Stock Of Public Debt Research Articles

30 Years of Macroeconomic Effects in Zambia-VECM, ARDL & IRF Approaches

Purpose: This study examines the impact of selected time series macroeconomic variables on Zambia’s economic progress for thirty (30) years (1992 to 2022) Methodology: The study employs the autoregressive distributed lag (ARDL), vector error correction models (VECMs) and the impulse response functions (IRFs) approaches. Findings: The VECM regression estimates indicate that in the long-run, ceteris paribus, a 1% increase in inflation and population growth rates cause a significant positive impact on economic progress of 0.36% and 0.68 % respectively whereas the total public debt stock causes decrease in economic growth of 0.45%. The ARDL long-run regression estimates indicate that ceteris paribus, a 1% increase in inflation and public debt significantly reduces real GDP by 0.2% and 0.03%, respectively, but a 1% increase in population growth rate increases real GDP by 23.11%. The IRF estimates show that a negative shock to the real GDP causes a mildly negative effect on the inflation rate, causes a significant positive increase in the population growth rate, which dissipates after 9.5 years and causes a significant positive increase in public debt, which dissipates after 10 years. Unique Contribution to Theory, Policy and Practice: Therefore, the study recommends that the Zambian government should prioritize repayment of the outstanding public debt by bringing down the debt-to-GDP ratio to sustainable levels, adhering to prudent public financial management and continuing to grow the domestic revenue base. The policies to promote population growth should be pursued cautiously because rapid population growth rates could erode the future economic growth prospects of Zambia.

Debt Dynamics and Fiscal Sustainability in Nigeria

This study investigated the stabilizing effect of sustainable fiscal policy on public debt dynamics as well as the impact of debt dynamics on fiscal sustainability in Nigeria for the period (1980 – 2022). Using secondary data obtained from the Central Bank of Nigeria Statistical Bulletin (2023), World Development Indicators (WDI, 2023), Debt Management Office (DMO – various years), Penn World Table (PWT – multiple years), and World Economic Outlook (WEO – various years), the study used suitable cointegration and other econometrics techniques viz: Dynamic Ordinary Least Squares (DOLS), Markov-switching model and polynomial models. It was found, amongst other things, that (i) Automatic debt dynamics can influence debt dynamics, (ii) The robustness or otherwise of primary fiscal balance determines the direction of changes in the total debt stock, and (iii) positive debt dynamics vis-à-vis dwindling revenue flows and growing government expenditure, would result in fiscal unsustainability. It was recommended, amongst other things, that since automatic debt dynamics is one of the significant influences on debt dynamics and is being fuelled by the direction of adjustments in inflation and interest rate, there is a need for concerted efforts at stabilising inflation and interest rate to stabilise public debt dynamics. Also, the study revealed that the size of the primary balance influences the changes in public debt stock. It was recommended that the authorities should endeavour to maintain a robust primary fiscal surplus to stabilise growth in public debt, if not minimise it and grow the economy.

International reserves, currency depreciation and public debt: New evidence of buffer effects in Africa

The paper adds to the literature on the issue of public debt in African economies, by investigating the role foreign exchange reserves play in improving the level of indebtedness and as buffer of the negative effect of exchange rate depreciation while considering the exchange rate policy. Our results show a direct link between the level of foreign currency reserves and that of external debt in Africa. Particularly, we demonstrate that higher foreign currency reserves tend to decrease the public debt stock to GDP. This effect is even more significant when countries go through high exchange rate depreciation episodes (10% or higher). This impact, however, is not homogenous among country groups, as only countries with a floating exchange regime tend to benefit from this buffer effect compared to anchored regimes. In a time where most African economies face severe exchange rate depreciation episodes following the U.S. monetary tightening policy, central bankers and policy makers need to consider a plethora of policy issues including interventions in the FX market to mitigate depreciations and maintain a sustainable public debt stock.

