The Political Economy of Unsustainable Fiscal Deficits

Pastén, Cesar; Cover, James Peery

doi:10.4067/s0717-68212010000200002

Cited by 9 publications

(6 citation statements)

References 35 publications

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“…Fan et al (2018) also found that conflict results in an increase of military spending, while health and education spending declines. Using an intertemporal model, Pasten and Cover (2010) highlighted that political instability results in fiscal deficits, and this happens because political instability gives the government an incentive to implement a myopic fiscal policy in order to increase its chances of remaining in office. Gupta et al (2004) found that internal unrest, including terrorism and armed conflict, can affect countries' fiscal accounts by disrupting economic activities, eroding the tax base, lowering the efficiency of tax administration and resulting in higher fiscal deficits.…”

Section: Review Of the Literaturementioning

confidence: 99%

The impact of conflict and political instability on banking crises in developing countries

et al. 2021

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HAL is a multi-disciplinary open access archive for the deposit and dissemination of scientific research documents, whether they are published or not. The documents may come from teaching and research institutions in France or abroad, or from public or private research centers. L'archive ouverte pluridisciplinaire HAL, est destinée au dépôt et à la diffusion de documents scientifiques de niveau recherche, publiés ou non, émanant des établissements d'enseignement et de recherche français ou étrangers, des laboratoires publics ou privés.

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Section: Review Of the Literaturementioning

confidence: 99%

The impact of conflict and political instability on banking crises in developing countries

et al. 2021

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“…Weak governance or political instability could amplify fiscal instability and negatively impacts fiscal outcomes [22].…”

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confidence: 99%

Assessing Swaziland’s Fiscal Sustainability and Policy Options

Mafusire

2015

Economics Research International

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In 2011, Swaziland's fiscal policy was extensively scrutinized following its worst fiscal crisis in decades. The impacts of fiscal adjustment on Swaziland's growth, inflation, and sectoral allocations of resources were some of the issues analyzed. The fall in the Southern African Customs Union revenue receipts to levels below the trend line, for two consecutive years, and the fiscal challenges that followed were the main motivation behind this interest. This paper attempts to establish whether fiscal sustainability was threatened, and if so what were the policy options? Based on the results from econometric estimations, using a sample for the 1986 to 2012 period, I show that the country's fiscal sustainability was not threatened. However, calculations of the tax gap and the primary gap covering the period 2000 to 2016 reveal that fiscal sustainability was threatened. Subject to the major drivers of government expenditure and revenue handles, it is concluded that, in the short run, the two needed to be realigned while also allocating more resources to support growth.

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“…They found that a higher interest rate enhanced fiscal deficit in terms of high debt servicing costs, while higher growth led to a lower deficit in terms of high revenue. Pasten and Cover (2010) explained political factors' contribution to public sector deficit in Chile by using time series data from 1833 to 1999. They found that the government's increasing tendency towards tilting taxes to the future and fiscal condition was weak in response to political instability.…”

Section: Empirical Literaturementioning

confidence: 99%

Decentralisation and Quality of Fiscal Management: Empirical Evidence from Pakistan

Razzaq

Nazir

Shaheen

2022

JoDPRP

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Effective use of public resources is crucial for developing countries facing persistent deficits. Fiscal decentralisation is believed to enhance government efficiency over resource use. Therefore, the paper intends to examine the association between Pakistan’s Fiscal Decentralisation (FD) and Fiscal Management from 1988 to 2020. The authors develop a Composite Decentralisation Index (CDI) that captures the effect of both Expenditure Decentralisation (ED) and Revenue Decentralisation (RD) processes. After confirmation of stationarity through augmented Dickey-Fuller (ADF) and Philip-Peran (PP) unit roots tests, the study employs the Johansen cointegration method to draw longrun estimates. The study’s findings reveal that composite decentralisation reduces public deficit significantly - lower corruption, weaker underground economy, and smaller government size help reduce the fiscal deficit. The Error Correction Term (ECM) is also negative and significant at 1%, which confirms the speed of convergence towards longrun equilibrium in case of any shock or dis equilibrium in the short run. These study findings may help policymakers and legislatures draft effective long-term fiscal management policies.

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The Political Economy of Unsustainable Fiscal Deficits

Cited by 9 publications

References 35 publications

The impact of conflict and political instability on banking crises in developing countries

The impact of conflict and political instability on banking crises in developing countries

Assessing Swaziland’s Fiscal Sustainability and Policy Options

Decentralisation and Quality of Fiscal Management: Empirical Evidence from Pakistan

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