Sustainability of external debt: further evidence from non-linear framework

This study investigates sustainability of external debt under a two-step non-linear framework. The first step uses a general linearity test proposed by Harvey and Leybourne (2007 Harvey, David I. and Leybourne, Stephen J. 2007. Testing for time series linearity. Econometric Journal, 10: 149–165. [Crossref], [Web of Science ®] , [Google Scholar]) to determine the linearity property of external debt. The second step applies a non-linear ADF unit root test proposed by Kapetanios, Shin, and Snell (2003 Kapetanios, G., Y. Shin, and A. Snell. 2003. Testing for a unit root in the nonlinear STAR. Journal of Econometrics 112: 359–79.  [Google Scholar]) on the non-liner processes and the linear ADF test on the linear processes to examine the sustainability of external debt. The analysis of 36 debt and 55 current account ratios identifies strong evidence of non-linearity and sustainability. The results indicate superior performance of the non-linear unit root test over the ADF test in determining the stationary property of the data.     

Cyclicality of stock market volatility

By utilizing the significance and stochastic dominance tests, this paper formally tests the relationship between stock market volatility and the business cycle. Results show that, for most matured markets, stock market volatility is countercyclical, while for emerging markets, the volatility can be procyclical.     

On the Cyclicality of Public Finances in Europe

Under EMU, monetary policy is oriented toward the euro area as a whole and fiscal policy is an important instrument remaining in the hands of national governments to cushion economic shocks to individual countries. The current paper analyses the cyclical pattern of public finances in Europe and addresses the question of whether fiscal policies have been geared towards this stabilising role. Although taxes fluctuate countercyclically in a conventional manner, we find that discretionary measures have tended to undermine automatic stabilisers. On the expenditure side, we find that public investment also displays a consistent procyclical pattern. Dynamic analysis reveals that a permanent shock to output induces asynchronous fluctuations in taxes and expenditures in the year of the shock and in periods thereafter. Finally, we examine political and institutional factors. The political fragmentation of the government as well as the partisan hue of the government do not interfere with the cyclical response of public finances, but we do find evidence of a pronounced electoral cycle.     

Environmental taxes and industry monopolization

This paper considers a market with an incumbent monopolistic firm and a potential entrant. Production by both firms causes polluting emissions. The government selects a tax per unit of emission to maximize social welfare. The size of the tax rate affects whether or not the potential entrant enters the market. We identify the conditions that create a market structure where the preferences of the government and the incumbent firm coincide. Interestingly, there are cases where both the government and incumbent firm prefer a monopoly. Hence, the government might induce profitable monopolization by using a socially optimal tax policy instrument.      

Currency devaluations,aggregate demand,and debt dynamics in economies with foreign currency liabilities

The article uses a post Kaleckian model to analyze how currency devaluations affect aggregate demand and capital accumulation in an economy with foreign currency liabilities in the short-run. In benchmark post Kaleckian open economy models, currency devaluations have two effects. First, they change international price competitiveness and thus affect net exports. Second, devaluations change income distribution and thereby affect consumption and investment demand. The overall effect on aggregate demand and investment is ambiguous and depends on parameter values. Existing models, however, disregard balance sheet effects that arise from foreign currency-denominated external debt. The article develops a novel post Kaleckian open economy model that introduces foreign currency-denominated external debt and balance sheet effects to examine the demand-effects of devaluations. Furthermore, the article models the dynamics of external and domestic corporate debt. It discusses how an economy may end up in a vicious cycle of foreign-currency indebtedness and derives the conditions under which indebtedness becomes stable or unstable. It shows that the existence of foreign currency-denominated debt means that contractionary devaluations are more likely, and that foreign interest rate hikes, and high illiquidity and risk premia compromise debt sustainability. Devaluations only stabilize debt ratios if they succeed in boosting domestic capital accumulation.     

Public debt and optimal taxes without commitment

Benhabib and Rustichini [Optimal taxes without commitment, J. Econ. Theory 77 (1997) 231-259] study the properties of optimal capital taxes in economies without commitment and no government debt. They find that capital taxes may be different from zero at steady state. This note shows that, once governments have the possibility of issuing debt and smoothing taxes over time, optimal steady state capital taxes turn out to be zero.     

The role of debt profile vulnerabilities in sovereign distress

Sovereign debt distress has raised difficult issues in terms of debt sustainability in the past, but it has been associated not only with medium-term debt dynamics, but also with various dimensions of the debt profile that have typically built vulnerabilities over time. Vulnerabilities associated with the public debt structure and liquidity may play an important role in derailing a stable debt trajectory and thus contribute to debt distress. Financial developments may also contribute to the building in sovereign debt vulnerabilities, as deterioration in financial stability indicators can affect the balance sheet of the national treasury. Based on the experience during 37 debt distress events in countries with market access between 1993 and 2010, this article identifies early warning indicators of sovereign debt distress and defines thresholds – for the whole sample and for different regions – at which these latter have been associated with distress in the past. This approach allows us to assess indicators on an individual basis, and to develop a composite indicator of debt vulnerabilities as well.     

我国地方政府债务管理的问题及对策

由于地方政府债务规模不断扩大,债务管理过程中存在的问题日益凸显。在阐述地方政府债务规模及结构的基础上,提出地方政府债务管理中存在的问题,并有针对性地提出加强地方政府债务管理的具体建议。     

Consumer debt and unemployment

We present evidence that US consumer debt has varied inversely with unemployment rates since 1990, potentially reflecting responses by households and/or lenders to adverse labour market conditions, and helping explain why consumer debt recently fell despite low interest rates. For several measures of debt, unemployment exhibits greater explanatory power and economic significance than interest rates.     

