Revisiting the Sustainability of India’s Fiscal Deficit

2021 ◽  
pp. 001946622110066
Author(s):  
Manisha Devi ◽  
Amiya Sarma
Keyword(s):  
Public Debt ◽  
Jel Classification ◽  
Annual Data ◽  
Data Sets ◽  
Fiscal Deficit ◽  
Fiscal Policies ◽  
Time Period ◽  
Sustainability Issue ◽  
Fiscal Reaction Function ◽  
The Government

Growing fiscal deficit and public debt has been a cause of concern for the government, economists and the policymakers of India since long. Various studies have tried to test the sustainability issue of India’s fiscal policies applying various methodologies time to time. However, the results obtained are ambiguous. Such ambiguity might emerge because of the various methodologies adopted for the respective studies. In view of this, the current study attempts to revisit the sustainability issue of India’s fiscal deficit using up-to-date time series methodologies on the annual data sets ranging from the time period 1981 to 2019. Apart from this, the study also tries to verify the results using a model based on fiscal reaction function (FRF) developed by Henning Bohn. The study found the fiscal deficit of India to be sustainable. JEL Classification: H61, H62, H63, H68

scholarly journals DP 0250 - Fiscal Fatigue and Public Debt Limit in Brazil: are we on sustainable path?

2020 ◽  
pp. 1-28
Author(s):  
Rodrigo Mendes Pereira
Keyword(s):  
Public Debt ◽  
Fiscal Sustainability ◽  
Reaction Function ◽  
Monthly Data ◽  
Fatigue Effect ◽  
Advanced Economies ◽  
Debt Dynamics ◽  
Fiscal Reaction Function ◽  
The Government

In this paper I use Ghosh et al. (2013) approach to assess Brazil’s fiscal sustainability, fiscal fatigue, and public debt limit. Using monthly data for the last 21 years, I estimate Brazil’s fiscal reaction function and an eventual fiscal fatigue effect, which is a lack of government’s will (or capability) to implement higher primary surpluses as a reaction to higher levels of debt. I show that fiscal fatigue occurs at relatively mild levels of debt in Brazil. I also define Brazil’s debt limit, which is the precise level of debt/GDP ratio above which the debt dynamics becomes explosive, public debt becomes unpayable, and the government invariably defaults. I show that the debt limit in Brazil is much lower than the limits that have been estimated for advanced economies.

scholarly journals Sustainable Debt Policies of Indian State Governments

2018 ◽  
Vol 12 (2) ◽  
pp. 224-243 ◽  
Author(s):  
P.S. Renjith ◽  
K.R. Shanmugam
Keyword(s):  
Panel Data ◽  
Public Debt ◽  
Jel Classification ◽  
State Governments ◽  
Indian States ◽  
Individual Level ◽  
Panel Data Estimation ◽  
Sustainability Issue ◽  
The Individual ◽  
Debt Policies

This study analyses the public debt sustainability issue of 20 major Indian states using the Bohn framework for panel data from 2005–2006 to 2014–2015. It employs regular panel data estimation procedures and the penalized spline (p-spline) technique. The results indicate that the primary balance of state governments responds positively to high public debt, so debt policies are successful in sustaining the debt situation of Indian states as a whole. However, at the individual level, debt is sustainable only in 12 states; in 8 states, debt is unsustainable and so these states require corrective action. These findings may be useful to policymakers and other stakeholders to formulate appropriate strategies to improve the debt situation of Indian states. JEL Classification: E62, H63, H72, H740

scholarly journals Estimating Optimum Growth-Maximizing Public Debt Threshold for Nepal

2020 ◽  
Vol 32 (2) ◽  
pp. 1-28
Author(s):  
Gopal Prasad Bhatta ◽  
Anu Mishra
Keyword(s):  
Economic Growth ◽  
Public Debt ◽  
Trade Openness ◽  
Threshold Level ◽  
Debt Management ◽  
Annual Data ◽  
Bivariate Model ◽  
Long Run ◽  
Short Run ◽  
The Government

