Public Borrowing Research Articles

Selling ‘The World’s Favourite Airline’: British Airways’ privatisation and the motives behind it

This article investigates the motives behind one of the earliest airline privatisations in history, that of British Airways. The British Airways privatisation experience highlights the dynamic characteristics of privatisation policymaking from the perspective of a flag carrier, including the various motives behind the sale, competing interests, and sale structuring, among other. The principal British Airways privatisation motives were reducing company borrowing, stimulating efficiency, and achieving popular capitalism. These received priority at different times given the long privatisation process. The initial motives were reducing public sector borrowing and stimulating efficiency, followed later by the aim of extending wider share ownership. Curbing union power and fostering domestic competition were not privatisation motives.

A burden on future generations? How we learned to hate deficits and blame the baby boomers

The idea that public borrowing places an intolerable burden on posterity is as old as the institution of public debt itself. But the debate over deficit-spending assumed an entirely new scope and import with the rise of the fiscal state in the early twentieth century, as governments assumed greater responsibilities with regard to public welfare and found themselves subject to a new kind of conflict concerning the uses and distribution of public income. In this context, the intergenerational argument against social welfare spending became an important tool in the fight against class redistribution. With a focus on American debates, this article provides a historical sociology of the idea that deficits constitute a burden on future generations, identifying the key historical turning points when this idea acquired new political resonance. In particular, the article investigates how we learned to blame baby boomers for the alleged ills of government deficit-spending and how this now ubiquitous motif of public discourse was reintroduced by the Virginia school public choice theorist James M. Buchanan and later refined by the chief proponent of generational accounting, Laurence Kotlikoff.

A Test of the validity of Crowding-out (or- in) hypothesis: A new examination of link between public borrowing and private investment in Emerging Europe

This study seeks to test the existence of the crowding-out (or- in) hypothesis in a sample of 17 Emerging Europe countries divided in two panels. The study employs a panel autoregressive distributed lag (ARDL) model based on three estimators, Mean Group Estimator (MG), Pooled Mean Group (PMG) and Dynamic Fixed Effect (DFE), in order to evaluate the of stability of short run and long run coefficients using consistently compiled public borrowing and private investment data between 2000 and 2019. The empirical findings of the paper generally confirm the existence of a crowding out effect in both long run and short run in European post-transition countries, and in the long run for European transition countries. More specifically, elasticity of private investment with respect to public debt is greater in the European transition countries than in the European post-transition countries. However, the findings on the crowding out (in) effect of government spending and economic growth on private investment are mixed and conflicting in both the long run and the short run. Accordingly, the study recommends that selected countries should reassess their austerity agendas employed for lowering debt levels, and follow new strategies for managing public debt burden.

Left-Turn Ahead in the UK Economy: The Johnson Factor

The paper identifies the key features and specific nature of the economic strategy adopted by Boris Johnson’s conservative government. The record growth of the public sector net borrowing in the post-war era is viewed as the main risk factor to the strategy implementation. The author concludes that liberal market economy in the UK has been gradually morphing into a coordinated market economy. The paradigm shift expresses itself in the deviation from economic neoliberalism to the idea of ‘one-nation conservatism’ adapted to modern trends. In practice, this means reinforcement of the redistributive and regulatory functions of the state, as well as transition from the consumption-led to export-led growth model.

Crowding-Out and Crowding-In Effects of Public Borrowing on Private Domestic Investment in Nigeria

Crowding-Out and Crowding-In Effects of Public Borrowing on Private Domestic Investment in Nigeria

Сучасний стан державного боргу України та перспективи використання зарубіжного досвіду управління державними запозиченнями

