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This paper aims to determine whether local governments (LGs) use non-consolidated municipally owned companies (MOCs), excluded from public sector entities and, consequently, from sub-national debt to avoid fiscal debt limits. This paper contributes to the literature by analysing the fiscal debt rule’s impact on the off-budget municipal activities in total and separate in different types of local government units.

This paper uses difference-in-differences and the system general method of moments model with the Blundell–Bond estimator for dynamic panel data analysis of MOCs owned by 866 Polish municipalities in 2010–2018.

This paper shows that the MOCs’ revenues support limited local public debt capacity by indebtedness restrictions imposed on municipalities in 2014. As a result, less indebted municipalities have higher off-budget revenues. The tightening of fiscal rules related to sub-sovereign indebtedness increased off-budget activities, but that effect is much stronger in rural and rural–urban municipalities than in urban municipalities and big cities.

This paper contributes to the literature by exploring the fiscal debt rule’s impact on the off-budget municipal activities in total and separate in different types of local government units. In this paper, the authors combine theories relating to private and public finance; this is a novel approach and one that is also necessary – as, in fact, the worlds of public and private actors intersect – as exemplified by the existence of MOC.

The purpose of this study is to examine the fiscal sustainability issue by dividing the fiscal deficit into high and low regimes using the quarterly data from 1997: Q1 to 2013: Q3. Further, we obtain the optimum level of public debt at which fiscal sustainability can be achieved.

This study uses the Markov Switching-Vector Error Correction Model (MS-VECM) for examining fiscal sustainability and threshold regression model to obtain the optimum level of debt.

The results derived from MS-VECM reveal the evidence in favor of fiscal sustainability during low fiscal deficit periods. Similarly, using a threshold regression model, the optimum public debt as a percentage to GDP seems to be around 21 per cent on a quarterly basis, beyond this level, public debt hurts economic growth.

From the policy front, the government of India should cut down the fiscal deficit only if debt reaches beyond a threshold level.

Noting that the vast literature has focused on examining the fiscal sustainability in India, the novelty of this study is to examine the fiscal sustainability by considering high and low deficits regimes using a non-linear approach.

This paper aims to revisit the theme of fiscal-monetary coordination in a general equilibrium setup that allows for unconventional monetary policy, monetary policy transmission and developing country characteristics.

This paper uses a calibrated new Keynesian dynamic stochastic general equilibrium (DSGE) model to study fiscal-monetary interaction.

Debt sits at the center of monetary-fiscal interaction. Under high-debt conditions, the inflation-output trade-off rises with an increase in the strictness with which monetary policy targets inflation, undermining the standard prescription of strict inflation targeting. At the same time, the transmission of monetary policy is also impeded, due to which unconventional monetary policy becomes more appropriate. The need for coordination among the policies gets enhanced in the presence of borrowing cost channel. While the presence of borrowing cost channel increases the need for policy coordination regardless of the debt situation, features like higher share of non-Ricardian households and weaker monetary policy transmission affect monetary-fiscal interaction to a greater extent under high-debt environment.

First, this paper uses inflation-output trade-off as a metric, to analyze fiscal-monetary interaction. Second, this paper considers the impact of developing country characteristics (such as a higher share of non-Ricardian households, impeded monetary policy transmission and supply constraints/borrowing cost channel) on fiscal-monetary interaction. Third, the DSGE model developed in this paper incorporates open market operations that could shed light on the role of unconventional monetary policy in the presence of high fiscal deficit and debt, which is particularly relevant in the current context of the COVID-19 pandemic. Fourth, the model also permits an investigation into monetary policy transmission under different debt regimes.

This paper aims to investigate the effects of contractionary fiscal policy shocks on major Greek macroeconomic variables within a structural vector autoregression framework while accounting for debt dynamics.

The sign restriction approach is applied to identify a linear combination of government spending and government revenue shock simultaneously while accounting for debt dynamics. Additionally, output and unemployment responses to fiscal shocks under different scenarios concerning the amalgamation of austerity measures are considered.

The results indicate that a contractionary consumption policy shock, namely, a 1 per cent decrease in government consumption and a 1 per cent increase in indirect taxes, is preferred, as it produces a minor decrease in output and substantially decreases public debt, while a contractionary wage policy shock is suitable only when the government aims to sharply reduce public debt, as the consequences for the economy are harsh. A contractionary investment policy shock is not recommended, as it triggers a rise in unemployment and a fall in output, while the effect on the public debt is minor.

Policymakers should focus their efforts on reducing unproductive government consumption on the expenditure side. Concerning revenues, the reinforcement of tax administration is recommended to ensure that indirect taxes will be collected.

