scholarly journals Fiscal Sustainability in Indonesia with Asymmetry

2021 ◽  
Vol 67 (1) ◽  
pp. 19
Author(s):  
Mohamad Ikhsan ◽  
I Gede Sthitaprajna Virananda
Keyword(s):  
Public Debt ◽  
Fiscal Sustainability ◽  
Partial Sums ◽  
Debt Ratio ◽  
Debt Sustainability ◽  
Fiscal Management ◽  
Weak Sustainability ◽  
Long Run ◽  
Fiscal Balance ◽  
Fiscal Imbalance

The management of fiscal balance determines public debt sustainability, where a positive response of primary balance towards the debt ratio indicates a sustainable path. However, there might be asymmetry in the government’s fiscal management between different phases of the debt trajectory and business cycle. This study examines the sustainability of fiscal imbalance and public debt in Indonesia using the fiscal reaction function with annual fiscal data from 1976 to 2019. We incorporate asymmetry by decomposing the lagged debt ratio and cyclical output variables into their positive and negative partial sums. We find that Indonesia’s fiscal imbalance is on a path of weak sustainability as revenue grows more slowly than expenditure in the long run, with the bi-directional Granger causality between the two indicating fiscal synchronization. Long-run public debt sustainability is on a more sustainable path as primary surplus responds positively to the debt ratio. However, our asymmetric analysis suggests that this might be a false impression as primary balance decreases only in response to debt ratio decrease but increases less or fails to increase when the debt ratio rises, which is potentially dangerous.

scholarly journals Fiscal sustainability in developing Asia – new evidence from panel correlated common effect model

2019 ◽  
Vol 27 (1) ◽  
pp. 66-80 ◽  
Author(s):  
Duy-Tung Bui
Keyword(s):  
Public Debt ◽  
Developing Economies ◽  
Fiscal Sustainability ◽  
Debt Sustainability ◽  
Content Type ◽  
Long Run ◽  
Heterogeneous Effects ◽  
Sustainability Issue ◽  
Asian Economies ◽  
Common Correlated Effects

Purpose The purpose of this paper is to investigate the problem of fiscal sustainability for a panel of developing Asian economies. Design/methodology/approach In this study, cross-section dependence and heterogeneity are controlled while estimating the fiscal reaction function, which shows how governments react to the accumulation of public debt. The study employs the common correlated effects mean group estimator in Pesaran (2006) for a panel of 22 developing Asian economies for the period 1999‒2017. Findings It is found that the fiscal sustainability issue in the region is not so benign as in previous studies. Overall, fiscal policy is unsustainable, even for the nonlinear fiscal rule. Country-specific long-run coefficients are also examined in the study. Research limitations/implications The findings show that many developing economies in the region could not satisfy the intertemporal budget constraint, which raises concerns about debt sustainability in the area, especially for the post-crisis period. Originality/value This study investigates whether governments can maintain the sustainability of public finances in the long-run, if the ratios of public debt over GDP and primary deficit over GDP continue their recent problematic trends. Another novelty is controlling for heterogeneous effects among the countries in the region to give a more precise picture of debt sustainability. The empirical evidence also supports that insolvency risk can occur at low levels of public debt.

scholarly journals Social development and public debt sustainability

2021 ◽  
Vol 14 (2) ◽  
pp. 79
Author(s):  
Chara Vavoura ◽  
Ioannis Vavouras
Keyword(s):  
Fiscal Policy ◽  
Social Development ◽  
Public Debt ◽  
Debt Crisis ◽  
Necessary Condition ◽  
Debt Sustainability ◽  
Long Run ◽  
Policy Measures ◽  
Of Greece

The issue of public debt sustainability is of exceptional importance in the case of Greece. As a rule, the relevant analysis is limited to the examination of the fiscal policy measures reported to contribute to reducing public debt leaving out the investigation of the factors that caused the country’s debt crisis. The objective of the present paper is to explore the determinants of Greece’s debt crisis and the strategy required to address it. Our work highlights the issue of social development, which is found to be a necessary condition for ensuring the long run sustainability of the country’s public debt.