Growth and external debt under risk of debt repudiation

We analyze the pattern of growth of a nation which borrows abroad and which has the option of repudiating its foreign debt. We show that the equilibrium strategy of competitive lendrs is to make the growth of the foreign debt contingent on the growth of the borrowing country. We give a closed-form solution to a linear version of our model. The economy, in that case, follows a two-stage pattern of growth. During the first stage, the debt grows more rapidly than the economy. During the second stage, both the debt and the economy grow at the same rate, and more slowly than in the first stage. During this second stage, the total interest falling due on the debt is never entirely repaid; only an amount proportional to the difference of the rate of interest and the rate of growth of the economy is repaid each period.     

Foreign debt and economic growth

This paper empirically examines the relationship between government foreign debt and the growth rate of per capita GDP based on a total sample of 77 countries, as well as sub‐samples of various regions. Cross‐sectional estimates of the coefficient of foreign debt based on the total sample have a negative sign, but are not always statistically significant. Available data from African countries indicate that foreign debt and the growth rate of per capita GDP were negatively related at a high level of significance. For industrialized and Latin American sub‐samples, this relationship is negative but statistically insignificant. The sub‐sample Asian and other developing countries show a positive but insignificant relationship. JEL classification: F34, H6, O23.     

Italian households’ debt: the participation to the debt market and the size of the loan

This paper analyses Italian households’ participation to the debt market, separating the probability of demanding a loan from the probability of being rationed by lenders; on the supply side of the market specific attention is paid to enforcement costs of the loan contract when customers default. A new result is that the age of the household head acts essentially as a demand factor, rather than a variable influencing the lender’s choice. Both current and future households’ income increase the demand for loans and reduce credit rationing. Self-employed workers are more rationed by lenders. Credit constraints are also linked to the area where the household lives, partly because of different enforcement costs. The final part of the paper analyses the equilibrium quantity of the loan, for households who have a loan and are not constrained. The loan size is positively linked to household net wealth and income profile. An important contribution of this paper is the finding that, not only the participation to the debt market, but also the loan size is negatively affected by enforcement costs.      

A positive theory of government debt

A government that cannot commit to future policy choices faces a trade-off that explains the level of debt. On the one hand, there is an incentive to increase debt and delay taxation, so as to reduce current distortions. On the other hand, inflating current prices lowers the real value of nominal debt and so there is a motive to reduce it now. The size of long-run debt will depend on the interaction of these two opposing incentives. The critical determinant is the willingness of households to substitute away from goods being taxed by inflation. Numerical simulations show that the model matches some qualitative and quantitative properties of U.S. policy variables, including the fact that wars are frequently financed with a mix of instruments. The theory interprets the unusual post-World War II inflation and fast liquidation of accumulated debt as being due to higher long-run debt and expenditure in the period leading up to the war.     

经济全球化下我国税收管理的问题与对策

在经济全球化日益扩大的形势下，税收管理也日益复杂、本文试图探讨经济全球化的税收管理问题，并提出一些建议     

Corruption and public debt: a cross-country analysis

Using data from a large panel of countries over the period 1995–2015, this article empirically investigates the effect of corruption on public debt. Overall, the estimates reveal that corruption increases public debt. The effect, however, appears to be heterogeneous across income-related sample splits: it is stronger for advanced economies, but weaker and less statistically robust for less-developed countries, where external factors such as foreign aid may also affect public debt. The analysis suggests the inadequacy of conventional wisdom assuming that more detrimental fiscal effects of corruption arise in low-income countries.     

Sovereign debt assistance and democratic decision-making

Organizational reforms stimulating democratic decision-making play a role in the economic effectiveness of concessional debt and debt relief. Effectiveness is defined as the increase in project approval produced by debt assistance. This claim is supported by a theoretic model illustrating the role of democratic decision-making in increasing lending as well as in determining the effectiveness of debt assistance. Using the framework of group decision-making in a fixed-size committee, we suggest a novel explanation to the advantage of conditioning debt assistance on organizational reforms that target the decision-making structure in organizations. The results imply that if the aid organization can affect the level of democratization in organizations, it can exploit its advantage and set the debt assistance that induces the maximal increase in project approval. We derive conditions under which organizational reforms that impose various forms of democratic norms in decision-making are important for increasing the effectiveness of debt assistance. We also point to the case where replacing an autocratic decision maker can cause debt assistance effectiveness to decline.     

Optimal foreign debt for Egypt: A stochastic control approach

This study assesses the foreign debt policy in Egypt and contrasts it versus the optimal policy during the period 1985–2008. It also presents a forecast of the optimal debt during the period 2009–2014. The optimal debt policy was derived using an open economy model for Egypt. The uncertainties in the model stem from the uncertainties in the interest or debt service payments and the uncertainties in the rate of return on investments. The stochastic control approach was used to find the optimal debt policy. It was found that Egypt could borrow externally as long as the trend in the rate of return on investments exceeds the trend in the real interest rate or the trend in the rate of the debt service payments. The analysis finds that Egypt's foreign debt was higher than the optimal level before 1997. After 1997, foreign debt seems to converge to the optimal level. However, Egypt's foreign debt is still below its optimal level which results in an opportunity cost for the economy to grow, otherwise, GDP could have recorded a favorable increase.     

Endogenous longevity,public debt and endogenous growth

This study explores the mechanism that causes an inverted U-shaped relationship between the public debt to GDP ratio and the economic growth rate which is observed in empirical studies. We show that this relationship is caused even when the government does not introduce the golden rule of public finance, and government health care expenditure has important role in generating this relationship.