Macroeconomic policy at the end of the age of abundance

Progressive policy proposals influenced by post-Keynesian economics emphasise the use of fiscal policy and income redistribution to maintain aggregate demand at levels which achieve full employment. Given persistent evidence of weak demand, excess capacity and unemployment in rich economies since around 1980, expansion of demand would have been appropriate over much of this period. Tighter supply constraints – both short-run constraints due to disruption caused by climate change and geopolitical tensions, and longer-run constraints due to absolute carbon budgets – impose additional challenges in designing policy. In order to increase investment sufficiently to achieve net zero goals, constraints on consumption may be required. Such constraints would weaken the multiplier mechanisms emphasised by post-Keynesian analysis, implying lower growth and higher public debt stocks. Traditional progressive policy proposals will need updating to reflect these constraints. New institutional arrangements will be required to implement updated policy packages.

Constraints to Debt Sustainability in Egypt: Structural Response and Fiscal Fatigue

Public debt sustainability is a multidimensional process. Egypt maintains a sustainable general path in conducting its fiscal policy. However, the rising path of accumulated debt to GDP ratio implies critical restrictions on fiscal stance and fiscal space. The research tests the structural endogenous long-term response of the Egyptian government towards the accumulated stock of public debt. in addition to examining the fiscal fatigue hypothesis when debt jumps to high extreme levels. The research adopts the widely accepted approach proposed by Bohn to estimates a fiscal reaction function. the Autoregressive Distributed Lag ARDL technique is applied for the time period from 1981 to 2021. Empirical wise, two critical specified regressions are estimated. The first measures the response of the structural long-term primary balance as a percentage of GDP to the stock of public debt to GDP ratio. This provides a general judgement whether the fiscal policy is expansionary, neutral or restrictive. Second, a non-linear estimation is implemented to test for the possibility of fiscal fatigue. the existence of an inverse U-shaped response can be used to endogenously determine a debt threshold above which the government is unable to keep its fiscal position within the sustainability condition. Findings of the first regression indicate that the government is unable to adjust its structural primary balance positively with the increase in the stock of previous debt to GDP ratio during the examined time period. Thus, fiscal policy of the Egyptian government tends to be restrictive during the examined time period. Furthermore, the fiscal fatigue hypothesis applies as the magnitude of government fiscal response is conditioned by the level of accumulated public debt. At low levels of debt to GDP ratio the government adjustment of its primary balance is not structurally planned. Government show weak response. When the level of accumulated debt to GDP ratio goes high, government undertakes serious measures and effectively adjust the primary balance to GDP with the increased public debt. however, when the level of the previous debt to GDP ratio jump to extreme high levels, government is unable to maintain the positive response indicating the possibility of fiscal fatigue and fiscal default. The research emphasizes the necessity of a planned serious fiscal actions to correct the long-term response. Cyclical automatic response of the government should be revised. Moreover, Non-interest expenditures should be structurally adjusted to maintain the required level of government reasonable primary balance.

Rising Debt Burden and Its Impact on the Implementation of Three (3) Sustainable Development Goals in the Commonwealth African Member Countries (2016-2022)

This paper examined rising debt burden and its implication for implementing three (3) selected Sustainable Development Goals (SDGs) in the Commonwealth African member states. The methodology was mainly “Desk Research’’ with data collected from the World Bank Data Online Portal, covering the period 2016-2020. The approach analysis was to compare the estimated debt servicing obligations against estimated costs on investments on the selected SDGs and discuss its implications for successfully meeting these goals by 2030, under the assumption of rising public debt burden and low growth. The findings were as follows: - (i). Public debt stocks in all of these Commonwealth African states were already high, even, before COVID-19 which struck late in 2019, experiencing a very high-debt-to GDP ratios; that was far above 50 percent- Mozambique (116 %), Mauritius (105%), Zambia (85%) and Zimbabwe (61%) were spotted to have very high debt- to-GDP ratio amongst these member states. (ii). economic growth and domestic revenue collection in all of these Commonwealth African member states deteriorated in the year following the outbreak of the COVID-19. This widened the deficit and hence, the cycle of increased borrowing and rising debt burden continued unabated in these member states. (iii). none of these (20) Commonwealth African member states had invested enough in the SDGs to have come closer to meeting the internationally acceptable minimum annual expenditure threshold of 15-20% of GDP needed to achieve any of these three (3) selected SDGs. Governments therefore are encouraged to improve key aspects of macroeconomic fundamentals in order to improve domestic productivity, innovations in private sector involvement and stimulate overall confidence in the domestic economy in order to achieve the SDG agenda 2030.