scholarly journals Analisis Kesinambungan Fiskal Indonesia Pasca Krisis Ekonomi

2019 ◽  
Vol 17 (2) ◽  
pp. 59-70
Author(s):  
Muhammad Basorudin
Keyword(s):  
Gross Domestic Product ◽  
Error Correction ◽  
Early Warning ◽  
Fiscal Sustainability ◽  
General Description ◽  
Debt Ratio ◽  
Upward Trend ◽  
Long Run ◽  
Error Correction Mechanism ◽  
Short Run

The debt to Gross Domestic Product (GDP) ratio is one of the indicators used to measure fiscal sustainability in Indonesia. From 2010-2017 on a quarterly basis, the debt to GDP ratio of Indonesia contributed to an upward trend. The purpose of this research is to get a general description of the debt ratio to GDP and analyze the factors that affect the ratio of debt to GDP simultaneously and partially to be used as an early warning for the fiscal sustainability of Indonesia. The model used in this research is Error Correction Mechanism (ECM).  The results obtained from this research is the Indonesia’s debt to GDP ratio is influenced by the debt to GDP ratio previous quarter. The influence given to the current quarterly debt ratio in the short run is greater than long run.

scholarly journals Empirical Analysis of Fiscal Sustainability and Optimal Level of Debt in Pakistan

2020 ◽  
Vol 7 (4) ◽  
pp. 282-292
Author(s):  
Sehrish Haleem ◽  
Awais Khan ◽  
Malik Adeel Ur Rahman
Keyword(s):  
Interest Rate ◽  
Public Debt ◽  
Significant Relationship ◽  
Government Expenditure ◽  
Optimal Level ◽  
Fiscal Sustainability ◽  
Public Expenditures ◽  
Long Run ◽  
Short Run ◽  
The Interest Rate

Through the current study it’s been tried to discuss that how fiscal sustainability is impacted by the debt which is taken by countries in order to push their economy towards prosperity and growth in Pakistan. Because the economy is considering vulnerable in terms of Public debt due to huge fiscal deficit in the economy. The ARDL approach is being applied by taking GDP as dependent variable while public debt, total revenues, government expenditures and interest rate are been taken as independent variable. The findings of the study suggested that there is strong and significant relationship exist between focused variables. Public debt is negatively associated with GDP in both short run and long run, while government expenditure give positive and significant relationship with GDP and interestingly total revenue give negative significant relationship in long run that supported the argument that the high revenues in developing nations inversely affects the investment that is pillar of GDP, so it adversely affected. The interest rate is positively significant in long run but in short run its negatively related with GDP because it affects cost of capital. The findings of study attract the attention of policy makers that we need either debt reduction strategies or either to minimize the gap between public revenues and public expenditures to promote sustain economic growth in the economy.

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.

Fiscal Rules and Public Investment: The Case of Peru, 2000-2019

2021 ◽  
Author(s):  
Waldo Mendoza ◽  
Marco Vega ◽  
Carlos Rojas ◽  
Yuliño Anastacio
Keyword(s):  
Public Debt ◽  
Public Investment ◽  
Commodity Price ◽  
Fiscal Sustainability ◽  
Fiscal Rules ◽  
Long Run ◽  
Fiscal Rule ◽  
Commodity Price Shocks ◽  
Year 2000 ◽  
The Impact

This article has three goals. First, it describes the genesis of fiscal rules in Peru and its degree of compliance. Second, it estimates the effect of fiscal rules adoption on public investment. Last, it analyzes the impact of alternative fiscal rules on public investment and public debt sustainability. Our main results are as follows. First, the implementation of fiscal rules in the year 2000 caused a 60 to 80 percent fall in public investment relative to several counterfactuals. Second, our DSGE model suggests a Structural Fiscal Rule would have increased the consumers welfare in the period 2000-2019 more than other fiscal designs. This rule reduces the procyclicality of public investment under commodity price shocks and macroeconomic volatility under world interest rate shocks. Third, a Structural Fiscal Rule has the lowest probability of exceeding the current public debt limit (30 percent of GDP), although there is a trade-off between investment-friendly rules and fiscal sustainability issues. Nevertheless, our quantitative results are limited to short spans of analysis. With a long-run perspective, we may say that fiscal rulesdespite constant modifications and recurring non-compliancehave fulfilled their original and most important goal of achieving the consolidation of public finances.

