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Open Access
Article
Publication date: 3 August 2021

Ola Al Sayed, Ashraf Samir and Heba Hesham Anwar

This paper aims to assess the fiscal sustainability in Egypt during the period 1990–2018 using deficit accounts (DA) approach. It also tries to investigate the possibility…

Abstract

Purpose

This paper aims to assess the fiscal sustainability in Egypt during the period 1990–2018 using deficit accounts (DA) approach. It also tries to investigate the possibility of applying generational accounts (GA) in Egypt as a new approach to assess fiscal sustainability.

Design/methodology/approach

This paper tries to assess fiscal sustainability in Egypt during 1990–2018 using DA and GA approaches. DA approach includes primary deficit indicator, tax gap indicator, augmented Dickey-Fuller stationarity test for debt/GDP ratio and Johansen co-integration test between government revenues and expenditures. However, concerning the possibility of applying GA in Egypt, field study form was designed including specific questions to academic and executive economic experts to investigate if it is possible to apply GA in Egypt.

Findings

The empirical findings of the field study indicate that Egypt witnessed fiscal sustainability during the period 1990–2018 using DA. On the other hand, there are various obstacles, including administrative, technical, legal and political obstacles which hinder Egypt from applying GA to assess fiscal sustainability.

Originality/value

To the best of the authors' knowledge, this paper assesses fiscal sustainability in Egypt using DA for a longer and updated time series within 1990–2018. In addition, it is the first paper to examine the possibility of assessing fiscal sustainability using GA approach in Egypt.

Details

Review of Economics and Political Science, vol. 6 no. 4
Type: Research Article
ISSN: 2356-9980

Keywords

Article
Publication date: 4 July 2019

Vaseem Akram and Badri Narayan Rath

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…

Abstract

Purpose

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.

Design/methodology/approach

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.

Findings

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.

Practical implications

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

Originality/value

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.

Details

Studies in Economics and Finance, vol. 38 no. 2
Type: Research Article
ISSN: 1086-7376

Keywords

Open Access
Article
Publication date: 25 July 2019

Duy-Tung Bui

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

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Abstract

Purpose

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

Design/methodology/approach

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.

Findings

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.

Research limitations/implications

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.

Originality/value

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.

Details

Journal of Asian Business and Economic Studies, vol. 27 no. 1
Type: Research Article
ISSN: 2515-964X

Keywords

Open Access
Article
Publication date: 29 April 2021

Michał Mackiewicz

The purpose of the paper is to assess the fiscal sustainability of nine southern African countries that belong to the Southern African Development Community.

Abstract

Purpose

The purpose of the paper is to assess the fiscal sustainability of nine southern African countries that belong to the Southern African Development Community.

Design/methodology/approach

In this paper, the author performs a novel time-varying analysis of fiscal sustainability in southern African countries.

Findings

The authors found that in Zimbabwe and Namibia, the formal condition of solvency was not fulfilled, resulting in the explosive growth of debt during the recent slowdown. In contrast, Angola, Botswana and Malawi prove to run sustainable fiscal policies, and they were also fiscally invulnerable to the recent unfavourable economic developments in Africa. For the rest of the countries in the sample (Eswatini, Lesotho, South Africa and Zambia), the results are mixed.

Originality/value

In the existing literature, there is abundance of empirical evidence concerning fiscal sustainability in European and American countries. In contrast, there is strikingly little knowledge concerning this phenomenon in African countries. The authors tried to fill this gap using a novel, time-varying approach.

Details

International Journal of Emerging Markets, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 1746-8809

Keywords

Article
Publication date: 5 September 2018

Assil El Mahmah and Magda Kandil

Given the persistence of low oil prices and the continued shrinking of government revenues, Gulf Cooperation Council (GCC) countries continue to adapt to the new normal of…

Abstract

Purpose

Given the persistence of low oil prices and the continued shrinking of government revenues, Gulf Cooperation Council (GCC) countries continue to adapt to the new normal of the oil price environment, with a focus on pressing ahead with subsidies’ reforms and measures to increase non-oil revenues, as well as accelerating debt issuance, which raise concerns about fiscal sustainability and the implications on macroeconomic stability.

Design/methodology/approach

The purpose of this paper is to examine the sustainability of fiscal policy in GCC by exploring governments’ reaction to rising public debt accumulation via the estimation of a fiscal reaction function to higher debt. Subsequently, the paper compares the obtained results with other similar and non-similar groups, in terms of economic structures and oil dependency, to understand how some macroeconomic factors affect differently the fiscal policy responses, in a context of oil price shocks and high price volatility.