Does Public Debt and Investments Create Crowding-out Effect in Turkey? Evidence from ARDL Approach

The impact of public sector debt composition on the private sector is a matter of curiosity. This article explores the crowding-out effect of public debt and public investment on private investment in Turkey from 1975 to 2020, utilising the ARDL method. The findings reveal that public investment, public domestic debt stock, and external debt service create a crowding-out effect; on the other hand, the public external debt stock has a crowding-in effect on private sector investments. In this study, the crowding-out effect of public debt, which has not been directly related to private sector investments in the literature, is tried to be examined.

Asymmetric modeling of the public debt–economic growth nexus in Ghana

PurposeThe impact of debt on economic growth has attracted immense economic research necessitated by ballooning public debt stock among countries and most of the literature presume a symmetric relationship between debt and economic growth. However, this study contemplates an asymmetric relationship and thus relies on annual series from 1970 to 2019 to examine the asymmetric effects of public debt on economic growth in Ghana.Design/methodology/approachThe nonlinear autoregressive distributed lag (NARDL) bounds approach was employed. Gross domestic product (GDP) growth is the dependent variable while public debt and other control variables each decomposed into their positive and negative shocks constitute the independent variables.FindingsThe results reveal that a positive shock to public debt insignificantly impacts the growth of the economy in the short and long runs. Also, a negative shock to public debt exerts significant short-run negative and insignificant long-run positive effects on the growth of the economy. The divergence in the short- and long-run effects on growth of a negative shock to public debt and the general insignificant effects of a positive shock to the same is a glitch that is attributed to overcapitalized loans and poor utilization of credit facilities.Practical implicationsThe study recommends “inter alia” that the government of Ghana strengthens the short to medium-term debt management strategies achievable through the enforcement of the Public Financial Management Act (PFMA) Act-921 and the Public Procurement Act (PPA) Act-914 to deal with any adverse effects of debt on the growth of the economy.Originality/valueThe novelty of the current study lies not only in the fact that it captures recent public debt dynamics at a time Ghana faces extreme fiscal constraints and escalating cost of debt servicing but it also does so in an asymmetric environment which is unprecedented an assumption in the analysis of Ghana's public debt–economic growth nexus.

Macroeconomic Fundamentals, Economic Growth and Poverty in Ecowas Franc Zone: Does Single Currency Matter?

The paper investigated the role of single currency macroeconomic variables (exchange rate, central government tax and grant revenue, central government fiscal balance, inflation rate, external public debt stock, and gross capital formation) on output, poverty, international trade volume and unemployment in ECOWAS Franc zone. The question was about the state of symmetry of these factors and its effects on economic growth. The core objective was to examine the pattern of relationship these variables have with economic growth. The paper covered the period 1980 to 2019 and countries in the zone. Romer endogenous growth model, optimum currency theory (OCA) and PMG-ARDL methodology were used. From the group coefficients, fiscal balance (0.03) and inflation (0.15); exchange rate (-0.29) and inflation (-4.50); GCF (0.01); and tax/grant revenue (4.10e-10) were significant at the 5% level in the output, poverty, international trade volume and unemployment models, respectively. While the poverty model indicated two OCA groups in the region, the output, international trade and unemployment models showed four OCA groups each. The long run error correction terms in the output, poverty, international trade volume and unemployment models were 0.61, 0.11, 0.10, and 0.093 respectively and significant at the 5% level, meaning divergence from long run equilibrium. A minimum of two OCAs and a maximum of four OCAs were found. The paper therefore concluded that the zone does not fulfill OCA requirements and recommended that appropriate policy mix should be developed to align these single currency macroeconomic factors towards achieving sustainable economic growth in the zone.