The article is devoted to an important component of the country’s financial security –public debt. The formation of governmental borrowing is caused by the State’s need for additional financial resources. These resources are used to ensure the fulfillment of all tasks set before the State aiming to ensure economic and social prosperity. Improperly developed policy of public debt management will undermine the financial security of the State. To analyze the state of public borrowing, the following indicators were considered: the volume of total, external and internal public debt of Ukraine from 2017 to 2021; the ratio of external, external-guaranteed, internal and internal-guaranteed public debt of Ukraine in 2021. It was determined that over the last 5 years the dynamics of governmental borrowing has been changing from positive to negative and vice versa. The problems of public debt management in Ukraine include inefficient using of borrowed funds; raising loans to cover existing debt; imperfect legislative support; small volumes of gold and foreign exchange reserves; permanent budget deficit, etc. The following prospects for public debt management were identified: a policy to reduce the budget deficit; greater focus on domestic creditors; diversification of investors; fulfillment of IMF lending conditions; simplification of the IGLBs procurement system, etc. The international experience of government borrowing management was also considered. The most effective public debt model that can be implemented in Ukraine is the example of Sweden, where the government launched a policy of reducing public debt through systemic reforms that need to be implemented at all levels of the State management

Domestic Debt and Private Investment: The Case of a Small Open Economy

According to the Debt Management Office (DMO) Nigeria's total debt stock (foreign and domestic) as at June 2020 stood ₦31.01 trillion (US$85.9 billion), 8.31 percent increase when compared with ₦28.63 trillion (US$79.3 billion) recorded in March 2020. A breakdown reveals that total external debt stood at ₦11.36 trillion (US$31.47 billion), accounting for 36.65 percent of the total debt stock while domestic debts stood at ₦19.65 trillion (US$54.42 billion), represented 63.35 percent of the total debts. A cursory look at the historical trend shows that Nigeria's public debt increased by US$22.09 billion between June 2015 and June 2020. Nigeria spent a whopping US$1.3 billion to cover external debt obligations in 2019 as external debt service payment accumulated to US$3.5 billion in the last five years. In general, the unprecedented increase in the public debt is a source of anxiety for stakeholders in Nigeria. The study investigates the relationship between domestic debt and private investment in Nigeria for the period 2000: Q1–2019: Q2. The paper uses the Augmented Dickey Fuller (ADF) and Philp Perron (PP) tests to examine the statistical properties of the data and determine the appropriate model for the analysis. Also, Autoregressive Distributed Lag (ARDL) methodology to uncover the short and long run relationship between public debt and private investment. The time series data were found to exhibit mixed order of integration, I(0) and I(1), thereby necessitating the choice of the Autoregressive Distributed Lag (ARDL) methodology that allows for data with mixed integration order in modelling the relationships among economic variables. The model was tested for cointegration and the results of the Bounds test showed the existence of a long-run relationship among the variables. From the long-run equation, domestic debt, real GDP and prime lending rate were statistically significant and maintained a priori expectation. The study affirms that domestic debt has a significant negative effect on private investment in Nigeria, confirming the crowding-out hypothesis. On the basis on the empirical findings, the study recommends minimizing public borrowing (especially from domestic sources) in Nigeria. In addition, funds sourced through borrowing should be judiciously utilized to improve the investment climate in the country.

AN ANALYTICAL STUDY ON PUBLIC DEBT AND ITS IMPACT ON NEPALESE ECONOMY

This study aims to find out the pattern and composition of public debt, and its impact on Gross Domestic Product (GDP) growth of Nepal. This study is based on secondary sources of infor-mation and the data are collected from relevant archives. The collected data and information have been analyzed through descriptive as well as analytical research methods. Public borrowing has become a common practice for developing and even developed countries in order to meet the inter-nal resource crisis and development budget. Nepal had formally started borrowing from 1960s and government owed more from the external sources in the beginning, but the foreign assistance has been decreasing in recent periods. Public debt can not be so fruitful in terms of GDP growth, and this statement is supported by the fact that the average growth rate remains almost constant at 4.5 percent, but the average inflation rate is at 5.9 percent in the 40 years of study period. The amount of public debt has been increasing due to poor mobilization of internal resources and growth in unproductive recurrent expenses, especially due to the implementation of federalism of Nepal. The interest and principal of public debt especially in context of foreign debt, has been grow-ing year over year, so the burden of public debt has also been growing. In Nepalese context, the public debt to GDP ratio is 30.02 percent, so judging from that, public debt does not seem to be a serious problem as of now, because the alarming threshold specified by World Bank is at 77 per-cent. But, the growing trend of public borrowing may be a challenging problem for any nation in a long run, so the heavy dependence of national economy upon public debt, especially on foreign loan, ought to be minimized.

