Work

Fiscal Policy, Institutional Quality, and Public Debt: Evidence from Transition Countries

Year: 2021

Type: article

Abstract: This research makes a significant contribution to the literature on the economic implications of fiscal policy and institutional quality by modeling empirically the impact of these factors on public debt in 27 transition countries over the period 2000–2018. Applying Ordinary Least Squares (OLS), Random effects, and two-step GMM methods, the research gives evidence to confirm the background theory that deducing public expenditure and improving government revenue could push government debt lower. The main findings especially demonstrate that institutional quality contributes to making an impact on public debt. Particularly, weak governance in controlling corruption leads to higher accumulation of public debt while financing to improve the institutional quality in relation to government effectiveness, regulatory quality, and rule of law after changes in the regime in those countries increases the size of public debt. The results of this paper convince policymakers of crucial implications of both fiscal policy and institutional quality in managing public debt.

Source: Sustainability

DOI: 10.3390/su131910706

Authors: Thi Anh Nhu Nguyen, Thi Thuy Huong Luong

Institution: Ho Chi Minh City Open University

Language: English

Topic: Fiscal Policies and Political Economy

Subfield: Economics and Econometrics

Field: Economics, Econometrics and Finance

Domain: Social Sciences

SDG: Peace, justice, and strong institutions

Open Access status: gold

Estimated APC paid: $2,052