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Article
Publication date: 1 February 2015

Hassen Chtourou

The objective of this paper is to determine the effects of the European debt crisis on the European government bonds.

Abstract

Purpose

The objective of this paper is to determine the effects of the European debt crisis on the European government bonds.

Design/methodology/approach

In this paper, we present the European government bond; we explain the European debt crisis; and we examine the evolution of the European debt.

Findings

Our results suggest that the increase of the European debt contributed to the increase of the risk and the default of the European debt and to the depreciation of the economies of the European countries.

Originality/value

We calculate the value of the European debt risks in normal cases and in the case of crisis with normal distribution.

Details

Journal of Centrum Cathedra: The Business and Economics Research Journal, vol. 8 no. 2
Type: Research Article
ISSN: 1851-6599

Keywords

Content available
Article
Publication date: 1 July 2021

Ferdinando Ofria and Massimo Mucciardi

The purpose is to analyze the spatially varying impacts of corruption and public debt as % of GDP (proxies of government failures) on non-performing loans (NPLs) in…

Abstract

Purpose

The purpose is to analyze the spatially varying impacts of corruption and public debt as % of GDP (proxies of government failures) on non-performing loans (NPLs) in European countries; comparing two periods: one prior to the crisis of 2007 and another one after that. The authors first modeled the NPLs with an ordinary lest square (OLS) regression and found clear evidence of spatial instability in the distribution of the residuals. As a second step, the authors utilized the geographically weighted regression (GWR) to explore regional variations in the relationship between NPLs and the proxies of “Government failures”.

Design/methodology/approach

The authors first modeled the NPL with an OLS regression and found clear evidence of spatial instability in the distribution of the residuals. As a second step, the author utilized the Geographically Weighted Regression (GWR) (Fotheringham et al., 2002) to explore regional variations in the relationship between NPLs and proxies of “Government failures” (corruption and public debt as % of GDP).

Findings

The results confirm that corruption and public debt as % of GDP, after the crisis of 2007, have affected significantly on NPLs of the EU countries and the following countries neighboring the EU: Switzerland, Iceland, Norway, Montenegro, and Turkey.

Originality/value

In a spatial prospective, unprecedented in the literature, this research focused on the impact of corruption and public debt as % of GDP on NPLs in European countries. The positive correlation, as expected, between public debt and NPLs highlights that fiscal problems in Eurozone countries have led to an important rise of problem loans. The impact of institutional corruption on NPLs reports that the higher the corruption, the higher is the level of NPLs.

Details

Journal of Economic Studies, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 0144-3585

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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

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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

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Article
Publication date: 11 January 2021

Eda Orhun

This paper aims to investigate the impact of the coronavirus (COVID-19) on major stock markets. Specifically, an event study analysis is executed to estimate the abnormal…

Abstract

Purpose

This paper aims to investigate the impact of the coronavirus (COVID-19) on major stock markets. Specifically, an event study analysis is executed to estimate the abnormal returns of selected stock indices from 15 countries to key events concerning the global pandemic.

Design/methodology/approach

Specifically, an event study analysis is executed to estimate the abnormal returns of selected stock indices from 15 countries to key events concerning the global pandemic. The study continues with a regression analysis that looks into cross-country variation of estimated abnormal returns by using country-specific characteristics as predictors.

Findings

The results indicate that stock markets of countries that have larger foreign direct investment exposure to China, higher democracy index, a higher number of confirmed COVID-19 cases and that accept a higher percentage of Chinese tourists are more prone to getting negatively affected by such a global health crisis. On the other hand, stock markets of countries with higher health expenditure, a higher level of preparedness for pandemics and higher gross domestic product per capita are likely to have less negative abnormal returns.

Originality/value

It is one of the first studies that focuses on determining the country-specific characteristics that influence the reaction of financial markets to a global health crisis that the world is experiencing today with the COVID-19 infectious disease. Investigating cross-country effects is very relevant and important today because countries and their relevant policymakers can take lessons and get better prepared for future pandemics only by recognizing the relevant points that are underlying and shape the response of the country’s economy to such a global health crisis.

Details

Pacific Accounting Review, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 0114-0582

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Book part
Publication date: 23 October 2017

Julius Horvath and Alfredo Hernandez Sanchez

In the domestic credit market creditor and debtor rights are clearly defined. In contrast, sovereign debt repayment is largely contingent on the debtor government’s…

Abstract

In the domestic credit market creditor and debtor rights are clearly defined. In contrast, sovereign debt repayment is largely contingent on the debtor government’s willingness to repay as enforcement of contracts at the international level is limited. In this chapter we explore different sources of sovereign debt crises as opportunistic and myopic behavior by debtor nations, over-consumption of imported goods, credit temptation by lenders eager to allocate savings surpluses, and unexpected consequences of initially seen appropriate policies. We explore how these factors have played out in the Euro-debt crisis and outline a framework for creditor responsibility to complement debtor self-restraint.