Critical Analysis of the Zero Risk Weight Privilege for European Sovereign Debt in Light of Art. 124 TFEU

AbstractThe zero risk weight privilege for European sovereign debt in the current capital adequacy requirements for credit institutions incentivises credit institutions to acquire and hold sovereign debt. However, it also poses a significant risk to the stability of the banking system and thus the financial system as a whole. It is argued that this privilege should not only be abolished due to the risk it entails but that it is also non conformant with EU primary law. Art. 124 TFEU prohibits privileged access of the EU and Member States' public sector to financial institutions except for prudential considerations. The protective purpose of Art. 124 TFEU to ensure sound budgetary policies by subjecting public borrowing to the same rules as borrowing by other market participants is thwarted by the uniform zero risk weight privilege. Further, as this privilege does not take into account the varying creditworthiness of the individual Member States it does not promote the soundness of financial institutions so as to strengthen the soundness of the financial system as whole, but rather endangers systemic stability. The zero risk weight privilege is therefore not based on prudential considerations and hence violates Art. 124 TFEU.

An Empirical Analysis of Public Borrowing and Economic Growth in Nigeria

This study seeks to evaluate the impact of public borrowing on economic growth in Nigeria using time series data from 1980 to 2018. Specifically, the study seeks to analyze the effect of domestic debt (proxy by Federal Government Bonds-FGB) and external debt (proxy by International Monetary Fund Loan-IMFL) on Nigerian’s Gross Domestic Product (GDP). To achieve this objective, secondary data was collected from the Central Bank of Nigeria Statistical bulleting and the Debt Management Office of Nigeria. A multiple regression model involving the dependent variable (GDP) and the independent variables (FGB and IMFL) was formulated and subjected to econometric analysis. These variables were adjusted with the Jarque-bera test of normality while the correlation result was used to check the possibility of multi-collinearity among the variables. The t-test was used to answer the research questions and test the formulated hypotheses at the 5percent statistical level. Results from the analysis show that a positive relationship exists between IMF Loan and Nigeria’s gross domestic product, while a negative relationship exists between FG Bonds and Nigeria’s gross domestic product, which violates the Keynesian theory of public debt. The study concludes that both domestic and external debt significantly affect economic growth in Nigeria. Therefore, it was recommended that public borrowing should be efficiently used and contracted solely for economic reasons and not for social or political reasons as this will help to avoid accumulation of debt stock over time.

Сутність та архітектоніка фіскального простору держави

Introduction. The objective civilizational processes of modern times transform national economies, significantly influence the formation of a new paradigm of state development as a competitive participant in interstate communications in the global dimension. The financial relations in the state, which are the result of its financial policy, take place in the search for coherence of the interests of its internal subjects. Taxpayers are trying to reduce the tax burden, citizens need quality public goods as a fair result of tax refunds, and the state is trying to effectively replenish resources, the main source of which is taxes, to fulfill its functions and develop competitive participation in the interstate communications of the globalized world. Under these conditions, the fiscal space is formed, the essence of which still remains unclear. Purpose. The purpose of the article is a comprehensive substantiation of the theoretical foundations of the essence and architecture of the fiscal space of Ukraine. Results. It has been proved that the transformation of the fiscal space of the state is a systematic change in the essential properties of the environment of interaction between the subjects of fiscal policy, aimed at effective mobilization of budget revenues and their rational use to obtain a positive impact on socio-economic development and welfare. It has been substantiated that the fiscal space belongs to the components of the public finance system, including revenues, expenditures and borrowings. Conclusions. In our opinion, the main idea of the transformation of the fiscal space is in two equally important areas: its effective formation for the allocation of additional financial resources and effective use to increase the efficiency of reasonable areas of budget expenditures. In these interconnected processes, a balance is sought between the divergent interests of the state and taxpayers as the main subjects in the fiscal space. This balance can be achieved on the basis of established public trust, which is an important indicator of a harmonious society.

