Riding the storm: fiscal sustainability in the Caribbean
| Autor: | Vibha Nanda, Serhan Cevik |
|---|---|
| Rok vydání: | 2020 |
| Předmět: |
Macroeconomics
Economics and Econometrics 050208 finance media_common.quotation_subject Debt-to-GDP ratio 05 social sciences Government debt Vulnerability Climate change Storm Monetary economics Interest rate Fiscal policy Test (assessment) Output gap Debt Sustainability 0502 economics and business Economics General Earth and Planetary Sciences 050207 economics Fiscal sustainability General Environmental Science media_common |
| Zdroj: | International Review of Applied Economics. 34:384-399 |
| ISSN: | 1465-3486 0269-2171 |
| DOI: | 10.1080/02692171.2020.1749241 |
| Popis: | Fiscal sustainability remains a paramount challenge for small economies with high debt and greater vulnerability to climate change. This paper applies the model-based sustainability test for fiscal policy in a panel of 16 Caribbean countries during the period 1980–2018. The results indicate that the coefficient on lagged government debt is positive and statistically significant, implying that fiscal policy in the Caribbean takes corrective actions to counteract an increase in the debt-to-GDP ratio. Nonlinear estimations, however, show that the quadratic debt parameter is negative, which indicates that fiscal policy response is not adequate to ensure sustainability at higher levels of debt. We also find that the fiscal stance tends to be countercyclical on average during the sample period. These empirical results confirm that maintaining prudent fiscal policies and implementing growth-enhancing structural reforms are necessary to build fiscal buffers and ensure debt sustainability with high probability even when negative shocks occur over the long term. |
| Databáze: | OpenAIRE |
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