Findings

The results show that the coefficient of the lagged debt stock was significant and positive, which means that GCC are increasing the pace of reforms and the fiscal primary balance as they issue more debt to ensure a sustainable fiscal policy. The evidence is consistent with the theory that higher levels of debt warrant greater fiscal effort, but at lower debt levels, countries still have the space to increase spending without jeopardizing debt sustainability as long as they remain committed to fiscal reforms to increase the primary balance. The evidence supports the notion that the region’s public finances have improved in response to recent fiscal adjustments. However, national experiences differ considerably, especially given variation in the fiscal breakeven prices against the new normal of low oil prices. Moreover, the findings reveal that various measures of economic performance, as captured by economic growth, openness and the oil price, were also found to be important factors in explaining fiscal performance. The combined effects of low oil prices and high degree of openness warrant further efforts to reform the budget to increase the primary balance while safeguarding priority spending tomobilize non-energy growth and ensure debt sustainability in GCC.

Originality/value

Given recent experiences and the “low for long” oil price, policy priorities and reforms are necessary in oil-dependent economies, including GCC, to ensure macroeconomic sustainability. Sustaining the momentum of non-energy growth would reduce continued dependency of GCC economies on oil revenues and fiscal spending in the medium-term, creating a bigger scope for private sector participation in economic activity and increasing the prospects of further diversification away from long dependency on oil price volatility and their adverse implications on the fiscal budget and economic cycles.

Details

International Journal of Development Issues, vol. 18 no. 1
Type: Research Article
ISSN: 1446-8956

Keywords

Article
Publication date: 7 December 2015

Olusegun Ayodele Akanbi

– The purpose of this paper is to examine the sustainability of fiscal policy in Nigeria by disaggregating the economy into oil and non-oil segments.

Abstract

Purpose

The purpose of this paper is to examine the sustainability of fiscal policy in Nigeria by disaggregating the economy into oil and non-oil segments.

Design/methodology/approach

Owing to the enormous influence of the oil revenue, the study distinguishes between the oil and non-oil fiscal balances. In addition, it abstracted from the endogenous macroeconomic environment, therefore, fiscal policy sustainability is investigated on the basis of the responses of the government primary balance to changes in deficits and debt levels. The models are estimated with time-series data from 1970 to 2011 using the Johansen estimation techniques.

Findings

The results from the estimations performed suggest that government responds more to deficit targets than debt targets. However, this differs in the non-oil segment, as the fiscal policy actions of government do not consistently respond to either deficit or debt targets. Given this, the overall economy and the oil segment have revealed a strong fiscal sustainability over the years while fiscal policy is unsustainable in the non-oil segment.

Research limitations/implications

The major limitation of this study is the unavailability of data on government expenditure resulting from oil revenue. Therefore, it would be imperative to reinvestigate the specifications adopted in this study in follow-up studies.

Practical implications

The study includes implications for policy makers, especially in Nigeria and other oil-producing countries, to detect the extent to which the economy should rely on the oil revenue stream as the main source of revenue to government. The proceeds from the oil endowment have not yet trickled down to the rest of the economy where real economic activity could be carried out which would eventually lead to more tax revenue for the government.

Originality/value

To assess the sustainability of fiscal policy in an oil-rich economy such as Nigeria, it is imperative to detect the influence of oil funds on both government revenue streams and expenditure decisions. This study has made this distinction.

Details

African Journal of Economic and Management Studies, vol. 6 no. 4
Type: Research Article
ISSN: 2040-0705

Keywords

Article
Publication date: 13 November 2017

Narayana Muttur Ranganathan

Population ageing, extended coverage of beneficiaries and rise in benefit levels of a public-funded universal social pension scheme (USPS) for elderly individuals may…

Abstract

Purpose

Population ageing, extended coverage of beneficiaries and rise in benefit levels of a public-funded universal social pension scheme (USPS) for elderly individuals may exert fiscal pressures on India’s General Government. Using accounting frameworks, this paper aims at an assessment of public expenditure requirements of USPS scenarios in the short term and their long-term implications for fiscal sustainability.

Design/methodology/approach

Short-term public expenditure requirements are quantified for the current pension scheme and proposed USPS scenarios, if pension benefits are adjustable for official poverty line, per capita income, the inflation rate and income elasticity of public pension expenditure. Long-term fiscal sustainability is determined by the methodology of generational accounting.