CHANGE AND DEVELOPMENT IN THE PUBLIC DEBT STOCK STRUCTURE IN TURKEY: COVID-19 PANDEMIC PERIOD

Bu çalışmanın amacı, küresel boyutta ekonomik krize yol açan Covid-19 salgın döneminde Türkiye’nin kamu borç stok yapısını incelemektir. Çalışma, salgın döneminde kamu borç stok yapısındaki değişimi görebilmek ve salgın sonrası sürecin gelişimini değerlendirebilmek amacıyla 2018-2022 dönemini kapsamaktadır. Türkiye’de 2020 yılı Mart ayından itibaren kısa zamanda yayılan salgın aynı zamanda bir ekonomik krize dönüşmüştür. Bu kapsamda salgının hem toplumsal hem ekonomik etkilerini azaltmaya yönelik maliye politikası araçlarının etkin bir şekilde uygulanmasıyla, artan merkezi yönetim bütçe açığının finansmanı kamunun borçlanma ihtiyacını önemli ölçüde artırmıştır. Salgın ile birlikte bozulan mali disiplinin yanı sıra bozulan makroekonomik göstergeler, artan dolarizasyon sadece kamu borç stok büyüklüğünü artırmakla kalmamış aynı zamanda borç stok yapısında da ciddi bozulmalara yol açmıştır. Özellikle kamu borç stoku içinde TL cinsi değişken faizli ve döviz cinsi borçlanmanın payının artmakta olması Türk Lirasına (TL) olan güveni azaltmakta ve TL değer kaybetmektedir. Sonuçta, kamu borç stokunun faiz ve kur şoklarına karşı kırılganlığının ve maliyetinin artması etkin bir borç yönetim uygulanmasını engellemektedir.

THE RELATIONSHIP BETWEEN FISCAL PERFORMANCE, GOVERNANCE QUALITY, AND ECONOMIC GROWTH: EVIDENCE FROM SUB-SAHARAN COUNTRIES

Many studies in recent years have focused on the relationship between the government's ability to manage and economic performance indicators. There is ample empirical evidence that factors such as the presence of corruption, violence, and terrorism in a country, and the quality of institutions controlling the market affect the success of economic policies. Similarly, the issue of how the public debt stock affects economic growth has been the central question of many studies. Especially in recent years, the violence, terrorism, and separatist wars that have emerged in Africa have led to the intensification of studies on the continent. In addition, there are many studies supporting that the climate of insecurity created by the violence and terrorist incidents in the continent is the cause of the failure of governance in Africa. Governance failure is also an indicator of ineffectiveness in the formulation and implementation of public policies. This study focuses on investigating the effects of fiscal performance and governance quality on economic growth in Sub-Saharan African countries. In the study, data from 25 sub-Saharan African countries for the period 2002-2019 were used. According to the results of the analysis, as public expenditures increase in the mentioned countries, economic growth decreases. In terms of the focus of the study, it has been found that as fiscal performance and governance quality increase, economic growth also increases. As a fiscal performance indicator, the arithmetic average of the public's domestic and external debt stock was calculated and included in the analysis. An increase in the fiscal performance value means an increase in the country's debt stock.

Macroeconomic implications of escalating stock of public debt: Evidence from sub‐Saharan African economies

AbstractThe study investigated the effect of public debts on macroeconomic indicators, such as inflation and the exchange rate, using a panel of 25 sub‐Saharan African (SSA) economies. The study contributed to extant studies by looking at the separate effect of domestic and foreign debts on inflation and exchange rate. We adopted a battery of econometric tools such as the Driscoll–Kraay standard errors and the dynamic panel threshold model. The results show that foreign debts worsen the inflation rate and expose the economy to unanticipated movements in the exchange rate, whereas domestic debts help to reduce the inflationary pressure. The study also found a nonlinear relationship between public debts and macroeconomic indicators of inflation and exchange rates. This implies the further accumulation of foreign debt will heighten the inflation rate and expose the region to unanticipated movements in the exchange rate. The study recommends that governments and policymakers in SSA should ensure that foreign debts are sufficiently hedged against currency and interest rate risks to reduce the exposure of SSA economies to exchange rate risks. The study also recommends that governments adhere strictly to the maximum debt limit of 60.59% (of gross domestic product), otherwise inflation and exchange rates may worsen.

