The effectiveness of debt rule on fiscal sustainability: do macroeconomic data matter?
The effectiveness of the debt rule to achieve a certain level of public debt and debt sustainability targets is one of the fiscal sustainability discussed in the literature. The current study attempts to estimate the impact of the debt rule on fiscal sustainability indicators for 77 countries during...
| Main Authors: | , , , |
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| Format: | Article |
| Language: | English |
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Universiti Malaysia Sarawak
2023
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| Online Access: | http://psasir.upm.edu.my/id/eprint/110295/1/110295.pdf |
| _version_ | 1825939847463829504 |
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| author | Cahyadin, Malik Sarmidi, Tamat Khalid, Norlin Siong, Hook Law |
| author_facet | Cahyadin, Malik Sarmidi, Tamat Khalid, Norlin Siong, Hook Law |
| author_sort | Cahyadin, Malik |
| collection | UPM |
| description | The effectiveness of the debt rule to achieve a certain level of public debt and debt sustainability targets is one of the fiscal sustainability discussed in the literature. The current study attempts to estimate the impact of the debt rule on fiscal sustainability indicators for 77 countries during 1985 - 2018. There are two existing indicators are widely utilized cover primary gap and recursive algorithm. To deal with the potential of a random walk of the variables, the two-step system generalized method of moment (GMM) estimator is employed. Specifically, the current study constructs a new fiscal sustainability indicator by incorporating financial technology (FinTech) using principal component analysis (PCA) for 67 countries in 2014 and 2017. The new indicator is the main contribution on the existing literature of fiscal sustainability. The findings reveal that the debt rule has a positive and significant impact on the primary gap, either in the short- or medium-term, implying that the debt rule is effective in encouraging fiscal sustainability. Conversely, it has a negative and significant impact on the recursive algorithm. Similarly, this rule significantly contributes on the new indicator by incorporating FinTech. Therefore, policymakers are challenged to conduct this rule as a key fiscal rule in fiscal sustainability policy. The policymakers should also take more attention to increase the level of FinTech to guarantee fiscally sustainable level. |
| first_indexed | 2024-12-09T02:21:39Z |
| format | Article |
| id | upm.eprints-110295 |
| institution | Universiti Putra Malaysia |
| language | English |
| last_indexed | 2024-12-09T02:21:39Z |
| publishDate | 2023 |
| publisher | Universiti Malaysia Sarawak |
| record_format | dspace |
| spelling | upm.eprints-1102952024-11-07T03:49:19Z http://psasir.upm.edu.my/id/eprint/110295/ The effectiveness of debt rule on fiscal sustainability: do macroeconomic data matter? Cahyadin, Malik Sarmidi, Tamat Khalid, Norlin Siong, Hook Law The effectiveness of the debt rule to achieve a certain level of public debt and debt sustainability targets is one of the fiscal sustainability discussed in the literature. The current study attempts to estimate the impact of the debt rule on fiscal sustainability indicators for 77 countries during 1985 - 2018. There are two existing indicators are widely utilized cover primary gap and recursive algorithm. To deal with the potential of a random walk of the variables, the two-step system generalized method of moment (GMM) estimator is employed. Specifically, the current study constructs a new fiscal sustainability indicator by incorporating financial technology (FinTech) using principal component analysis (PCA) for 67 countries in 2014 and 2017. The new indicator is the main contribution on the existing literature of fiscal sustainability. The findings reveal that the debt rule has a positive and significant impact on the primary gap, either in the short- or medium-term, implying that the debt rule is effective in encouraging fiscal sustainability. Conversely, it has a negative and significant impact on the recursive algorithm. Similarly, this rule significantly contributes on the new indicator by incorporating FinTech. Therefore, policymakers are challenged to conduct this rule as a key fiscal rule in fiscal sustainability policy. The policymakers should also take more attention to increase the level of FinTech to guarantee fiscally sustainable level. Universiti Malaysia Sarawak 2023-08 Article PeerReviewed text en cc_by_nc_sa_4 http://psasir.upm.edu.my/id/eprint/110295/1/110295.pdf Cahyadin, Malik and Sarmidi, Tamat and Khalid, Norlin and Siong, Hook Law (2023) The effectiveness of debt rule on fiscal sustainability: do macroeconomic data matter? International Journal of Business and Society, 24 (2). pp. 677-689. ISSN 1511-6670 https://publisher.unimas.my/ojs/index.php/IJBS/article/view/5953 10.33736/ijbs.5953.2023 |
| spellingShingle | Cahyadin, Malik Sarmidi, Tamat Khalid, Norlin Siong, Hook Law The effectiveness of debt rule on fiscal sustainability: do macroeconomic data matter? |
| title | The effectiveness of debt rule on fiscal sustainability: do macroeconomic data matter? |
| title_full | The effectiveness of debt rule on fiscal sustainability: do macroeconomic data matter? |
| title_fullStr | The effectiveness of debt rule on fiscal sustainability: do macroeconomic data matter? |
| title_full_unstemmed | The effectiveness of debt rule on fiscal sustainability: do macroeconomic data matter? |
| title_short | The effectiveness of debt rule on fiscal sustainability: do macroeconomic data matter? |
| title_sort | effectiveness of debt rule on fiscal sustainability do macroeconomic data matter |
| url | http://psasir.upm.edu.my/id/eprint/110295/1/110295.pdf |
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