The effect of budget deficit on economic growth in Nigeria

The study examined budget deficit and economic growth in Nigeria. It specifically investigated the relationship between excess public expenditure, public revenue reduction, inflation rate, unemployment rate and real gross domestic product of Nigeria. This study adopted ex-post facto research design. Relevant data regarding the variables under-study were extracted from the Central Bank of Nigeria (CBN) statistical bulletin. The study period covered thirty-one (10) years spanning from 2009 to 2019, while error correction model was used to analyze the data. The findings revealed among other things that; there was presence of co-integration (long-run relationship) among the variables in the model, excess public expenditure and public revenue reduction has significant relationship with economic growth of Nigeria, while inflation rate and employment rate does not any positive relationship with economic growth of the country in the long run. The study therefore concluded that there is significant relationship between excess public expenditure and economic growth of Nigeria, depending on the variable of interest. Likewise, the study recommended among other things that government should ensure efficiency and effectiveness in the public financial management due to the insignificant influence of inflation rate on economic growth both in the long run and short run which is a pure indication of poor public financial management in the country. Also, the component governments in Nigeria should reduce it public borrowing as it has a significant inverse effect on the economic growth of the country in the long run.

Value added tax and its effect on revenue generation in Nigeria

This study examined value added tax and its effect on revenue generation in Nigeria. Specifically, the study examined the effect of consumption tax on total government revenue in Nigeria, personal income tax on oil revenue in Nigeria, goods and service tax on non-oil revenue in Nigeria and company income tax on total public borrowing in Nigeria. Secondary data were used in the study. Data were sourced from Central Bank of Nigeria (CBN) statistical bulletin, Budget office of the Federation, as well as the World Bank Development Indicator Database. Collected data covered the period of 20 years spanning from 1999-2019. Data collated were analysed using both descriptive and Vector Error Correction Model method of analysis. Descriptive analysis conducted in the study include the mean, standard deviation, Kurtosis, and Jarque-Bera statistics of each variable. The findings revealed that there was presence of co-integration (long-run relationship) among the variables in the model, actual public consumption tax and personal income tax had 0.699243 and 1.798114 (P=0.0043, 0.0034) respectively significant relationship with revenue generation in Nigeria, while goods and service tax and revenue generation (0.209789, (P=0.0911) are not significantly related to revenue generation of the country in the long run. The study therefore concluded that there is significant relationship between consumption tax and revenue generation in Nigeria. Likewise, the result of the study concluded that value added tax is beneficial to the Nigeria economy, and the research, shows that value added tax is statistically significant to revenue generation in Nigeria. From the findings, for Nigeria to attain its economic growth and development, Nigeria must be able to generate enough revenue in order to meet up with the challenges of her expenditures in term of provision of social amenities and the running costs of the Government. The result of this research work recommend that government should ensure efficiency and effectiveness in the discourse of tax administration and that if more goods and services are taxed, the revenue base of the country will increase both in the long run and short run

The role of the age-friendly cities movement in the framework of active aging policies against the socioeconomic risks of demographic aging

Aging, a common problem in almost all countries, both developed and developing, is expressed in terms of a decrease in global birth and death rates or, from a different perspective, an increase in mean life expectancy. Demographic aging, which may be regarded as both a threat and an opportunity, affects a very broad sphere, including basic health, the economy, social security, the saving-consumption balance, living arrangements, urbanization, and the family structure, and therefore brings different disciplines together. Looked at in greater detail, it is a subject that requires reflection and planning since it affects such areas as change in a country’s population structure, economic growth, labor markets, labor supply and productivity, development policies, public borrowing, health and social security policies, education policies, and urbanization policies. The fact that demographic aging is a common problem of both developed and developing countries raises the question of active and healthy aging policies. These policies are thought to play an important role in measures created or potentially created by aging. Discovery of the importance of individual capital accumulation and wide social capital has prepared the dissemination of active-healthy aging policies out of the idea that investment in individuals’ health, education, and participation opportunities will benefit both the individual and the community. The emergence of the ‘Age-Friendly Cities’ movement initiated by the World Health Organization is one concrete outcome of these policies. The first section of this study will discuss the concept of demographic aging and its relationship with active-healthy aging. The economic and social effects of demographic aging will then be discussed. Another section of the study will discuss the concept of age-friendly cities, their relationship with active aging, and their role against the impacts of demographic aging.

