scholarly journals State Budget Balance, Public Debt, and International Norms

2015 ◽  
Vol 22 (04) ◽  
pp. 51-75
Author(s):  
Hoai Bui Thi Mai ◽  
Thanh Su Dinh ◽  
Tung Bui Duy
Keyword(s):  
Fiscal Policy ◽  
Potential Risk ◽  
Public Debt ◽  
Fiscal Sustainability ◽  
Institutional Factors ◽  
Budget Constraints ◽  
Budget Balance ◽  
Government Budget ◽  
State Budget ◽  
Sustainability Model

A fiscal sustainability model requires that budget revenues and expenditures be in balance while government budget constraints, ensured. Yet, it becomes problematic while failing to address the dynamism of the budget constraints, associated with the government’s role (i.e. extending its intervention may affect public debt and finance). On adopting approaches by Trehan and Walsh (1991) and Hakkio and Rush (1991), which empirically tests cointegration between government revenues and its spending, this study’s aim is to assess the issue of public debt and fiscal sustainability in Vietnam. The findings, on the ground of analyzing institutional factors, demonstrate that no sustainability, as well as potential risk, is reflected by Vietnam’s public debt and fiscal policy.

scholarly journals THE SUSTAINABILITY OF STATE BUDGET IN DEBT REPAYMENT

2011 ◽  
Vol 13 (4) ◽  
pp. 415-434
Author(s):  
Haryo Kuncoro
Keyword(s):  
Data Analysis ◽  
Central Government ◽  
Foreign Debt ◽  
Theoretical Background ◽  
Fiscal Sustainability ◽  
Government Budget ◽  
State Budget ◽  
Quarterly Data ◽  
Domestic Debt ◽  
The Government

This paper is designed to analyze the sustainability of the central government budget in the case of Indonesia over the period of 1999-2009. First, we explore the theoretical background of the fiscal sustainability. Second, we develop a model to capture some factors determining the fiscal sustainability. Unlike the previous studies, we use both domestic debt and foreign debt to assess the fiscal solvency. Finally, we estimate it empirically. Based on the quarterly data analysis, we concluded that the government budget is unsustainable. This is associated with domestic debt rather than foreign debt. They imply that the central government should manage the debts carefully including re-profile, re-schedule, and re-structure them in order to spread the excess burden in the future. Also, the fiscal risks should be calculated comprehensively in order to maintain solvency.Keywords: Domestic debt, Foreign debt, Fiscal sustainability, Primary balanceJEL Clasbsification: E62, H63

IMPERATIVES AND RISKS OF THE STATE BORROWINGS’ ACCUMULATION

2018 ◽  
Vol 2018 (6) ◽  
pp. 26-43
Author(s):  
Vasyl KUDRYASHOV ◽  
Keyword(s):  
Fiscal Policy ◽  
Public Debt ◽  
Budget Deficit ◽  
Peak Load ◽  
Banking System ◽  
The State ◽  
State Budget ◽  
State Sector ◽  
Budget Support ◽  
Analysis Of Dynamics

Analysis of dynamics of indicators of the state and the state-guaranteed debt in Ukraine in recent years is carried out and imperatives of the growth of public debt are determined. It is found out that its primary factors were the expansion of financing of the state budget for budget support of the state sector of economy, banking system, as well as the financing of the budget deficit. It is concluded that the solving of such tasks was carried out under conditions of aggravation of financial risks, namely: revenue mobilization, attraction of an additional resource for the purpose of financing the budget deficit and deficit-debt adjustment, under-fulfilment of privatization plans, admission of high inflation, as well as depreciation of the national currency. It is noted that the growth of public debt was due to an increase in the state borrowings, which were used to repay obligations, cover the costs of conducting the active operations and shift part of the borrowings of corporations and institutions to the state budget. The conduct of active operations was aimed at providing the financial support to the state banks and state institutions, DGF and capitalization of some private banks. Changes in the volume of the state borrowings are disclosed in terms of the ratio of their internal and external components. The reasons and consequences of growth of costs of deficit-debt adjustment (active operations within the framework of the state budget) are determined. Under conditions of non-fulfillment of revenue plans from privatization of the state property, such a policy will lead to aggravation of fiscal risks (retention of high indicators of the state borrowings and debt financing at the expense of the NBU and the state banks). The policy of state borrowings (in terms of internal and external components) turned out to be inconsistent: sharp changes were allowed in attracting the resource from internal and external sources, and the implementation of debt policy was marked by significant peak load on the state budget as well as their high profitability both in domestic and foreign markets. The volume of loan servicing continued to grow, which became a factor of increasing budget expenditures. Financing of borrowings using the resources of the NBU and the state-owned banks were reaching high rates. The author proposes the directions of fiscal policy aimed at restraining and restricting the state and the state-guaranteed debt by introducing changes to fiscal policy in Ukraine.

