Debt affordability in developed and emerging market economies: The role of fiscal rules

Arbeitspapier

This paper studies the effect of fiscal rules on debt affordability in a large set of developed and emerging market economies, using a panel data model which allows the inclusion of weakly exogenous regressors, and which deals appropriately with cross-sectional dependence. The results show a positive and significant effect of fiscal rule implementation on public debt affordability which is robust to various model specifications. The effect is stronger for emerging market economies which benefit from the implementation of any fiscal rule. In contrast, developed countries benefit only from high-quality fiscal rules. The findings have important policy implications for fiscal management, especially in emerging market economies.

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• Language: Englisch

References and Relationships

• Bibliographic citation: Series: IDB Working Paper Series ; No. IDB-WP-1344

Classification and Topics

• Classification: Wirtschaft ; Multiple or Simultaneous Equation Models: Panel Data Models; Spatio-temporal Models ; International Lending and Debt Problems ; International Financial Markets
• Subject: cross-sectional dependence ; debt affordability ; emergingmarket economies ; fiscal rules ; weakly exogenous regressors

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Valencia, Oscar M. ; Gómez González, José Eduardo ; Sánchez, Gustavo A.
• Event: Veröffentlichung
• (who): Inter-American Development Bank (IDB)
• (where): Washington, DC
• (when): 2022

Further information

• DOI: doi:10.18235/0004267