This paper contributes to the existing literature by providing a disaggregated analysis of the effects of fiscal policy actions in Greece by implementing several fiscal policy scenarios and accounting for the level of public debt. All scenarios are in the vein of the economic adjustment programs guidelines.

Despite balanced budget requirements, each year most states carry short term debt (STD) across fiscal years. Logit analysis results suggest structural fiscal stress causes states to carry STD across fiscal years. This strategy may not be rational, because STD is a tool for smoothing short-term shortfalls, and not for correcting structural fiscal stress. Cross sectional time series analysis results suggest both structural and cyclical factors influence the amount of year end STD. Findings suggest STD amounts fluctuate as a rational temporary replacement for long-term debt, growing when long term rates rise and decreasing when they fall.

The recent recession provides us a good window to reveal fiscal problems and inadequate preparations of state and local governments. To address the fiscal crisis, and more importantly, to prepare for the potential economic downturns, this paper designs a framework of necessary tools to combat fiscal crisis. With matching policies of revenue diversification and counter-cyclical fiscal policy (CCFP), debt financing can be used as an effective tool to help state and local governments pull through fiscal crises. A brief example of local governments in Georgia proves the possibility and effectiveness of the counter-cyclical debt policy. It will be much better to institutionalize these policies to avoid the moral hazards of governments and politicians, which, in a great sense, requires engaging and educating the public and, finally, obtaining support from them.

Theory suggests that as long as a country runs a balanced budget regime, there is no linkage between fiscal variables and the interest rates. In the case of fiscal expansion that is not sufficiently covered by government revenues, however, the government has two options to finance its deficit: printing money or additional borrowing. Both options lead to an increase in the risk premia on government bonds. One strand of literature focuses on a currency crisis that emerges as a necessary outcome in light of contradictions between fixed exchange rate, and fiscal and financial fundamentals. If government bonds are denominated in domestic currency, the government can reduce their real value by higher inflation or by devaluation of the national currency. In order to bear this risk foreign investors require a currency risk premium. Governments can eliminate the risk of currency devaluation by issuing bonds denominated in foreign currencies, but the default risk remains and it depends on public finances. Another strand of the literature looks at the relation between fiscal variables and government bond yields in the framework of portfolio balance model.

The objective of the study is to determine if an over-borrowing bias emerges when the state fiscal base is shared by multiple general-purpose and special-purpose jurisdictions serving different groups of citizens.

This study uses panel data from all 50 states in the US from 1997 to 2007 to estimate models of total debt levels of state governments and total debt levels of all local governments aggregated at the state level. For comparison, it also estimates total debt levels of state and local governments taken together for the same years.

This study finds that jurisdictional overlap will increase state government debt, local government debt, as well as combined state and local government debt.

The finding from the study suggests that the fiscal common-pool model provides a more accurate analysis and more appropriate understanding of the institutional composition at the state and local public sector, especially for the vertical dimension of the local public sector where there are more specialized and overlapping jurisdictions.

This study examines and compares different specifications of the fiscal policy rule in the fiscal sustainability analysis of Nigeria.

This is methodologically achieved by estimating the baseline constant-parameter and Markov regime switching fiscal models. The asymmetric autoregressive distributed lag fiscal model is also employed to substantiate the differential responses of fiscal authorities to public debt.

The baseline constant-parameter fiscal model provides mixed results of sustainable and unsustainable fiscal policy. The inconclusiveness is adduced to instability in primary fiscal balance–public debt dynamics. This makes it necessary to capture regime switches in the fiscal policy rule. The Markov switching estimations show a protracted fiscal unsustainable regime that is inconsistent with the intertemporal budget constraint (IBC). The no-Ponzi game and debt stabilizing results of the Markov switching fiscal model further revealed that the transversality and debt stability conditions were not satisfied. Additional findings from the asymmetric autoregressive model estimation show that fiscal consolidation responses vary with contraction and expansion in output and spending, coupled with downturns and upturns in public debt dynamics in both the long and short run. These findings thus confirm the presence of asymmetries in the fiscal policy authorities' reactions to public debt. Further, additional evidences show the violation of the IBC which is exacerbated by the deleterious effect of the pro-cyclical fiscal policy response in boom on the improvement of the primary fiscal balance.

This study deviates from the extant literature by accommodating time variation, periodic switches and fiscal policy asymmetries in the fiscal sustainability analysis of Nigeria.

The purpose of this paper is to investigate the problem of fiscal sustainability for a panel of developing Asian economies.

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.

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.

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.

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.