Empirical appraisal of fiscal stability: the case of Ghana

2015 ◽  
Vol 42 (5) ◽  
pp. 753-779
Author(s):  
Nana Kwame Akosah
Keyword(s):  
Economic Growth ◽  
Monetary Policy ◽  
Fiscal Policy ◽  
Central Bank ◽  
Public Debt ◽  
Inflation Targeting ◽  
Fiscal Sustainability ◽  
Content Type ◽  
Quarterly Data ◽  
Poor Countries

Purpose – The purpose of this paper is to appraise the stability of Ghana’s fiscal policy by assessing government’s reaction in the past to rising public debt over the last three decades. Design/methodology/approach – Using quarterly data spanning 1990Q1-2013Q2, the study evaluated the mean reverting properties of Ghana’s public debt and also estimate the fiscal policy reaction function. The complementary estimation techniques include Pesaran et al. (2001) bound testing cointegration test, differencing method and also Granger two-step cointegration methods. Findings – Using quarterly data from 1990Q1 to 2013Q2, the study found the fiscal policy to be unstable in the 1990s, necessitating the adoption of Heavily Indebted Poor Countries’ initiative in 2001. The fiscal situation however relatively stabilizes afterwards following the external debt relief in 2001. Nevertheless, the study reveals that the recent fiscal policy (since 2006) seems to be confronted with tremendous fiscal pressures, exacerbated by fiscal excesses during election cycles as well as excessive domestic and external borrowings. In addition, the economic growth-debt link was found to be weak, though debt appears to adversely affect economic growth. Research limitations/implications – The study does not thoroughly explore the possibility of non-linear relationship between public debt and primary balance. Also, the result could be different using different data frequencies. Practical implications – The state of government finance has implications on the monetary policy and economic growth prospects of an economy. As an inflation targeting central bank since 2002, a successful monetary policy implementation that reins in inflation requires fiscal policy that curtails fiscal volatilities originating from imprudent behaviour of government. Therefore, the looming fiscal pressures in recent times would impair the effective implementation of the inflation targeting framework by the central bank, and also retard economic growth as the bulk of these expenditures are usually recurrent in the case of Ghana. Originality/value – This is the first paper to employ complementary econometric techniques to empirically evaluate fiscal sustainability in Ghana.

Policy asymmetries and fiscal sustainability: evidence from Nigeria

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Opeoluwa Adeniyi Adeosun ◽  
Olumide Steven Ayodele ◽  
Olajide Clement Jongbo
Keyword(s):  
Fiscal Policy ◽  
Public Debt ◽  
Markov Switching ◽  
Fiscal Sustainability ◽  
Constant Parameter ◽  
Policy Rule ◽  
Content Type ◽  
Sustainability Analysis ◽  
Debt Dynamics ◽  
Fiscal Balance

PurposeThis study examines and compares different specifications of the fiscal policy rule in the fiscal sustainability analysis of Nigeria.Design/methodology/approachThis is methodologically achieved by estimating the baseline constant-parameter and Markov regime switching fiscal models. The asymmetric autoregressive distributed lag fiscal model is also employed to substantiate the differential responses of fiscal authorities to public debt.FindingsThe baseline constant-parameter fiscal model provides mixed results of sustainable and unsustainable fiscal policy. The inconclusiveness is adduced to instability in primary fiscal balance–public debt dynamics. This makes it necessary to capture regime switches in the fiscal policy rule. The Markov switching estimations show a protracted fiscal unsustainable regime that is inconsistent with the intertemporal budget constraint (IBC). The no-Ponzi game and debt stabilizing results of the Markov switching fiscal model further revealed that the transversality and debt stability conditions were not satisfied. Additional findings from the asymmetric autoregressive model estimation show that fiscal consolidation responses vary with contraction and expansion in output and spending, coupled with downturns and upturns in public debt dynamics in both the long and short run. These findings thus confirm the presence of asymmetries in the fiscal policy authorities' reactions to public debt. Further, additional evidences show the violation of the IBC which is exacerbated by the deleterious effect of the pro-cyclical fiscal policy response in boom on the improvement of the primary fiscal balance.Originality/valueThis study deviates from the extant literature by accommodating time variation, periodic switches and fiscal policy asymmetries in the fiscal sustainability analysis of Nigeria.

