On the dynamics of sovereign debt in China: Sustainability and structural change

Cuestas, Juan Carlos; Regis, Paulo José

doi:10.1016/j.econmod.2017.08.003

Cited by 23 publications

(15 citation statements)

References 13 publications

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“…Fiscal sustainability in Asia is also assessed using country-specific time series, for instance Japan (Doi et al, 2011;Sakuragawa and Hosono, 2011), China (Cuestas and Regis, 2018), India (Pradhan, 2014) and Vietnam (Hoai et al, 2015). For the Japanese case, all the studies conclude that fiscal policy is unsustainable.…”

Section: Empirical Results For Asian Countriesmentioning

confidence: 99%

Fiscal sustainability in developing Asia – new evidence from panel correlated common effect model

Bui

2019

JABES

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Purpose The purpose of this paper is to investigate the problem of fiscal sustainability for a panel of developing Asian economies. Design/methodology/approach In this study, cross-section dependence and heterogeneity are controlled while estimating the fiscal reaction function, which shows how governments react to the accumulation of public debt. The study employs the common correlated effects mean group estimator in Pesaran (2006) for a panel of 22 developing Asian economies for the period 1999‒2017. Findings It is found that the fiscal sustainability issue in the region is not so benign as in previous studies. Overall, fiscal policy is unsustainable, even for the nonlinear fiscal rule. Country-specific long-run coefficients are also examined in the study. Research limitations/implications The findings show that many developing economies in the region could not satisfy the intertemporal budget constraint, which raises concerns about debt sustainability in the area, especially for the post-crisis period. Originality/value This study investigates whether governments can maintain the sustainability of public finances in the long-run, if the ratios of public debt over GDP and primary deficit over GDP continue their recent problematic trends. Another novelty is controlling for heterogeneous effects among the countries in the region to give a more precise picture of debt sustainability. The empirical evidence also supports that insolvency risk can occur at low levels of public debt.

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Section: Empirical Results For Asian Countriesmentioning

confidence: 99%

Fiscal sustainability in developing Asia – new evidence from panel correlated common effect model

Bui

2019

JABES

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“…Subsequently, the Chinese government has adopted the expansion of its fiscal policies. Cuestas and Regis (2018) have tried to analyze time series properties of public debt of China. The findings of the study revealed that Chinese debt accumulation is non-stationary.…”

Section: Literature Reviewmentioning

confidence: 99%

Assessment of Public and External Debt Sustainability Using Debt Dynamics Equation Approach: A Comparative Study of Pakistan and India

et al. 2019

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The study examines the sustainability of public and external debt burden of Pakistan and India for the period 1971–2017. The debt dynamics equation for public debt uses two components for the analysis of public debt sustainability, namely, interest rate–growth rate differential and differential of primary budget balance-to-GDP and change of reserve money-to-GDP ratio. The equation for external debt dynamics also uses two components for the assessment of external debt sustainability, namely, current account balance-to-exports ratio and differential of exports growth and interest rate. The significance of the approach used in the current study lies in the fact that in case of evaluation of countries’ debt sustainability, it is quite necessary to monitor debt trends along with emerging domestic and external vulnerabilities and systemic risks that threaten debt sustainability. This phenomenon has been captured through debt dynamics approach, which is used in the current study. The results are based on the estimation of two equations, namely, debt dynamics equation for overall public debt sustainability and debt dynamics equation for external debt sustainability. The results of the study indicate that primary budget deficit and current account deficit have played a significant role in the accumulation of public debt and external debt, respectively in Pakistan and India. The study concludes that public debt and external debt of Pakistan and India are sustainable but in a weak form.

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“…The previous studies examine the level of debt sustainability and the factors that determine it, such as debt dynamic in Pakistan (Chandia, & Javid, 2013), fiscal limit and external debt risk (Bi, Shen & Yang, 2014), debt dynamic in China (Cuestas & Regis, 2017), debt sustainability and non-linear primary balance (Fournier & Fall, 2017), debt sustainability and fiscal reaction functions in India (Kaur, Mukherjee & Ekka, 2017), macroeconomic dynamic and external debt (Semmler & Tahri, 2017), long-run debt and structural primary balance (Beqiraj, Fedeli & Forte, 2018), monetary policy and debt equilibrium (Cavalcanti, et al, 2018), external debt and economic growth (Edo, Osadolor & Dading, 2019). Conceptually, Semmler & Tahri (2017) suggest that debt dynamic analysis to assess external debt sustainability should be done using a non-linear approach and dynamic macroeconomic models.…”

Section: Literature Reviewmentioning

confidence: 99%

“…Another condition will occur when the increased risk of external debt is triggered by exchange rate volatility and the fiscal limit decreases over time (Bi, Shen & Yang, 2014). Macroeconomic instability and an unreliable fiscal policy can also encourage debt accumulation to become unsustainable (Cuestas & Regis, 2017). The higher debt accumulation and the indication of a decrease in the interest rate will be responded significantly by the primary balance to GDP ratio under the debt limit approach (Fournier & Fall, 2017).…”

Section: Literature Reviewmentioning

confidence: 99%

External Debt Sustainability in Selected ASEAN Countries: Do Macroeconomic Data and Institutions Matter?

Cahyadin¹

2021

j. ekon. terap.

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Studi ini akan mengukur indikator hutang luar negeri yang berkelanjutan di tujuh negara ASEAN selama 1996-2017 menggunakan indicator-based model. Uji kointegrasi panel diterapkan untuk mengestimasi dampak indikator makroekonomi dan kelembagaan terhadap hutang luar negeri yang berkelanjutan. Terdapat dua indikator hutang luar negeri yang berkelanjutan, yaitu: (a) EDS1 – yang menunjukkan tingkat pertumbuhan hutang luar negeri lebih rendah dibandingkan dengan pertumbuhan GDP, dan (b) EDS2 – yang menunjukkan pertumbuahn GDP lebih besar dibandingkan dengan tingkat bunga riil. Temuan-temuan studi menunjukkan bahwa indikator makroekonomi dan beberapa indikator kelembagaan berdampak signifikan terhadap EDS1 sedangkan makroekonomi indikator – seperti pertumbuhan GDP, inflasi dan FDI inflows – dan satu indikator kelembagaan – seperti efektivitas pemerintah – berdampak signifikan terhadap EDS2 dalam jangka pendek. Speed of adjustment berdampak signifikan terhadap hutang luar negeri yang berkelanjutan dalam jangka pendek. Lebih lanjut, kointegrasi panel menjelaskan bahwa dalam jangka panjang indikator makroekonomi (kecuali nilai tukar) dan kelembagaan berdampak signifikan terhadap hutang luar negeri yang berkelanjutan. Hasil studi berkontribusi terhadap kebijakan pemerintah seperti kebijakan pengelolaan hutang luar negeri, pro-pertumbuhan, pro-investasi, stabilitas harga dan peningkatan kualitas kelembagaan baik pada tingkat sebuah negara dan tingkat ASEAN.

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On the dynamics of sovereign debt in China: Sustainability and structural change

Cited by 23 publications

References 13 publications

Fiscal sustainability in developing Asia – new evidence from panel correlated common effect model

Fiscal sustainability in developing Asia – new evidence from panel correlated common effect model

Assessment of Public and External Debt Sustainability Using Debt Dynamics Equation Approach: A Comparative Study of Pakistan and India

External Debt Sustainability in Selected ASEAN Countries: Do Macroeconomic Data and Institutions Matter?

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