One of the common agenda of underdeveloped economies is to achieve a high and sustainable level of economic growth in the long run. Domestic and external borrowings are playing a crucial role in fulfilling the resource gap in the context of Nepal for a long period. A growing number of recent studies support the idea of a debt threshold level (turning point) above which debt starts reducing economic growth. This paper empirically investigates the relationship between economic growth and several other factors (investment, trade openness, population growth, domestic savings, and government debt) in the context of Nepal. The debt-growth relationship has been estimated by regression analysis and further explored the non-linear relationship between public debt and economic growth using time series annual data for the period of 1976-2019. The ARDL bound technique has been applied to estimate the short-run and the long run impact of debt on economic growth. Moreover, a quadratic bivariate model based on ARDL coefficients has been estimated to identify the growth maximizing level of debt. The estimated parameters confirm the optimum public debt to GDP ratio in the context of Nepal is 33 per cent. The policy implication of this finding for the Government of Nepal (GoN) is to ensure public debt management in line with the growth maximizing debt threshold. Further, a high level of trade deficits and government effectiveness in public sector management squeezes the fiscal space in utilizing adequate public debt in Nepal.

Fiscal sustainability in India: evidence from Markov switching and threshold regression models

2019 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Vaseem Akram ◽  
Badri Narayan Rath
Keyword(s):  
Regression Model ◽  
Public Debt ◽  
Markov Switching ◽  
Fiscal Sustainability ◽  
Optimum Level ◽  
Fiscal Deficit ◽  
Threshold Regression ◽  
Content Type ◽  
Sustainability Issue ◽  
Threshold Regression Model

PurposeThe purpose of this study is to examine the fiscal sustainability issue by dividing the fiscal deficit into high and low regimes using the quarterly data from 1997: Q1 to 2013: Q3. Further, we obtain the optimum level of public debt at which fiscal sustainability can be achieved.Design/methodology/approachThis study uses the Markov Switching-Vector Error Correction Model (MS-VECM) for examining fiscal sustainability and threshold regression model to obtain the optimum level of debt.FindingsThe results derived from MS-VECM reveal the evidence in favor of fiscal sustainability during low fiscal deficit periods. Similarly, using a threshold regression model, the optimum public debt as a percentage to GDP seems to be around 21 per cent on a quarterly basis, beyond this level, public debt hurts economic growth.Practical implicationsFrom the policy front, the government of India should cut down the fiscal deficit only if debt reaches beyond a threshold level.Originality/valueNoting that the vast literature has focused on examining the fiscal sustainability in India, the novelty of this study is to examine the fiscal sustainability by considering high and low deficits regimes using a non-linear approach.

Exogenous risks loom over Indonesia’s foreign debt

2016 ◽  
Keyword(s):  
Public Sector ◽  
Private Sector ◽  
Public Debt ◽  
Foreign Debt ◽  
Commodity Prices ◽  
Household Debt ◽  
Fiscal Deficit ◽  
Content Type ◽  
Private And Public ◽  
The Government

Subject Outlook for Indonesia's foreign debt distress. Significance Indonesia’s total foreign debt reached 325.3 billion dollars by end-September, up 7.8% from the same period last year, according to Bank Indonesia data. This debt is spread almost equally between the private and public sector: 163.1 billion dollars and 162.2 billion dollars respectively. However, while private sector debt is falling, public debt is rising. Impacts Private miners are unlikely to invest heavily in smelters unless they are certain of an uptick in commodity prices. Raising the legal fiscal deficit limit beyond 3% of GDP will be politically difficult for the government. Household debt is unlikely to rise substantially in 2017.