Debt Revenue and the Sustainability of Public Debt

While public debt has risen in the last two decades, the return that it offers to investors has fallen, especially relative to the return on private investment. This creates a revenue for the government as the supplier of the special services offered by public bonds, which include storage of value, safety, liquidity, and reprieve from repression. The present value of this debt revenue is large relative to the stock of public debt, keeping it sustainable even as the present value of primary balances is zero or negative. It gives rise to different policy tradeoffs than the conventional analysis of primary balances and makes different recommendation on the effects of austerity, the optimal amount of debt, or the spillovers between monetary and fiscal policy.

Sub‐Saharan Africa's rising public debt stock: Is there a cause for concern?

AbstractThe study investigated public debt sustainability in sub‐Saharan Africa (SSA) by testing the reaction of the primary balance to positive and negative shocks in public debts in a panel of 45 SSA countries. The study adopts the innovative nonlinear fiscal reaction function and the dynamic panel threshold model to account for the potential asymmetric phenomenon in the public debt series. In line with extant studies, the study found that public debts in SSA are weakly sustainable and there is a highly procyclical fiscal policy bias in SSA countries, particularly in resource‐rich countries, indicating that governments' fiscal policy responses are expansionary during economic upturns and contractionary during recessions, which may aggravate recessions and worsen debt situations across SSA. For robustness, the study compares the results with emerging and developed economies. The results indicate that in advanced economies, public debt is sustainable and that fiscal policy response is countercyclical. The research and policy implications are discussed.

Sub-Saharan Africa's rising public debt stock: before another debt relief!

PurposeIn light of the recent calls for another round of debt relief for African countries, by African finance ministers and governments, the aim of the study is twofold. First, the study examined the effect of public debt on macroeconomic performance. Two, the study also examined whether previous debt relief has impacted positively on sub-Saharan African economies.Design/methodology/approachThe study adopts the two-step system GMM that accounts for potential endogeneity and feedback effect in dynamic panel models. As robustness, the study performs the two-stage least square (2SLS) estimation method.FindingsThe study reveals that previous debt relief programmes only had a marginal effect on economic growth in the region. The study found that corruption impacts negatively on the effectiveness of debt relief to achieve the desired economic outcomes. The study also found that sub-Saharan African economies seem to have shifted away from traditional concessional sources of financing towards market-based lenders dominated by China.Originality/valueThe study adds to the growing evidence in the public debt literature by looking at the separate impact of domestic and foreign debts on macroeconomic indicators of economic growth, inflation, unemployment and exchange rate. The study also controlled for previous debt relief in light of the call for another round of debt relief.Graphical

Mali Konsolidasyon Programlarının Özel Tüketim Harcamaları Üzerindeki Etkisi: PIIGS Ülkelerine Yönelik Panel Veri Analizi

Bütçe dengesinin çeşitli nedenlerle bozulması sonucunda dengenin tekrar kurulması amacıyla mali konsolidasyon programları uygulanmaktadır. Mali konsolidasyon, kamu açıklarını ve borç stokunu azaltmaya yönelik uygulanan daraltıcı maliye politikaları olarak tanımlanmaktadır. Çalışmada, mali konsolidasyon programlarının özel tüketim harcamaları üzerindeki etkisi 1995-2020 yılı verilerine dayalı olarak PIIGS (Portekiz, İtalya, İrlanda, Yunanistan, İspanya) ülkelerini içeren panel veri analizi ile ortaya koyulmuştur. Elde edilen bulgular ışığında mali konsolidasyon programlarının ülkeler arasında farklı etkiler oluşturduğu görülmüştür. İrlanda ve İtalya’da genişletici mali daralma hipotezini destekleyici bulgular elde edilmiştir. Yunanistan’da ise Keynesyen etkileri destekleyen sonuçlara ulaşılmıştır. Örneklem yıllarından olan 2019-2020 yıllarında yaşanmış olan ve çalışmaya dahil edilen Covid-19 salgını nedeniyle uygulanan hükümet programlarının ise Portekiz, İtalya ve İrlanda’da özel tüketim harcamalarını olumlu etkilediği görülmüştür. Bu durum mali konsolidasyon dönemlerinde genişletici mali daralma hipotezinin; genişleme dönemlerinde ise Geleneksel Keynesyen modelin geçerli olabileceğini göstermektedir.