scholarly journals Countercyclical fiscal policy in South Africa: Role and iImpact of automatic fiscal stabilisers

2003 ◽  
Vol 6 (4) ◽  
pp. 802-822 ◽  
Author(s):  
JA Swanepoel ◽  
NJ Schoeman
Keyword(s):  
South Africa ◽  
Fiscal Policy ◽  
Economic Activity ◽  
Budget Balance ◽  
Government Budget ◽  
Output Fluctuations ◽  
Cyclical Fluctuations ◽  
General Government ◽  
The Government ◽  
Fiscal Analysis

As actual budget balances reflect both cyclical developments and discretionary measures, they are not very useful when seeking to assess the orientation of underlying fiscal policy and possible structural imbalances in the budget balance. The influence of fluctuations in economic growth on the government’s budget balance can be examined by decomposing the actual budget into a cyclical and a structural or cyclically adjusted component. The former component shows the effect on the government budget of cyclical fluctuations in economic activity, the latter reflects what the budget balance would be if economic activity were at its trend level. This paper calculates the extent to which fiscal policy stabilises output fluctuations in South Africa and estimates the cyclically adjusted budget balance of the consolidated general government as an alternative fiscal indicator that can contribute to more effective fiscal policy and fiscal analysis.

scholarly journals Fiscal Sustainability And Fiscal Reaction Functions In The US And UK

2012 ◽  
Vol 11 (8) ◽  
pp. 935 ◽  
Author(s):  
Philippe Burger
Keyword(s):  
Fiscal Policy ◽  
Economic Crisis ◽  
Public Debt ◽  
Fiscal Sustainability ◽  
Smooth Transition ◽  
The Public ◽  
Reaction Functions ◽  
The Us ◽  
The Future ◽  
The Uk

Following the 2008/9 financial and economic crisis, public debt/GDP ratios in several countries rose to their highest levels in 40 years. Also in the US and the UK did the public debt/GDP ratios increase significantly, thereby putting the spotlight again on fiscal sustainability. Based on past behaviour, this article asks whether fiscal policy in these two countries is likely to be sustainable. The article investigates how the US and UK governments, by changing their deficits, react to changes in their debt positions. To do this, the article estimates fiscal reaction functions using Smooth Transition Regressions. It finds that based on past behaviour, fiscal policy in both the US and UK can be expected to remain sustainable. Based on the same past behaviour, and assuming this behaviour will continue in the future, the article also calculates the levels to which the public debt/GDP ratios in the US and UK can be expected to converge.

scholarly journals Fiscal sustainability and public debt in an endogenous growth model

2008 ◽  
Vol 9 (2) ◽  
pp. 277-302 ◽  
Author(s):  
JESÚS FERNÁNDEZ-HUERTAS MORAGA ◽  
JEAN-PIERRE VIDAL
Keyword(s):  
Fiscal Policy ◽  
Endogenous Growth ◽  
Public Debt ◽  
Overlapping Generations ◽  
Fiscal Sustainability ◽  
Fiscal Rules ◽  
Human Capital Formation ◽  
Fiscal Adjustment ◽  
Educational Spending ◽  
Endogenous Growth Model

AbstractThis paper investigates fiscal sustainability in an overlapping generations economy with endogenous growth coming from human capital formation through educational spending. We assess how budgetary imbalances affect economic dynamics and the outlook for economic growth, thereby providing a rationale for fiscal rules ensuring sustainability. Our results show that the appropriate response of fiscal policy to temporary shocks is not trivial in the absence of fiscal rules. Fiscal rules allow for a timely reaction, thereby avoiding possibly disruptive fiscal adjustment in the future: the more adjustment is delayed, the larger its necessary scale is. We perform a rough calibration of the model to simulate the effects of a demographic shock (change in the population growth rate) under different fiscal policy scenarios.

