Open Access Subscription Access
Open Access Subscription Access
Sustainability of Public Debt:An Analytical Framework
Sustainability is a term that has been used with increasing frequency in the academic literature and recent multilateral policy discussions. Taking note of the crises in different countries heading for a debt trap, it is necessary to look at the right combination of fiscal parameters and growth to achieve sustainability and stable development. Fiscal prudence involves exercise of good judgment, common sense and even caution in the conduct of fiscal policies, especially on the expenditure front. This paper deals with finding: (a) debt-GDP threshold which will support to find out at what threshold level there is nonlinear relationship between debt and GDP, (b) sustainability indicators which gives the overall depiction of the fiscal side which guides for fiscal prudence policies, and (c) Markov regime switching model which explains the relationship of debt and growth. The period of study is from 1980 to 2016 and it is with respect to the central government.
- Acharya, S. (2001), India’s Macroeconomic Management in the 1990s, Indian Council for Research on International Economic Relations, New Delhi.
- ---------- (2002), Macroeconomic Management in the 1990s, Economic and Political Weekly, 37(16): 1515-1538, April 20-27.
- Ahluwalia, M.S. (2002), India’s Vulnerability to External Crisis: An Assessment in M.S. Ahluwalia, S.S. Tarapore and Y.V. Reddy (Eds.), Macroeconomics and Monetary Policy: Issues for a Reforming Economy: Essays in Honor of C. Rangarajan, Oxford University Press.
- Balassone, F. and D. Franco (2001), EMU Fiscal Rules: A New Answer to an Old Question, in Banca d’Italia (Ed.), Fiscal Rules, Roma.
- Baum, Anja Westphal, Cristina Checherita and Rother Philipp (2012), Debt and Growth: New Evidence for the Euro Area, 14th Public Finance Workshop, Banca DÍtalia, 29-31 March 2012.
- Bispham, J.A. (1987), Rising Public Sector Indebtedness: Some More Unpleasant Arithmetic, in M.J. Boskin, S. Flemming and S. Gorini (Eds.), Private Savings and Public Debt, Basil Blackwell.
- Blanchard, O.J., J.C. Chouraqui, R.P. Hagemann and N. Sartor (1990), The Sustainability of Fiscal Policy: New Answers to an Old Question, OECD, Economic Studies, 15: 7-36, Autumn.
- Buiter, W.H. (1985), Guide to Public Sector Debt and Deficit, Economic Policy, 1(1): 13-79, November.
- Buiter, W.H. and U.R. Patel (1992), Debt, Deficits and Inflation: An Application to the Public Finances of India, Journal of Public Economics, 47(March): 172-205.
- Cecchetti, Stephen G., M.S. Mohanty and Fabrizio Zampolli (2011), The Real Effects of Debt, Monetary and Economic Department, BIS Working Papers No 352, September 2011.
- Chalk, N. and R. Hemming (2000), Assessing Fiscal Sustainability in Theory and Practice, IMF, Working Paper No. 00/81.
- Chang, T. and G. Chiang (2009), The Behavior of OECD Public Debt: A Panel Smooth Transition Regression Approach, The Empirical Economics Letters, 8(1): 24-37.
- Checherita, C. and P. Rother (2010), The Impact of High and Growing Government Debt on Economic Growth - An Empirical Investigation for the Euro Area, ECB Working Paper No.1237.
- Chouraqui, J., R. Chaude, P. Hagemann and N. Sartor (1990), Indicators of Fiscal Policy: A Reexamination, OECD, Working Paper, No. 78, April.
- Cordella, Tito (2005), Antonio Ricci Luca and Marta Ruiz-Arranz (2005), Debt Overhang or Debt Irrelevance? Revisiting the Debt-Growth Link, IMF Working Paper, WP/05/223, December.
- Domar, E. (1944), The Burden of Debt and National Income, American Economic Review, 34: 798-827.
- Easterly, William R. (2001), Growth Implosions and Debt Explosions: Do Growth Slowdowns Cause Public Debt Crises? Contributions to Macroeconomics, 1(1): 1-26.
- Egert, Balazs (2012), Public Debt, Economic Growth and Nonlinear Effects: Myth or Reality? 14th Public Finance Workshop, Banca DÍtalia, 29-31 March.
- Elmeskov, Jorgen and Douglas Sutherland (2012), Post-Crisis Debt Overhang: Growth Implications across Countries, Second International Research Conference on Monetary Policy, Sovereign Debt and Financial Stability: The New Trilemma, 1-2 February, Reserve Bank of India, Mumbai, India.