Uganda\u2019s experience with debt and economic growth: an empirical analysis of the effect of public debt on economic growth\u20141980\u20132016

BackgroundEmpirical evidence on the effect of public debt on the economic growth of a country remains ambiguous. No theoretical convergence on the respective nexus has been attained. For the case of Uganda in particular, the public debt question remains critical in the country’s development trajectory. Under the Highly Indebted Poor Countries (HIPCs) initiative, Uganda was the first country to receive a debt relief of worth US$650 million in the 1990s and later in 2006, under the Multilateral Debt Relief Initiative (MDRI), the country generously received 100% debt forgiveness/cancelation which consequently reduced the stock of country’s debt to $1.6 billion. However, of recent, the debt stock has kept on increasing from UGX 14.257 trillion ($5.5 billion) in 2000 to the current UGX 35.3 trillion (9.8b) in July 2017 and it is projected to continue increasing in the short to medium term given the robust NDPII core projects and priorities which are set to attract more borrowing. The study employs the Auto Regressive Distributed Lag (ARDL)-bounds testing approach which is superior and suitable for our small sample.ResultsThe results reveal that public debt has a significant negative impact on economic growth in short run whereas in long-run debt has a mixed impact on Uganda’s economy. The total debt service has a negative impact whereas Gross debt as a share of GDP has a positive impact on the economy. The findings also reveal that Public debt has a negative effect on Uganda’s economic growth in the short run. The impact is however found to be positive in the long run. This result is in line with the study expectations and some findings by earlier researchers who found a negative impact of public debt on GDP and investment. The results suggest that the current trend of Uganda’s borrowing is to continue constraining the resources in the short run.ConclusionThe conclusion of the study in view of emerging findings especially on debt, various policy implications have emerged. At the current rate of borrowing, Uganda is likely to have deteriorating economic growth partly because such public borrowing adversely affects investment. The study thus recommends for policies geared toward efficient use of borrowed funds especially for such projects that have high potential to unlock the production capabilities of the country. There is a need for the government of Uganda to institute mechanisms to ensure efficient use of borrowed funds.

Five ways the pandemic could alter the economy

▀ Economic crises are often turning points, and the upheaval triggered by coronavirus may prove one of them. A permanently bigger state and public borrowing, persistently cowed consumers, a more ‘national’ UK economy and the impetus for beneficial reforms are all possibilities. ▀ We think the scale of state intervention in the economy to protect public health will increase pressure to do more in aid of other social goals. The austere ‘Treasury view’ of deficits is also likely to wane. ▀ Meanwhile, evidence suggests that major economic shocks can exert a decades‐long drag on consumers’ desire to spend, giving another reason why higher government borrowing may persist long after the pandemic has faded. ▀ Supply‐chain vulnerabilities exposed by the virus may crystallise the more ‘UK‐first’ approach to economic policy that Brexit ushered in. Although greater protectionism could threaten economic dynamism, the crisis could be the stimulus to structural reform, offering a potential growth upside