Fiscal risks are low but rising in Turkey

2016 ◽  
Keyword(s):  
Fiscal Policy ◽  
Public Debt ◽  
Global Economy ◽  
Current Account Deficit ◽  
Private Investment ◽  
Fiscal Sustainability ◽  
Budget Deficits ◽  
Content Type ◽  
The Public ◽  
The Government

Subject Turkey's fiscal sustainability. Significance By keeping fiscal deficits low, the government has steadily reduced the public debt to about 33% of GDP. However, fiscal policy is now shoring up growth. There is also concern about the lack of further public financial reform, insufficient transparency and contingent liabilities. Impacts Wider budget deficits may not affect growth notably, given the weak global economy and low private investment and investor confidence. Turkey will have one of Europe's lowest public-debt levels, but investors may need to pay more attention to public finances. Fiscal policy could join more urgent worries about politics, the current-account deficit, private-sector debt and monetary policy.

State Budget Balance, Public Debt, and International Norms

2015 ◽  
Vol 22 (4) ◽  
pp. 51-75 ◽  
Author(s):  
BUI THI MAI HOAI ◽  
SU DINH THANH ◽  
BUI DUY TUNG
Keyword(s):  
Public Debt ◽  
International Norms ◽  
Budget Balance ◽  
State Budget

Policy coordination in fiscal federalism: drawing lessons from the Dubai debt crisis

2019 ◽  
Vol 14 (5) ◽  
pp. 899-915
Author(s):  
Serhan Cevik
Keyword(s):  
Fiscal Policy ◽  
United Arab Emirates ◽  
Global Financial Crisis ◽  
Debt Crisis ◽  
Policy Coordination ◽  
Fiscal Sustainability ◽  
Fiscal Policies ◽  
Budget Balance ◽  
Content Type ◽  
Fiscal Policy Coordination

Purpose With the global financial crisis, the United Arab Emirates (UAE) experienced its own unraveling of macro-financial imbalances and thus presents an interesting case to analyze the underlying fragilities in federal governments. The purpose of this paper is to investigate the evolution of fiscal policy in the UAE at consolidated and subnational levels in the run-up and after the crisis, and provide pertinent insights about the importance of policy coordination in other federal fiscal systems – and monetary unions, as brought to light by the recent developments in Europe. Design/methodology/approach In measuring the cyclicality of fiscal balances at the consolidated and emirate level in the UAE, this paper uses the non-hydrocarbon primary budget balance, excluding interest spending and hydrocarbon revenues, investment income of the sovereign wealth fund, scaled by non-hydrocarbon GDP. The cyclically adjusted primary balance is estimated by deducting cyclical components from the actual balance. It is important to correct for cyclical changes because the budget balance tends to vary endogenously according the state of the economy – deteriorating during a bust and improving in a boom. Furthermore, since hydrocarbon revenues are dependent on the erratic behavior of hydrocarbon prices, the cyclically adjusted non-hydrocarbon primary balance is computed, using the elasticity of non-hydrocarbon revenues and primary expenditures relative to non-hydrocarbon GDP, to assess whether fiscal policy exacerbates economic fluctuations in the UAE at the aggregate and emirate levels. Findings The empirical findings show that procyclical fiscal policies prior to the crisis reinforced the financial sector cycle, exacerbated the economic upswing, and thereby contributed to the build-up of macro-financial vulnerabilities. The paper also sets out policy lessons to develop a rule-based fiscal framework that would help strengthen fiscal policy coordination between the various layers of government and ensure long-term fiscal sustainability and a more equitable intergenerational distribution of wealth. Originality/value The lack of fiscal policy coordination among subnational governments complicates macro-economic management at the federal level. Since the UAE has a pegged exchange rate regime and consequently a limited scope to use monetary policy, the burden of macro-economic stabilization falls on fiscal policy. Accordingly, this paper shows that procyclical fiscal policies prior to the crisis reinforced the “financial accelerator” effect, exacerbated the economic cycle, and thereby contributed to the build-up of economic and financial vulnerabilities in the UAE.

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