Findings

Public expenditure requirements for the USPS scenarios are remarkably higher as compared to the current expenditure on the Indira Gandhi National Old Age Pension Scheme (IGNOAPS). Short-term analyses offer economic justifications for an increase in pension benefits either by a single adjustment factor or combined adjustment factors but at a cost of remarkable increase in public expenditure requirements. Long-term analyses show that the IGNOAPS and proposed USPS scenarios are fiscally sustainable but sensitive to five parameters (productivity growth, inflation rate, discount rate, income elasticity public pension expenditure and income elasticity of health expenditure). A policy mix of these parameters leads to fiscal sustainability of the IGNOAPS and proposed USPS scenarios with differential impacts on inter-generational distribution of welfare by tax and transfer adjustments.

Research limitations/implications

Application of the generational accounting methodology is new for India’s pension economics and may have applicability and relevance for future extensions and analyses of other fiscal policy issues. This paper sets a benchmark for such extensions and applications.

Practical implications

The analyses and implications offer economic justifications for increase in levels of pension benefits by the current pension scheme and proposed USPS scenarios, introduction of sustainable USPS scenarios under current fiscal policies and choice of design parameters for a fiscally sustainable USPS.

Social implications

Social pensions have implications for providing income security and livelihood benefits for all elderly civilians in society.

Originality/value

The paper adds to the existing knowledge on economic analyses and fiscal implications of India’s old age pension policies in general and social pension policies in particular. Subject to the comparability of socio-economic structures and pension programmes, the methodology and public policy analyses of this paper may be of relevance and applicability for developing countries in Asia.

Details

Indian Growth and Development Review, vol. 10 no. 2
Type: Research Article
ISSN: 1753-8254

Keywords

Article
Publication date: 1 March 2013

John F. Sacco and Gerard R. Busheé

This paper analyzes the impact of economic downturns on the revenue and expense sides of city financing for the period 2003 to 2009 using a convenience sample of the…

Abstract

This paper analyzes the impact of economic downturns on the revenue and expense sides of city financing for the period 2003 to 2009 using a convenience sample of the audited end of year financial reports for thirty midsized US cities. The analysis focuses on whether and how quickly and how extensively revenue and spending directions from past years are altered by recessions. A seven year series of Comprehensive Annual Financial Report (CAFR) data serves to explore whether citiesʼ revenues and spending, especially the traditional property tax and core functions such as public safety and infrastructure withstood the brief 2001 and the persistent 2007 recessions? The findings point to consumption (spending) over stability (revenue minus expense) for the recession of 2007, particularly in 2008 and 2009.

Details

Journal of Public Budgeting, Accounting & Financial Management, vol. 25 no. 3
Type: Research Article
ISSN: 1096-3367

Article
Publication date: 3 June 2022

Christine Clarke, Patrice Whitely and Travis Reid

This study aims to explore the sustainability of Jamaica’s public debt over a highly volatile period of time.

Abstract

Purpose

This study aims to explore the sustainability of Jamaica’s public debt over a highly volatile period of time.

Design/methodology/approach

The authors use a suite of econometric tools, including, unit root testing, cointegration testing and estimating a fiscal reaction function. The authors control for structural breaks in the regression analysis.

Findings

The authors find that whilst reschedulings might be indicative of cash-flow problems in Jamaica, fiscal policy has responded effectively to increase the public debt, thereby making the debt sustainable. Notwithstanding the political economy and social demands of the population prior to the impact of the pandemic, the implications of higher debt stocks (higher debt-servicing and lower social expenditures) might make this approach to fiscal policy and debt management infeasible. As a result, the authors recommend that the government will need to take an active approach in managing its debt position to facilitate responses to shocks and provide conditions within which maintaining fiscal discipline is feasible.

Originality/value

To the best of the authors’ knowledge, this is the first study to explore fiscal sustainability in Jamaica over this time period whilst taking into consideration structural breaks caused by the global financial crisis and debt restructurings. The authors also take into consideration variables such as exchange rates and the occurrence of elections, which have not been included in previous studies.

Details

International Journal of Development Issues, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 1446-8956

Keywords

Article
Publication date: 6 April 2021

Opeoluwa Adeniyi Adeosun, Olumide Steven Ayodele and Olajide Clement Jongbo

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

Abstract

Purpose

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

Design/methodology/approach

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.

Findings

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.

Originality/value

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

Details

African Journal of Economic and Management Studies, vol. 12 no. 2
Type: Research Article
ISSN: 2040-0705

Keywords

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