AB ÜLKELERİNDE MALİ SÜRDÜRÜLEBİLİRLİK: PANEL REGRESYON ANALİZİ

Mali sürdürülebilirlik, tüm dünyada olduğu gibi AB ülkeleri için de özellikle borç krizi sonrası dönemde önemli konular arasındadır. Özellikle 2008 küresel finansal kriz ve 2019 Covid pandemisi, dünyada hemen hemen tüm ülkeleri etkilediği gibi AB ülkelerini de ciddi şekilde etkilemiştir. Bu kapsamda maliye politikası araçları etkin şekilde kullanılmaktadır. Ülkeler arka arkaya kurtarma paketleri açıklamış ve bu paketler kamu maliyesi üzerinde ciddi yükler meydana getirmiştir. Buradan hareketle çalışmada 27 AB ülkesinin 2000-2020 döneminde mali sürdürülebilirliğinin araştırılması amaçlanmaktadır. Çalışmada kullanılan verilerin yayınlanma tarihindeki sınırlılık zaman kısıtını oluşturmaktadır. Bu kapsamda panel regresyon analiz yöntemi kullanılmış ve yapılan tahminlerin değişen varyans ve otokorelasyon sorununa karşı dirençli olmasına dikkat edilmiştir. Analizler sonucunda, kamu gelirleri ve kamu harcamaları arasındaki ilişkiden hareketle AB ülkelerinde zayıf mali sürdürülebilirliğin olduğu, birincil bütçe dengesi ile kamu borç stokunun GSYH içindeki payı arasındaki ilişkiden hareketle AB ülkelerinde mali sürdürülebilirliğin olmadığı sonucuna ulaşılmıştır. Çalışma gerek kullanılan yöntem gerekse de örneklem ülke grubu açısından literatürde yer alan çalışmalardan farklılaşmaktadır.

A NOTE ON PUBLIC DEBT-PRIVATE INVESTMENT NEXUS IN EMERGING ECONOMIES

We examine the effect of public debt on private investment in selected emerging economies. Using a panel threshold regression model, we estimate a threshold value of about 3 percent, on average, below which public debt stimulates private investment. Our additional analysis involving selected developed economies suggests that the crowding out effect is less evident relative to the emerging economies as higher public debt stocks do not seem to significantly undermine their private investments. These results have implications for debt sustainability and maintaining a reasonable public debt–GDP ratio is crucial for sustainable investment growth.

Debt Burden and Sustainable Development: An Evaluation of the Nigeria Railway Modernization Project

This work investigated the sustainability or otherwise of the Nigeria public debt as it relates to the Nigeria railway modernization project. We set up two hypotheses: Ho1: That the current investment effort by the Nigeria government in the Nigeria railway modernization project has led Nigeria into huge external unsustainable public debt. Ho2: That Nigeria public debt stock is unsustainable. Two measures as found in the literature: debt servicing-to-export ratio and debt servicing to-GDP ratio were tested against data obtained from the CBN Statistical Bulletin to validate or invalidate our hypothesis. The analysis give an inconclusive result– Debt servicing-to-export ratio gave an overwhelmingly negative result, while the debt servicing-to-GDP was positive. We are therefore unable to confirm the sustainability or otherwise of Nigeria public debt as it relates to the railway modernization project. However by conjecture, these authors believe that the Nigeria public debt relative to the Nigeria modernization project is not likely to be sustainable. We recommend that government at all levels increase surveillance over borrowed fund for infrastructural development from being diverted to private use.

Public Expenditure, Stock of Public Debt and GDP growth – The case of Albania

The purpose of this paper is to study the impact of public expenditures - both current and capital expenditures on the growth of Albania's GDP. Also the impact that public debt has on the country's GDP. In the last 20 years, Albania has had a very dynamic development of both its debt and its current and capital expenditures. It is in the best interests of every country to know if these expenses are positively affecting the economic development of the country and if the public debt is utilized and used in the right way to give positive effects to the economy. The data were obtained for the period 2000-2020 for Albania and their source is the Ministry of Finance and Economy of Albania. In studies and articles carried out by different researchers, a significant negative relationship between the level of debt and economic growth has been seen. The main reason for this negative impact is because a very high portion of income will go to pay the interest on the debt.