Fiscal Policy and Sustainability of Public Debt: The Nigerian Experience

This paper examines the relationship between fiscal policy and public debt sustainability in Nigeria within a multivariate framework from 1970–2019. The autoregressive distributed lag (ARDL) bounds test is employed to determine the long run relationship among the variables. The results of the ARDL test reveal that there is a long run relationship between the variables used in this study. Specifically, the result shows that budget deficit has a positive and significant impact on public debt both in the short run and long, while interest rate, real gross domestic product and inflation rate were statistically insignificant irrespective of the period and thus had no impact on public debt. Thus, it was recommended that the budgeting procedure at the federal and state levels in Nigeria need to reassessed to make sure that allocative efficiency is achieved in the budgeting system.

Vietnam’s future public debt: Prospects and implicantions

By the end of 2017, VietNam's public debt had reached 3.1 million billion VND; 2.2 times higher than the end of 2011 (1,393 million VND). The ratio of public debt/GDP of Vietnam has increased rapidly in recent year, since 2011. Specifically, within only 5 years from 2011 to 2015, the ratio of public debt / GDP of Vietnam increased by 12.2 percentage points, from 50% to 62.2%. Although, the Government of Vietnam has made strong commitments to control public debt. But the actual results are not as expected and tend to get worse. With the current trend of increasing the size and risk of public debt, it is necessary to forecast the public debt and make policy implications on public debt management. Therefore, the author analyzed the state of Vietnam's budget deficit and public debt. Since the author used dynamic models Cechetti, Mohanty and Zampolli (2010) to forecast Vietnam's public debt trends to 2030, with three scenarios: The basic scenario is that there is no improvement in the balance of budget the Basic scenario is no improvement in the basic budget balance, the Bad scenario is the high budget deficit. From there, implications on public debt management that aim to increase the sustainability of public debt in VietNam.

Evaluating the Sustainability of Public Debt in the Presence of Current and Fiscal Accounts Deficit in Developing Countries

We estimate the public debt sustainability for 53 developing countries divided into different regions using data from 1996 to 2017. Sustainability of public debt calculation is based on theoretically derived models with necessary and sufficient conditions. Current study empirically validates the importance of least evident saving-investment gap along with other variables in public debt sustainability issue. Findings show that current account, fiscal account and saving-investment gap imbalances cause unsustainable public debt for all different regions which is a matter of great concern for each region. Policy makers of the developing countries must bring policies to promote investment activities backed by saving not by debt.

SUSTAINABILITY OF PUBLIC DEBT AND INEQUALITY IN A GENERAL EQUILIBRIUM MODEL

This study investigates the relationship between the sustainability of public debt and inequality in an endogenous growth model with heterogeneous agents. We show that the threshold for the sustainability of public debt is related to not only the relative size of public debt but also inequality. In addition, this study examines the effects of budget deficit and redistributive policies on the sustainability of public debt and inequality. We show that an increase in the deficit ratio or the redistributive tax makes public debt less sustainable. If the economy falls into the unsustainable region as a result of the policy change, both public debt and inequality continue to increase.

A Time-Varying Fiscal Reaction Function for Brazil

This paper evaluates the sustainability of public debt in Brazil using monthly data from January 2003 to June 2016, based on the estimation of fiscal reaction functions with time-varying coefficients. Three estimation methods are considered: Kalman filter, penalized spline smoothing and time-varying cointegration. Besides indicating that the reaction of the primary deficit to variations in the debt/GDP ratio declined over most of the analyzed period, all these methods lead to the conclusion that the Brazilian public debt, given the parameters then in force, reached an unsustainable trajectory in the last years of the sample.