scholarly journals Public expenditure and growth: the Indian case

2020 ◽  
pp. 1-25
Author(s):  
A. Bhatt Hakhu ◽  
C. Sardoni
Keyword(s):  
Public Debt ◽  
Public Expenditure ◽  
Public Spending ◽  
Debt Ratio ◽  
The Public ◽  
Long Run ◽  
The Government ◽  
The Relationship ◽  
Positive Effect ◽  
Theoretical Results

The paper deals with the relationship between public spending and growth as well as the dynamics of the ratio of public debt to GDP. The authors show that a composition of public spending that favors productive expenditures, that is, those with a direct positive effect on the economy's long-run rate of growth, can determine a situation in which the ratio of public debt to GDP is stable, even though the government runs primary deficits. We test our theoretical results by considering the Indian case. Our empirical analysis substantially supports the idea that the dynamics of the economy as well as of the public-debt ratio are contingent on having a public sector that favors productive expenditures.

scholarly journals AN ANALYSIS OF THE FISCAL CONVERGENCE CRITERIA IN THE EUROPEAN UNION IN TERMS OF THE SUSTAINABILITY

2013 ◽  
Author(s):  
Iulia Andreea Bucur ◽  
Simona Elena Dragomirescu
Keyword(s):  
Fiscal Policy ◽  
Euro Area ◽  
Public Debt ◽  
Budget Deficit ◽  
The European Union ◽  
Convergence Criteria ◽  
Eu Member States ◽  
Fiscal Management ◽  
Fiscal Balance ◽  
The Eu

Although the convergence criteria in the Maastricht Treaty led to the creation of the EMU and the euro area has resisted more than some of its critics believed, in the context of major macroeconomic imbalances, the issue of nominal convergence has been the subject of numerous research. This paper aims to analyze the capacity of fiscal criteria to reflect the ability of EU Member States to achieve economic development for the integration in the EMU and to comply strict fiscal policy that governing its operation. In the context of certain technical deficiencies of fiscal criteria, we analyzed the developments of budget deficit and gross public debt in the EU during 2000 and 2012. The results show that until 2007 the EU economies were able, overall, to meet the budget deficit criteria, but due to the financial crisis and the prolonged slowdown in economic growth, the fiscal balance had an unfavorable evolution since 2008, while the evolution of the gross public debt has worsened increasingly. Due to this pressure situation on the sustainability of public finances, examining the adoption, application and enforcement of the fiscal policy rules expressed by the evolution of the Fiscal Rule Index for the period 2000-2011, the importance of rules in the fiscal management of the Union and especially of the euro area appears increasingly obvious.

Infrastructure mortgage in Russia: Opportunities and prospects

2019 ◽  
pp. 114-133
Author(s):  
G. I. Idrisov ◽  
Y. Yu. Ponomarev
Keyword(s):  
Federal Government ◽  
Public Debt ◽  
Budget Deficit ◽  
Expert Assessment ◽  
Inflation Expectations ◽  
Direct Impact ◽  
Long Run ◽  
Gdp Growth Rate ◽  
Negative Effect

The article shows that depending on the goals pursued by the federal government and the available interbudgetary tools a different design of infrastructure mortgage is preferable. Three variants of such mortgage in Russia are proposed, each of which is better suited for certain types of projects and uses different forms of subsidies. According to our expert assessment the active use of infrastructure mortgage in Russia can increase the average annual GDP growth rate by 0.5 p. p. on the horizon of 5—7 years. In the long run the growth of infrastructure financing through the use of infrastructure mortgage could increase long-term economic growth by 0.9 p. p., which in 20—30 years can add 20—30% of GDP to the economy. However, the change in the structure of budget expenditures in the absence of an increase in the budget deficit and public debt will cause no direct impact on monetary policy. The increase in the deficit and the build-up of public debt will have a negative effect on inflation expectations, which will require monetary tightening for a longer time to stabilize them.

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