Abstract
Public debt is a notable measure of economic and financial sustainability which encountered policy and scholarly interest in the international development ambients. This paper investigates the major drivers of public debt growth in 184 countries. The underlying cross-country survey is conducted on the basis of the improved compilation of datasets on the central government debt for 2013. The study finds that oil abundance, economic growth rate, the share of mineral rent in the total revenue, interest rate payments for foreign borrowings, and being a developing country have a statistically significant impact on the growth of the public debt. In contrast, defence spending, unemployment rate, and inflation rate do not have a statistically significant positive impact on the public debt rate.Keywords: Public Debt, Natural Resources, Sustainability, Oil Rent, Mineral Rent, Defence Spending, Developing CountriesJEL Classifications: F21, F34, F36, G15, H6, N1, F3DOI: https://doi.org/10.32479/ijeep.10901
Highlights
Public debt extent is a primary measure of economic and financial sustainability
The analyses suggest an important role of oil embedment, mineral rent, economic growth rate, and interest rate payments for foreign borrowings in developing countries in public debt increase
We discover that defence spending, unemployment rate, and inflation rate do not play a major role in augmenting public debt rates
Summary
Public debt extent is a primary measure of economic and financial sustainability. The topic has often resurged in the wake of financial and economic crises, finding new fashions (Greiner and Fincke, 2016). Public budget and public debt sustainability is no news and have been attracted international financial organisations (Spaventa, 1987). They have often been referred to as the theory of intertemporal budget constraint (Baglioni and Cherubini, 1993), as part of the intertemporal viability of the economic policy (Cisco and Gatto, 2021). It is often referred to as a countercyclical resilience policy instrument to mitigate a system’s vulnerability (Gatto and Busato, 2020; Gatto and Drago, 2020) This issue is of relevance for crises connected with resource management and energy markets (Busato and Gatto, 2019)
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