Debt Sustainability, Public Investment, and Natural Resources in Developing Countries: the DIGNAR Model

Melina, Giovanni; Yang, Susan S.; Zanna, Luis-Felipe

doi:10.5089/9781475515459.001

Cited by 42 publications

(56 citation statements)

References 22 publications

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“…Melina et al . () have examined the relationship between debt sustainability and public investment in case of developing countries. Other studies, such as Dogan and Bilgili (), and Ramzan and Ahmad () have empirically examined the linkage between external debt and economic growth.…”

Section: Review Of the Literaturementioning

confidence: 99%

Is Public Debt a Burden for India?

Bal

Rath

2016

J of App Econs and Policy

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In this paper, we investigated whether the government debt caused a burden for India over the period 1970–2013. We achieved this goal using Bohn's (1998) hypothesis in a structural VAR framework. This study did not find evidence to support Bohn's hypothesis in the context of India because no statistically significant relationship between public debt and gross primary deficit was found. Second, this study observed a positive response of interest payments due to the shock of public debt, which is not surprising. Third, a positive shock of public debt was statistically significant and negatively affected developmental expenditure. Similarly, interest payments negatively affected the gross primary deficit. We concluded that public debt in India was not a burden for the country.

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Section: Review Of the Literaturementioning

confidence: 99%

Is Public Debt a Burden for India?

Bal

Rath

2016

J of App Econs and Policy

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“…3 Additional features Following Melina et al (2016) we enrich the core model by adding model features particularly relevant for LIDC. Three of these -distortionary taxes, credit-constrained consumers and investment adjustment costs -are now very common in DSGE models and we refer the reader to Melina et al (2016) or similar papers for details. The remaining features are less standard, hence we report them in turn.…”

Section: Identities and Market Clearing Conditionsmentioning

confidence: 99%

“…• Moderate frontloading (MF). With moderate frontloading, investment is delinked 8 See the Appendix and Melina et al (2016) for full details of the fiscal rules. In addition to these, to guarantee that the resource fund is not an explosive process, we assume that in the very long run, a small autoregressive coefficient…”

Section: Four Fiscal Regimesmentioning

confidence: 99%

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Non-Renewable Resources, Fiscal Rules, and Human Capital

Levine¹,

Melina²,

Onder³

2016

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This paper develops a multi-sector, small open economy Dynamic Stochastic General Equilibrium model, which includes the accumulation of human capital, built via public expenditures in education and health. Four possible fiscal rules are examined for total public investment in infrastructure, education, and health in the context of a sustainable resource fund: the spend-as-you-go, bird-in-hand spending; moderate front-loading, and permanent income hypothesis approaches. There are two dimensions to this exercise: the scaling effect, which describes the level of total investment, and the composition effect, which defines the structure of investment between infrastructure, education, and health. The model is applied to Kenya. For impacts on the nonresource economy, efficiency of spending, and sustainability of fiscal outcomes, the analysis finds that, although investment frontloading would bring high growth in the short term, the permanent income hypothesis approach is overall more desirable when fiscal sustainability concerns are taken into consideration. Finally, a balanced composition is the preferred structure of investment, given the permanent income hypothesis allocation of total investment over time.

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“…Melina et al . () study the effects of investment scaling‐up that is jointly financed with debt and resource revenues.…”

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confidence: 99%

Investing Volatile Resource Revenues in Capital‐Scarce Economies

Richmond

Yackovlev

Yang

2015

Pacific Economic Review

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Natural resource revenues are an important financing source for public investment in many developing economies. Investing volatile resource revenues, however, may subject an economy to macroeconomic instability. This paper studies fiscal approaches to investing resource revenues, using Angola as an example. With spend-as-you-go, resource revenues are spent as received, resulting in little external saving; public investment can be interrupted, driving up the capital depreciation rate and undermining stability. Gradual scaling-up, instead, allows countries to build up external saving to shield investment from revenue volatility. The framework adopted here can be used as a planning tool to define a medium-term fiscal strategy.

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Debt Sustainability, Public Investment, and Natural Resources in Developing Countries: the DIGNAR Model

Cited by 42 publications

References 22 publications

Is Public Debt a Burden for India?

Is Public Debt a Burden for India?

Non-Renewable Resources, Fiscal Rules, and Human Capital

Investing Volatile Resource Revenues in Capital‐Scarce Economies

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