The Role of Economics, Politics and Institutions on Budget Deficit in ASEAN Countries

Abstract

The paper examines the role of some determinants of economics, politics and institutions on the budget deficit volatility in some countries of the Association of South East Asian Nations (ASEAN) such as Indonesia, Thailand and Vietnam. The paper uses the fixed effects model (FEM) and the random effects model (REM) to investigate panel data of these countries in the period of 1990-2018. Moreover, the study also explores ordinary least square (OLS) to analyze time-series data for each country in the same period to make comparison among them. The economic data is collected from international financial statistics and world development indicators. The data on political variables are collected from International Country Risk Data Guide (ICRG). The empirical results both confirm that corruption and political stability are important indicators of budget deficit. Besides, the paper suggests authorities should pay more attention on improving the institutional setup of the economy in order to avoid high and unstable deficit. The findings offer new insight on the budget deficit in essence and suggest that the most important thing need to be done ahead is to strongly implement anti-corruption actions. By doing so, the status of budget deficit would be remarkably improved immediately.

Is the Fiscal Deficit of ASEAN Alarming? Evidence from Fiscal Deficit Consequences and Contribution towards Sustainable Economic Growth

“…We investigate the relationship in a four-factor CAD function. The empirical model for panel twin deficit estimation is presented as follows: (2) i = 1, 2, . .…”

“…Recently, economists and researchers have reported their findings on ASEAN's economy, provided suggestions, and created policy guidelines [1][2][3][4][5][6]. The fiscal componentsi.e., government expenditures, government revenues, and deficit financing-play an essential role in the fiscal policy of ASEAN.…”

External Debt and Economic Growth: A Dynamic Panel Study of Granger Causality in Developing Countries

“…Theoretical, economic growth and development are the main goals of nations to reduce poverty and improve the quality of life of citizens (Ngo & Nguyen, 2020b). A country has to accumulate many internal and external resources to achieve those macro goals.…”

Determinants of local government deficit: evidence from Spanish municipalities

“… Maltritz and Wüste (2015) find higher deficits during election years, while Lis and Nickel (2010) find a negative relationship only for OECD and EU countries. Ngo and Nguyen (2020) find that fiscal deficits are higher in countries with frequent changes of government. Artés and Jurado (2018) find that single-party majorities run budgets with significantly larger primary surpluses than in the presence of coalitions, and that lower deficits are mainly due to the ability of majority governments to raise more revenue.…”