In this note we derive the long-run public deficit to GDP ratio that is compatible with a sustainable public debt. Starting from the observation that a sustainable debt policy requires that the present value of public debt asymptotically converges to zero and that the debt to GDP ratio must be...

We design a Bayesian Mixed-Frequency vector autoregression (VAR) model for fiscal monitoring, i.e., to nowcast the government deficit-to-GDP ratio in real time and provide a narrative for its dynamics. The model incorporates both monthly cash and quarterly accrual fiscal indicators, together...

State-owned enterprises (SOEs) remain a cornerstone of Kazakhstan’s economy and growth model. However, SOEs’ quasi-fiscal activities conducted outside the fiscal framework obscure the overall fiscal stance, complicating macroeconomic management. This paper finds that the balance sheet...

Fiscal sustainability refers to a government's capacity to generate sufficient revenue to cover its expenses and repay its debts without accumulating excessive liabilities or creating new money. Recent observations indicate that Kenya's economic growth has slowed, prompting concerns about its...

The paper examines the effect of macroeconomic imbalances on bank lending with emphasis on the exchange rate movement, inflation differential and fiscal deficit. In the study, bank lending is modelled by gross loans and advances, assets quality and risk appetite. The panel GMM model results show...

The objective of this study is to evaluate the fiscal sustainability of Local Government Units (LGUs) in the Visegrad Group economies (Czechia, Hungary, Poland, and Slovakia; the V4), focusing on three key hypotheses: (1) LGUs in the V4 are involved in so-called Ponzi games; (2) the adverse...

The paper explores the impact of inflation on the validity of the twin deficits hypothesis (TDH) in the Eurozone countries, focussing on how different inflation levels influence twin deficit existence (i.e., a positive relation between fiscal and current account deficit) and how inflation...

Romania has maintained an external deficit continuously since 1990, which represents a vulnerability of the economy. The subject analysed is important because Romania is trying to keep under control and limit the negative effects of this imbalance, especially in the context of the process of...

This paper analyzes Liechtenstein's fiscal framework, highlighting its successful consolidation following the global financial crisis. The study examines the budget balance rule that anchors fiscal policy, benchmarking key fiscal indicators against European peers. Findings reveal Liechtenstein...

Using high-frequency macro data from a financially deregulated regime, this paper examines whether there is any evidence of financial crowding out in India. The macroeconomic channel through which financial crowding out occurs is the link between the fiscal deficit and the interest rate...

This paper investigates the implications of the European Union's revised fiscal governance framework for Italy, a country facing the dual challenge of high public debt and persistent economic stagnation. Using a Stock-Flow Consistent (SFC) macroeconometric model of the Italian economy (MITA), we...

The first section provides a brief review of developments in key macroeconomic variables since 2000. These include the usual target variables of economic growth, inflation, external balance and employment as well as intermediate target variables of fiscal balance, savings and investment. Section...

This paper proposes that the South African Reserve Bank should pursue a 3% inflation target, instead of the current 4.5% midpoint of a 3%-to-6% target range. Doing so may also result in lower inflation volatility, thereby reducing nominal exchange rate risk for investment and trade, and may thus...

This paper analyses the impact of various macroeconomic shocks - including aggregate demand, supply, monetary policy, real exchange rate, and budget deficit deviation shocks - on Romania's economy using a VAR model with Bayesian inference. The study captures the period following the adoption of...

This paper seeks to determine the interaction mechanism between the domestic imbalance and the external imbalance in Kenya and why it matters for banks. Whenever an economy has is on a path of soaring fiscal and current account deficits like Kenya has been over the past decade, concerns on the...

The paper examines the effect of macroeconomic imbalances on bank lending with emphasis on the exchange rate movement, inflation differential and fiscal deficit. In the study, bank lending is modelled by gross loans and advances, assets quality and risk appetite. The panel GMM model results show...

Through fiscal reaction functions, we investigate fiscal sustainability for five European country-group panels and check for a change in fiscal behaviour after countries adopted the euro as their currency. Using annual data for the period between 1990 and 2021, we identify evidence of average...

This paper provides a novel way for instructors to teach about the perils of a large National Debt, which is currently $36 trillion. We provide a detailed lesson plan that utilizes balloons to illustrate the possible paths a society can take to address this issue. The lesson plan consists of an...

We develop a simple two-period principal-agent model in which a present-biased government, the agent, chooses public investment levels given a deficit rule imposed by the principal. The principal sets a deficit cap to curb current debt-financed consumption. In doing so, it also reduces long-term...

We implement a two-step analysis of fiscal and external causality patterns using a data set covering the 27 EU countries in the period 2002Q1-2023Q4. In the 1st step, we compute fiscal and external sustainability time-varying coefficients, modelling the cointegration relationship between...

This study examines the relationship between energy transition and government debt in 15 developing countries using a dynamic generalized method of moments (GMM) estimation backed by a theoretical background. Results show that government debt is highly persistent, with past debt strongly...

This Working Paper explores the relationship between the uptake of accrual basis of accounting in government and the use of the resultant accrual information in fiscal statistics, using the European Union (EU) as a case study. The Paper looks at the current state of accounting practices in the...

The Ministry of Budget and Economic Planning's budget implementation reports reveal large fiscal forecast errors over the 2011-2023 period, for a range of fiscal aggregates including total revenues, expenditures, and the fiscal deficit. Revenues forecasts errors are driven by optimistic budget...

We present new evidence on the impact of fiscal variables on long-term interest rates and term premia in the United States. To alleviate endogeneity problems, we follow the seminal methodology by Laubach (2009) and resort to long-term projections of interest rates and fiscal variables. After...

This article models banking under the condition of fiscal dominance or monetised-fiscal deficits, and explains why resource-based economies experience a financial resource curse. The evidence shows that commodity price shocks engender premature deindustrialisation, reduce loan-deposit ratios and...

The West African Monetary Zone (WAMZ)'s economy has faced persistent fiscal deficits over the years, and this has affected other macroeconomic indicators like inflation. This study empirically examines the effect of fiscal deficit on inflation dynamics in the WAMZ. It employs the Panel Smooth...

Ausgabenelastizitäten messen die Reaktion der verschiedenen Komponenten der Staatsausgaben auf den Konjunkturzyklus. Sie sind wichtige Inputs für fiskalische Prognosen und sind im Kontext der Fiskalregeln relevant, da Elastizitätsschätzungen in die Bestimmung des fiskalischen Spielraums...