Argentine budget projections will prove optimistic

2017 ◽  
Keyword(s):  
Public Debt ◽  
Tax Reform ◽  
Economic Recovery ◽  
Fiscal Deficit ◽  
Content Type ◽  
New Public ◽  
Primary Deficit ◽  
The Government ◽  
Interest Payments ◽  
Public Revenues

Subject The 2018 Argentine budget. Significance The Economy Ministry sent the draft 2018 budget to Congress on September 15. The budget indicates no major changes in fiscal policy; the primary deficit will fall by just 3.4% in nominal terms, driven by the effect of the economic recovery on public revenues, and by a reduction in energy and transport subsidies. By contrast, interest payments will rise, showing the increasing burden of the government’s decision to finance the fiscal deficit through new public debt. Impacts The budget shows a slight fall in tax pressure, so tax reform will be postponed until 2019 at least. The cut in energy and transport subsidies will boost inflation, making it more difficult for the Central Bank to achieve its target. The government will need to show its optimism is well-founded if it hopes to do well in the 2019 elections.

GROWTH-MAXIMIZING PUBLIC DEBT UNDER CHANGING DEMOGRAPHICS

2015 ◽  
Vol 20 (6) ◽  
pp. 1640-1651 ◽  
Author(s):  
Nikola Bokan ◽  
Andrew Hughes Hallett ◽  
Svend E. Hougaard Jensen
Keyword(s):  
Public Debt ◽  
Overlapping Generations ◽  
Demographic Parameters ◽  
Fiscal Policies ◽  
Overlapping Generations Model ◽  
Welfare Spending ◽  
Age Related ◽  
Balanced Budget ◽  
The Government ◽  
Changing Demographics

This paper develops an overlapping-generations model to study the growth-maximizing level of public debt under conditions of demograhic change. It is shown that the optimal debt level depends on a positive marginal productivity of public capital. In general, it also depends on the demographic parameters, but not if the government is not allowed to borrow to cover revenue shortfalls for current age-related spending. In that context, balanced budget rules are not an approriate form of fiscal rule. The implication is that a government facing demograhic change or demands for more welfare spending will have to adjust its fiscal plans to accommodate those changes, most likely downward, if growth is to be preserved. An advantage of this model is that it allows us to determine in advance the way in which fiscal policies need to adjust as demographic parameters change.

The Impact of Monetary and Fiscal Policies on the Stock Market in the United States (U.S); Evidence from Linear ARDL Framework

2020 ◽  
Vol 11 (1) ◽  
pp. 132-132
Author(s):  
Aref Emamian
Keyword(s):  
United States ◽  
Stock Market ◽  
The United States ◽  
Real Effective Exchange Rate ◽  
Annual Data ◽  
Fiscal Policies ◽  
Long Run ◽  
The Us ◽  
Short Run ◽  
The Impact

This study examines the impact of monetary and fiscal policies on the stock market in the United States (US), were used. By employing the method of Autoregressive Distributed Lags (ARDL) developed by Pesaran et al. (2001). Annual data from the Federal Reserve, World Bank, and International Monetary Fund, from 1986 to 2017 pertaining to the American economy, the results show that both policies play a significant role in the stock market. We find a significant positive effect of real Gross Domestic Product and the interest rate on the US stock market in the long run and significant negative relationship effect of Consumer Price Index (CPI) and broad money on the US stock market both in the short run and long run. On the other hand, this study only could support the significant positive impact of tax revenue and significant negative impact of real effective exchange rate on the US stock market in the short run while in the long run are insignificant. Keywords: ARDL, monetary policy, fiscal policy, stock market, United States

Origins and Destinations – Social Security Claimant Dynamics

1998 ◽  
Vol 27 (3) ◽  
pp. 351-369 ◽  
Author(s):  
MICHAEL NOBLE ◽  
SIN YI CHEUNG ◽  
GEORGE SMITH
Keyword(s):  
The United States ◽  
Data Sets ◽  
Income Support ◽  
Data Set ◽  
Family Structures ◽  
Highly Educated ◽  
Lone Parents ◽  
Lone Mothers ◽  
Time Period ◽  
Short Time