Düyun-u Umumiye İdaresi’nin Borç Yönetiminden Bir Kesit: İkramiyeli Tahviller

Bu çalışmada uluslararası finans sermayenin Osmanlı ekonomisi üzerindeki etkilerinin Düyun-u Umumiye İdaresi’nin mali denetimi açısından analiz edilmesi amaçlanmaktadır. Osmanlı ekonomisi dünya ekonomisine tarımsal meta üretimi ihracatına dayalı dış ticaret ilişkileri ile entegre olmaktaydı. Osmanlı ekonomisinde ticaret ve finans sermayesinin uluslararasılaşması, dış borçlanma ilişkilerinde rol oynayan kurumlar ile yüzyıl sonunda gerçekleşti. 19. yüzyıl Osmanlı ekonomisinde kamu borçlarının mali denetiminde etkili olan Düyun-u Umumiye İdaresi, doğrudan yabancı yatırımları da desteklemekteydi. Yabancı demiryolu yatırımların risklerinin azaltılmasında rol oynayan Düyun-u Umumiye İdaresi, uluslararası sermaye yatırımları açısından güvenilir bir kurumdu. Çalışmada, Rumeli demiryolu yatırımının finansmanı için çıkarılan ikramiyeli tahvillerin incelenmesiyle, uluslararası sermayenin Osmanlı ekonomisinde yarattığı finansallaşma eğilimi incelenmektedir. Çalışmada, Düyun-u Umumiye’nin mali denetim dışındaki faaliyetlerinin özellikle yabancı yatırımlara yönelik faaliyetlerinin sonuçlarını analiz edebilmek açısından Rumeli demiryollarının finansmanı için çıkarılan İkramiyeli tahviller incelenmektedir. 1870 ve 1872 yılında iki seri halinde çıkarılan ve kura ile ikramiye kazandıran tahvillerin getirisinden küçük yatırımcılar yararlanamamıştır.

FAİZ ORANI ÜZERİNE VADELİ İŞLEM SÖZLEŞMELERİNİN RİSKTEN KORUNMAK AMACIYLA KULLANIMI

One of the most successful and exciting innovations in the history of the futures markets has been the emergence of interest rate futures contracts. Today, the interest rate futures market has come to represent about one-half of the entire futures market. The reason behind this success is the fact that the individual, the businessperson and the banker, by using interest rate futures instruments, alone or in combination, each has the ability to control and hedge their interest rate risk and seek opportunity by restructuring the portfolio in the cash market. İn this study, the hedging with interest rate futures, especially by using short-term interest rate futures contracts, has been analyzed. It is also pointed out that Turkey, with a huge level of public borrowing, high level of secondary market trading volüme in the Biliş and Bonds Market and volatile interest rate structure, urgently needs this money market instrument, as the potential practical use of interest rate futures contracts for hedging purposes will offer a new alternative to improve the performance of the market participants in the financial market. I.

Budgetary Policy in the Financial Security System

The financial security of the state becomes especially important given the crisis manifestations in the global financial system, loosening of the state control over the monetary system and the increasing political pressures on economic processes. The article’s objective is to review the theoretical foundations of the financial security and analyze the impact of the budgetary policy on the budgetary security as the core the financial security of the state. A statistical analysis of the budgetary policy impact on the budgetary security is made for the period of 2015–2019 on the basis of Methodological Recommendations on Computation of the Economic Security Level in Ukraine, with assessing four indicators: (i) the ratio of the public budget deficit/surplus to GDP; (ii) the share of deficit of budget and off-budget funds of the general government in GDP; (iii) the share of GDP redistributed via the consolidated budget; (iv) the ratio of cumulated payment for debt service and repayment to the public budget revenue. The assessment scale ranges from 0 to 1 (or from 0 to 100%) and consists of five intervals: absolutely critical level of danger; critical level of danger; dangerous level; unsatisfactory security level; satisfactory security level; optimal security level. Results of the analysis give grounds to suggest that the policy concerned with public borrowing, debt service and repayment is must be urgently revised, because the respective indicator (which is the ratio of cumulated payment for debt service and repayment to the public budget revenue) was signaling extremely high levels threats to the budgetary security in 2015–2019 and, eventually, to the financial security of the country.

A trilogy of debt. The emancipatory virtue of public debt in saint-simonian, liberal and socialist discourses in nineteenth century France (1825–1852)

This article compares public debt as it is concived by Saint-Simonians, Liberal economists and Socialists. I endeavour to analyse public debt through its capacity to modify or preserve social order. Armed with financial science, the Saint-Simonians wished to use public borrowing as a means for enabling the development of the industriels. Liberal economists condemned the development of public borrowing with advocating teachings of political economy. Against these two theories of public debt, the 1840s Socialists proposed an analysis based on social classes and concluded that public borrowing was unable to structurally modify the social antagonism of the nineteenth century society.