Details

Economic Imbalances and Institutional Changes to the Euro and the European Union
Type: Book
ISBN: 978-1-78714-510-8

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Book part
Publication date: 8 November 2019

Ludmila Stefanovich

This chapter is devoted to the issue of ensuring financial stability in the state. The main goal of the research is to determine the role and policy of the National…

Abstract

This chapter is devoted to the issue of ensuring financial stability in the state. The main goal of the research is to determine the role and policy of the National (Central) Bank, which was called up, together with the Government, to ensure financial stability in the Republic of Belarus. The actions of the National Bank for the implementation of monetary policy, macroprudential regulation, and supervision are reviewed. It is noted that the regulation and supervision of banks, nonbank credit and financial organizations, the payment system, the sector of other financial intermediaries (leasing activities, microfinance activities, activities of forex companies) is carried out by the National Bank of the Republic of Belarus. The main practical actions of the Government and the National Bank aimed at maintaining and ensuring financial stability is highlighted: monitoring of financial stability (goals, tasks, objects, monitoring directions are defined); creation of the Financial Stability Board (goals, objectives, representation, personal responsibility); disclosure of information on financial stability is carried out on an ongoing basis – the publication of the analytical review “Financial Stability in the Republic of Belarus.” The research provided a summary of the state of the country's financial sector and presented the achievements of the National Bank and state institutions for ensuring financial stability. The main problems affecting financial stability are highlighted: insufficient efficiency of the activities of large enterprises of the real sector of the economy; high levels of credit risk in banks; high dollarization of bank balance sheets. The directions of development of the financial market of the Republic of Belarus, contributing to ensuring financial stability are presented.

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Book part
Publication date: 19 February 2020

Nesrine Bentemessek Kahia

By the beginning of the nineteenth century, British public debt, accumulated over the eighteenth century and during the Revolutionary and Napoleonic Wars (1793–1815), had…

Abstract

By the beginning of the nineteenth century, British public debt, accumulated over the eighteenth century and during the Revolutionary and Napoleonic Wars (1793–1815), had attained extremely high levels, at times even reaching 200% of the gross national product (GNP). This increase in debt paradoxically coexisted with the early progression of the industrial revolution.

In this chapter, we explain this concomitance by the effective policies of sovereign debt management put in place by the State and the Bank of England (BoE). First, the State put in place measures to lower its risk of default by funding its debt with tax revenue that would allow it to honour due payments. Second, following the suspension in 1797 of cash payments for pounds sterling, the BoE, in addition to its role in financing the State, followed an active policy of sovereign debt management, promoting both bank liquidity and market liquidity.

Details

Research in the History of Economic Thought and Methodology: Including a Symposium on Public Finance in the History of Economic Thought
Type: Book
ISBN: 978-1-83867-699-5

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Article
Publication date: 17 December 2020

Wondemhunegn Ezezew Melesse

Public debt management is now an integral part of overall macroeconomic management in many developing and emerging market economies. Preventing unsustainable debt…

Abstract

Purpose

Public debt management is now an integral part of overall macroeconomic management in many developing and emerging market economies. Preventing unsustainable debt accumulation and maintaining healthy fiscal profile begins with understanding its key drivers both in the short and in the long run. The purpose of this paper is to analyze public debt and current account dynamics in Ethiopia.

Design/methodology/approach

This study applies structural vector auto-regressive (SVAR) model on annual time series data to study general government debt and current account dynamics in Ethiopia for the period 1980–2018.

Findings

Both the impulse response and forecast error variance decomposition results confirm that fiscal balance exerts the strongest influence on both government debt and current account balance in the short run. In addition, own shock as well as shocks stemming from gross fixed capital formation and growth have significant effects on general government debt. The findings were robust to alternative data transformation, differing Choleski ordering of the model variables, and inclusion of exogenous deterministic terms that capture changes in the political landscape.

Practical implications

The most important implication is that since fiscal balance is the strongest determinant of both public debt and current account balance, public investment efficiency is relevant here than anywhere else in the national economy. A recent study by Barhoumi et al. (2018) found that the sub-Saharan region lags behind its peers in terms of public sector investment efficiency with inefficiency gap of as large as 54% depending on the indicator variable for public investment output. Improving public investment spending efficiency would reduce government debt by enhancing productivity and growth – which has significant negative effect on public debt.

Originality/value

First, the few studies conducted on Ethiopia are dominated by single equation specifications and do not account for the possibility of endogenous feedback effects among the model variables. Second, still equally important is the role of rising gross fixed capital formation in Ethiopia, which increased from about 13% (relative to GDP) in the 1980s to about 35% in the 2010s. Ignoring this variable amounts to a major model misspecification when analyzing short-run macro dynamics in low-income economies. Finally, the paper complements existing limited studies on Ethiopia by comparing the strength of shock propagation mechanisms using alternative data transformation techniques.

Details

Journal of Economic and Administrative Sciences, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 1026-4116

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Article
Publication date: 30 November 2020

Natalia V. Trusova, Inna Ye. Yakusheva, Yuliia M. Zavoloka, Alina H. Yefremenko, Yuliia A. Malashenko and Maryna V. Sidnenko

The article deals with the imperatives of functioning of the financial market of Ukraine in the global space of debt loading.

Abstract

Purpose

The article deals with the imperatives of functioning of the financial market of Ukraine in the global space of debt loading.

Design/methodology/approach

Within the Laffer debt curve model, the dependence of gross domestic product (GDP) change on the level of debt of the financial system for countries that form the economic core in the global financial space and well control the level of the indicator, as well as new member states that have a different level of secure debt loading and affect the portion of the financial market that forms a portfolio of securities to cover the cost of nonperforming government securities is mentioned.

Findings

It has been shown that stock indices, as constituent indicators of changes in the price environment of a certain group of securities in time space, allow to estimate the general direction of the market movement even when prices within the index basket change in different directions.

Originality/value

The dynamics of changing the debt loading of the financial system of Ukraine in the current, medium-term perspective is analyzed. The amount of the fixed and floating rate debt of the government internal securities is determined to ensure the diversification of interest rate risk. Using the parameters of the model of approximation functions of dimensionless quantities, the corridor of a safe level of general government debt in the country was determined.

Details

Journal of Economic Studies, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 0144-3585

Keywords

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