This article briefly reviews American and British literature on welfare dynamics and examines the concepts of welfare dependency and ‘dependency culture’ with particular reference to lone parents. Using UK benefit data sets, the welfare dynamics of lone mothers are examined to explore the extent to which they inform the debates. Evidence from Housing Benefits data show that even over a relatively short time period, there is significant turnover in the benefits-dependent lone parent population with movement in and out of income support as well as movement into other family structures. Younger lone parents and owner-occupiers tend to leave the data set while older lone parents and council tenants are most likely to stay. Some owner-occupier lone parents may be relatively well off and on income support for a relatively short time between separation and a financial settlement being reached. They may also represent a more highly educated and highly skilled group with easier access to the labour market than renters. Any policy moves paralleling those in the United States to time limit benefit will disproportionately affect older lone parents.

scholarly journals Consistent satellite XCO<sub>2</sub> retrievals from SCIAMACHY and GOSAT using the BESD algorithm

2015 ◽  
Vol 8 (2) ◽  
pp. 1787-1832 ◽  
Author(s):  
J. Heymann ◽  
M. Reuter ◽  
M. Hilker ◽  
M. Buchwitz ◽  
O. Schneising ◽  
...  
Keyword(s):  
Carbon Cycle ◽  
Detailed Comparison ◽  
Mean Difference ◽  
Total Carbon ◽  
Retrieval Algorithm ◽  
Data Sets ◽  
Data Set ◽  
Time Period ◽  
Comparison Results ◽  
The Future

Abstract. Consistent and accurate long-term data sets of global atmospheric concentrations of carbon dioxide (CO2) are required for carbon cycle and climate related research. However, global data sets based on satellite observations may suffer from inconsistencies originating from the use of products derived from different satellites as needed to cover a long enough time period. One reason for inconsistencies can be the use of different retrieval algorithms. We address this potential issue by applying the same algorithm, the Bremen Optimal Estimation DOAS (BESD) algorithm, to different satellite instruments, SCIAMACHY onboard ENVISAT (March 2002–April 2012) and TANSO-FTS onboard GOSAT (launched in January 2009), to retrieve XCO2, the column-averaged dry-air mole fraction of CO2. BESD has been initially developed for SCIAMACHY XCO2 retrievals. Here, we present the first detailed assessment of the new GOSAT BESD XCO2 product. GOSAT BESD XCO2 is a product generated and delivered to the MACC project for assimilation into ECMWF's Integrated Forecasting System (IFS). We describe the modifications of the BESD algorithm needed in order to retrieve XCO2 from GOSAT and present detailed comparisons with ground-based observations of XCO2 from the Total Carbon Column Observing Network (TCCON). We discuss detailed comparison results between all three XCO2 data sets (SCIAMACHY, GOSAT and TCCON). The comparison results demonstrate the good consistency between the SCIAMACHY and the GOSAT XCO2. For example, we found a mean difference for daily averages of −0.60 ± 1.56 ppm (mean difference ± standard deviation) for GOSAT-SCIAMACHY (linear correlation coefficient r = 0.82), −0.34 ± 1.37 ppm (r = 0.86) for GOSAT-TCCON and 0.10 ± 1.79 ppm (r = 0.75) for SCIAMACHY-TCCON. The remaining differences between GOSAT and SCIAMACHY are likely due to non-perfect collocation (±2 h, 10° × 10° around TCCON sites), i.e., the observed air masses are not exactly identical, but likely also due to a still non-perfect BESD retrieval algorithm, which will be continuously improved in the future. Our overarching goal is to generate a satellite-derived XCO2 data set appropriate for climate and carbon cycle research covering the longest possible time period. We therefore also plan to extend the existing SCIAMACHY and GOSAT data set discussed here by using also data from other missions (e.g., OCO-2, GOSAT-2, CarbonSat) in the future.

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