The paper requires a connection between macroeconomics and public finance concepts. The research question is relevant to the Palestinian economy, with limited resources and a lack of control over many of them.
However, the research question is too broad and needs to be rephrased.
needs to have a better theoretical framework regarding the role of fiscal policy in general and the main macroeconomics tools that the government uses to implement its economic stability objectives (tax collection vs. government expenditures). Then, x needs to read more about the economic literature that discusses the financial policy in Palestine. In particular, the Palestinian economy is characterized as an aid-based economy. Therefore, most government expenditures are funded through the financial aid and indirect taxes (clearance taxes) that the Israeli Authority collects based on Oslo Accord.
Dr. X pointed out that the Palestinian Authority has more influence over fiscal policy tools than monetary policy tools because the Palestinian state does not have its own national currency.
The Palestine Monetary Authority (acting in the role of the central bank) sets interest rates in reponse to what neighboring countries decide (which determines the money supply). Further, it is hard to investigate the impact of fiscal policy on employment without considering the following factors: International financial aid, working in Israel, and the political stability in the region.
Dr.x indicated that the Palestinian budget usually suffers from a deficit (Expenditures > revenues). The government covers this defect through financial aid, bank lending, or decreasing running costs.
According to Dr. x, most governmental expenditures are running costs, while the development expense does not represent a significant portion of the Palestinian public spending. Therefore, the current aim of the Palestinian government is to reduce running costs by decreasing the monthly wage bills.
The board advised x to study the impact of fiscal policy on economic stability/macroeconomic performance indicators (gross domestic product [GDP], consumption, investment, and international trade and unemployment rate) using essential econometrics tools.
