Sustainability of public debt under physical and human capital accumulation in an overlapping generations model

Motoyama, Takumi

doi:10.1007/s00712-018-0630-4

Cited by 2 publications

(1 citation statement)

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“…Many theoretical papers have claimed that debt sustainability is not only explained by the threshold in the level of debt-to-GDP ratio, but the ability of a country to fulfill is debt obligation [28,37]. The group of theoretical papers claims would argue that grave concern is more when the foreign currency is preferred to a domestic currency which often leads to financial crises.…”

Section: Introductionmentioning

confidence: 99%

Debt sustainability and the fiscal reaction function: evidence from MIST countries

Ogbeifun

Shobande

2020

Futur Bus J

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The use of public debt is not new in financing developmental objectives. A significant challenge arose when it became obvious that the indebted countries could not fulfill its existing financial obligation to the rest of the world where debt is sourced. For a panel of 4 heterogeneous countries from 1990 to 2017, we study governments’ reactions to debt accumulation and the corrective measures taken when its borrowings result in a rise in debt–GDP ratio. The study evidence is based on the fixed effect and the feasible generalized least squares estimators. We find evidence that primary balance improves by about 0.005–0.013 for every 1 percentage point increase in central government debt after controlling for other relevant factors. The results further suggest that the accrued interest payments on debt reflect the effective debt management policies across the countries, whereas the activities on the current account balance impose a possible threat to the primary balance. The study calls for policies that increase fiscal bases through the reduction in fiscal expenditure and the reinforcement of tax base revenue across the MIST countries.

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Section: Introductionmentioning

confidence: 99%