Fiscal sustainability in the presence of structural breaks: Does overconfidence on resource exports hurt government’s ability to finance debt? Evidence from Nigeria

Aliyu, Alhaji Jibrilla

doi:10.1080/23322039.2016.1170317

Cited by 6 publications

(2 citation statements)

References 70 publications

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“…where Sttrue˜=Yt−ψxtrue˜−Ztδtrue˜t, t=2,…,T,δttrue˜ indicates a vector of coefficients in the regression of Δ Y t on Δ Z t , and ψxtrue˜=Y1−Z1δttrue˜ and Y 1 and Z 1 are the first observations of Y t and Z t , respectively. For the two structural breaks in level and trend, Z t = [1, t , D 1 t , D 2 t , DT 1 t , DT 2 t ]’ is a typical case with an intercept, linear time trend and two structural breaks in level and trend; where DT kt = t if t ≥ TB j + 1, j = 1, 2, and 0 otherwise (Jibrilla, 2016; Narayan, 2005).…”

Section: Methodology and Data Sourcementioning

confidence: 99%

Evaluating the Long-run Sustainability of India’s Fiscal Management with Structural Change

Shankar

Trivedi

2022

Margin: The Journal of Applied Economic Research

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Amidst output moderation, rising deficits and increasing debt, India’s macro-fiscal arithmetic witnesses severe strain and often invites downward rating pressures by sovereign rating agencies. The article aims to examine India’s fiscal sustainability during the past four decades employing time series integration and cointegration techniques, with structural breaks in a sequential schematic framework under intertemporal government budget constraints. It examines stationarity with exogenous and endogenous structure breakpoint(s) at the level and slope for government revenue and expenditure data-generating process following Narayan and Popp (2010), Lee and Strazicich (2003), Zivot and Andrews (1992) and Perron (1989). Furthermore, the cointegration vectors of these fiscal variables in Fully Modified Ordinary Least Squares (FMOLS), Dynamic Ordinary Least Squares (DOLS) and a generic cointegration framework following Gregory and Hansen (1996) with structural shifts confirm the sustainability of India’s fiscal management. However, a less-than-unity estimate of the DOLS cointegrating slope parameter with few exogenous breakpoints signifies a weak form of sustainability and hence emphasises a credible commitment to fiscal consolidation going forward for India. JEL Codes: C32, H50, E62, H62

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Section: Methodology and Data Sourcementioning

confidence: 99%

Evaluating the Long-run Sustainability of India’s Fiscal Management with Structural Change

Shankar

Trivedi

2022

Margin: The Journal of Applied Economic Research

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“…The Indian regime could be interpreted as "more flexible" during normal market conditions with the accent shifting to "management" when the market turns disorderly (Pattanaik and Sahoo, 2003). However, recently, the Indian currency has been quite volatile [1]. More importantly, it seems that the government is in mood to a frequent intervention in the exchange rate market [2].…”

Section: Jfep 74mentioning

confidence: 99%

Macroeconomic fundamentals and dynamics of the Indian rupee-dollar exchange rate

Sharma

Setia

2015

Journal of Financial Economic Policy

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Purpose – This paper aims to examine the relationship between Indian rupee-US dollar exchange rate and the macroeconomic fundamentals for the post-economic reform period. Design/methodology/approach – The authors have used an empirical model which includes a range of important macroeconomic variables based on the basic monetary theories of exchange rate determination. At the first stage of the analysis, they have tested structural break in the data. Subsequently, they have employed the fully modified ordinary least square, Wald’s coefficient restriction and impulse response functions (IRF) to estimate the monetary model in the long- and short-run horizons. Findings – Results of analyses indicate that the macroeconomic fundamentals determine exchange rate in a significant way, but their effect varies sizably across the periods. The IRF illustrate the importance of interest rate in controlling exchange rate volatility. Practical implications – The analysis of the behavior of inter-relationship among macroeconomic variables will help policymakers in a deep-rooted understanding of this complex and time-varying relationship. Originality/value – Most of the existing studies have tested the impact of a single or a few macroeconomic fundamentals on exchange rate. But in the present study, we have tested the impact of a range of important variables, i.e. money supply, real income or output, price level and trade balance. Further, considering the importance of structural breaks in data, they authors have employed standard tests of structural break and incorporated the issue in the cointegration analysis.

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Primary surplus dynamics and fiscal sustainability in sub-saharan African countries

Woldu,

Kanó

2024

Econ Polit

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The study analyzes the Bohn (2007) sustainability test, allowing for a quadratic fiscal reaction function to public debt levels over the period 2000–2019 for 40 countries in sub-Saharan Africa (SSA), employing a dynamic panel threshold model and other alternative estimation methods to investigate the reaction of fiscal policy and Dumitrescu–Hurlin Granger causality to identify potential causality linkages between government spending and revenue. Fiscal policy is found to follow a debt-stabilizing rule at a low to moderate level; however, fiscal responsiveness weakens when public debt to GDP ratio exceeds 55%, indicating that the use of primary surplus as an instrument to contain debt is insufficient when debt goes above the threshold, therefore jeopardizing the efficacy of fiscal retrenchments as an instrument to achieve sustainable debt reduction in SSA countries. The Dumitrescu–Hurlin result suggests a unidirectional flow from expenditure to revenue in SSA countries, implying that an increase in government spending has a substantial impact on widening fiscal imbalances and escalating debt levels within the SSA countries. Hence, governments in SSA countries should guarantee that public debt management strategies are in line with the public debt threshold to enhance fiscal sustainability. Considering these findings, this study highlights the importance of prudent fiscal management incorporating measures such as structural reforms, targeted investments, and prudent debt management strategies in SSA countries.

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Fiscal sustainability in the presence of structural breaks: Does overconfidence on resource exports hurt government’s ability to finance debt? Evidence from Nigeria

Cited by 6 publications

References 70 publications

Evaluating the Long-run Sustainability of India’s Fiscal Management with Structural Change

Evaluating the Long-run Sustainability of India’s Fiscal Management with Structural Change

Macroeconomic fundamentals and dynamics of the Indian rupee-dollar exchange rate

Primary surplus dynamics and fiscal sustainability in sub-saharan African countries

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