- Feldstein, M. (2004), Budget Deficits and National Debt, L.K. Jha Memorial Lecture at the Reserve Bank of India in Mumbai, India, 12 January.
- Greenidge, Kevin, Roland Craigwell, Chrystol Thomas and Lisa Drakes (2012), Threshold Effects of Sovereign Debt: Evidence from the Caribbean, IMF Working Paper No. WP/12/157.
- Hamilton, J. and M. Flavin (1986), On the Limitations of Government Borrowing: A Framework for Empirical Testing, American Economic Review, 76(4): 808-819.
- Haque, N.U. and P.J. Montiel (1992), Fiscal Policy in Pakistan since 1970, IMF, Working Paper, November, No. 92/97.
- Horne, J. (1991), Indicators of Fiscal Sustainability, IMF, Working Paper,No. 91/5, January.
- Kaur, B., A. Mukherjee, N. Kumar and A.P. Ekka (2014), Debt Sustainability at the State Level in India, RBI Working Paper Series.
- Kaur, Balbir and Atri Mukherjee (2012), Threshold Level of Debt and Public Debt Sustainability: The Indian Experience, Reserve Bank of India Occasional Papers, 33(1 & 2): Khundrakpam, J.K. (1998), Sustainability of Central Government Debt, RBI, Occasional Paper, 17(1), April 20-27.
- Kumar, Manmohan S. and Jaejoon Woo (2012), Public Debt and Growth, 14th Public Finance Workshop, Banca DÍtalia, 29-31 March.
- Lahiri, A. and R. Kannan (2001), India’s Fiscal Deficits and Their Sustainability in Perspective, paper presented at the World Bank-NIPFP seminar on Fiscal Policies for Growth.
- Masson, P.R. (1985), The Sustainability of Fiscal Deficit, IMF Staff Papers, 32(4): 577-605, December.
- Moorthy, V., B. Singh and S.C. Dhal (2000), Bond Financing and Debt Stability: Theoretical Issues and Empirical Analysis for India, Development Research Group, Reserve Bank of India.
- Pattnaik R.K., Anupam Prakash and Biswa Swarup Misra (2004), Sustainability of Public Debt in India: An Assessment in the context of Fiscal Rules, Paper presented at the Banca d’Italia Workshop, Perugia, 1–3 April.
- Pinto, B. and F. Zahir (2004), India: Why Fiscal Adjustment Now, World Bank, Policy Research, Working Paper No. 3230, March.
- Quintos, C. (1995), Sustainability of the Deficit Process with Structural Shifts, Journal of Business and Economic Statistics, 13(4): 409-417.
- Rajaraman, I. and A. Mukhopadhyay (1999), Sustainability of Public Domestic Debt in India, NIPFP, New Delhi, February.
- Rangarajan, C. and D.K. Srivastava (2003), Dynamics of Debt Accumulation in India, Economic and Political Weekly, 38(46): 4851-4858, November.
- ---------- (2005), Fiscal Deficits and Government Debt in India: Implications for Growth and Stabilisation, NIPFP, Working Paper No. 35.
- Rangarajan, C., A. Basu and N. Jadhav (1994), Dynamics of Interaction between Government Deficit and Domestic Debt in India, in A. Bagchi and N. Stern (Eds.), Tax Policy and Planning in Developing Countries, Delhi, Oxford University Press, p. 135.
- Rao, V.K.R.V. (1952), Investment, Income and the Multiplier in an Underdeveloped Economy, Indian Economic Review, 1(1): 55-67, February, Reprinted in V.K.R.V. Rao, Essays in Economic Development, Asia Publishing House, London, 1964.
- Reinhart, C. and K. Rogoff (2010), Growth in a Time of Debt, American Economic Review: Papers and Proceedings, 100(2): 573-378.
- Sarel, Michael (1996), Nonlinear Effects of Inflation on Economic Growth, IMF Staff Papers, 43(1): 199-215.
- Seshan, A. (1987), The Burden of Domestic Public Debt in India, Reserve Bank of India, Occasional Paper, 8(1): 45-77, June.
- Shenoy, B.R. (1955), A Note of Dissent, in Second Five Year Plan: The Framework, Publications Division, Ministry of Information and Broadcasting, Government of India, p. 163.
- Singh, Charan (1999), Domestic Debt and Economic Growth in India, Economic and Political Weekly, 34(23): 1445-1453, June 5.
- Spaventa, L. (1987), The Growth of Public Debt, IMF, Staff Paper, 34(4), December.
- Zee, H.H. (1988), The Sustainability and Optimality of Government Debt, IMF, Staff Papers, December.
Abstract Views: 158
PDF Views: 4