Abstract
Theoretical models on fiscal sustainability hypothesize that indebted governments can lower their current debt by generating future primary surpluses, ceteris paribus. While both developed and developing countries struggle with the issue of debt stabilization, the latter, in particular face heightened sensitivity from creditors, which provides them an impetus to respond more strongly to stabilize their debt. Based on a panel of 53 developing countries, we examine the fiscal response of these countries to changes in their debt‐to‐gross domestic product ratio. We find evidence of a positive relationship between the debt and primary surplus and that countries adjust along both the revenue and expenditure margins at roughly the same rate. (JEL E62, H50, O11)
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
