COVID-19. The simple observation of spillover to individual subsidiaries might not matter at the country level if the investment loss in those subsidiaries is substituted for increased investment activities in other domestic firms. (2015) and gather fiscal consolidation episodes that occurred in 14 Eurozone countries from 2004 to 2014. We ask the following key question: Does Thales’ German subsidiary adjust capital investment relative to Safran’s German subsidiary in response to the Italian austerity? We also find that as the multinational’s business confidence dampens, the subsidiary exposed to foreign austerities suffers from a greater decrease in investment. Other countries are opposing it, with some commentators blaming austerity policies for the slow recovery in Europe after the Great Recession (Ilzetzki, 2020). We find that the tax effect is more than four times as large as the effect of spending cuts. Mr Heng warned that other countries’ governments have committed trillions of dollars in response to COVID-19, and their debt levels have risen to record highs, which will take “generations to pay off”. We thus effectively compare the investment of business subsidiaries facing the same local and parent-level shocks but exposed to different levels of fiscal policy shocks in a third source country. Similar to our findings at the subsidiary level, we document a significant decline in aggregate investment when a greater share of local firms is linked to foreign austerity countries: an increase of one standard deviation in the foreign austerity share translates into an investment reduction of approximately EUR 36.3 million for a given country–industry. At the macro level, the channels that propagate such policies across national borders have yet to be established. Consistent with this conjecture, we confirm significantly stronger spillover to subsidiaries that are likely customers of the subsidiaries in the austerity country. Yes, you read that right. To address the question, we consider the aggregate investment of all firms in the same country and industry. Importantly, the effect is not driven by common shocks to the countries or industries in which the subsidiary or the parent firm is operating, because we saturate our empirical model with highly granular matched-pair fixed effects. Figure 1 provides an illustration. Furthermore, we find that subsidiaries belonging to a financially constrained multinational exhibit larger elasticities of local investment with respect to foreign fiscal consolidation. His research interests lie in the area of corporate finance, political economics, and behavioural finance. Visit his webpage. Berjaya has taken a more comprehensive approach by implementing austerity measures from April 1 to June 30 for all companies in the group. List choice SINGAPORE: The Government expects Singapore’s revenue position to remain weak for a number of years due to the impact of COVID-19 on the global … Guosong Xu is an assistant professor of finance at Erasmus University’s  Rotterdam School of Management and a researcher at the Erasmus Research Institute of Management (ERIM). In addition, public finances would be vulnerable to shortfalls in growth and other shocks. Amid the reignited interests in austerity, policymakers have increasingly called for cooperation in fiscal policies across nations (OECD, 2020). 198402668E, premium content on your favourite platforms, Strikes, protests in Greece over latest pension reform, Greece's centre-right government bears good news for Europe amid volatile landscape, AirAsia X proposes debt restructuring in bid for survival, Malaysia's Top Glove raises remediation payment to migrant workers, Top Glove to pay RM136m in remediation fees to migrant workers, SBI Group and Sygnum target up to US$75m for early-stage fund, Malaysia to impose targeted lockdowns to halt infections surge, Pandemic has renewed push to future-proof Singapore, No overseas December holidays this year as borders stay mostly shut: Ong Ye Kung, Singtel should take a leaf from Keppel's book when it comes to investor communications, Phillip SGD money market ETF debuts on SGX with initial AUM of S$100m, How Evergrande's billionaire founder skirted his latest crisis, Stocks to watch: DBS, Cordlife, ThaiBev, UG Healthcare, MLT. Pay cuts, staff furloughs, partial closing at Berjaya. At the same time, expenditure will rise as authorities continue to provide support for residents and businesses, he noted. Next, we assess how important austerity spillovers are for the economy in the aggregate. Operating revenue is expected to be S$63.7 billion, which is S$5.1 billion - or 7.4 per cent - lower than the revised estimate presented at May’s Fortitude Budget, mainly due to a more subdued economic growth environment arising from COVID-19 and lower economic activity during the “circuit breaker” period, the finance ministry said. In a recent paper (De Vito et al., 2020), we seek to fill this gap. We then explore three distinct channels to understand this phenomenon. We require the two subsidiaries under comparison to have a parent firm headquartered in the same foreign country, absent fiscal consolidation. To conclude, with new episodes of fiscal consolidation looming in a post-crisis environment, we visit this fundamental policy issue with a refreshed view. Antonio De Vito is an assistant professor of accounting at IE Business School, IE University; Madrid. Hello, your email is unverified. "We will also maintain a disciplined and judicious use of borrowing, reserving its use for long-term infrastructure whose benefits are spread across many generations.". As shown in Figure 2, we find negative investment spillover. “We have avoided this outcome, because successive generations have built up strong reserves ahead of this crisis,” he said.