Fiscal sustainability in the presence of structural breaks: Does overconfidence on resource exports hurt government’s ability to finance debt? Evidence from Nigeria

Aliyu, Alhaji Jibrilla

doi:10.1080/23322039.2016.1170317

Cited by 5 publications

(2 citation statements)

References 69 publications

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“…where Sttrue˜=Yt−ψxtrue˜−Ztδtrue˜t, t=2,…,T,δttrue˜ indicates a vector of coefficients in the regression of Δ Y t on Δ Z t , and ψxtrue˜=Y1−Z1δttrue˜ and Y 1 and Z 1 are the first observations of Y t and Z t , respectively. For the two structural breaks in level and trend, Z t = [1, t , D 1 t , D 2 t , DT 1 t , DT 2 t ]’ is a typical case with an intercept, linear time trend and two structural breaks in level and trend; where DT kt = t if t ≥ TB j + 1, j = 1, 2, and 0 otherwise (Jibrilla, 2016; Narayan, 2005).…”

Section: Methodology and Data Sourcementioning

confidence: 99%

Evaluating the Long-run Sustainability of India’s Fiscal Management with Structural Change

Shankar

Trivedi

2022

Margin: The Journal of Applied Economic Research

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Amidst output moderation, rising deficits and increasing debt, India’s macro-fiscal arithmetic witnesses severe strain and often invites downward rating pressures by sovereign rating agencies. The article aims to examine India’s fiscal sustainability during the past four decades employing time series integration and cointegration techniques, with structural breaks in a sequential schematic framework under intertemporal government budget constraints. It examines stationarity with exogenous and endogenous structure breakpoint(s) at the level and slope for government revenue and expenditure data-generating process following Narayan and Popp (2010), Lee and Strazicich (2003), Zivot and Andrews (1992) and Perron (1989). Furthermore, the cointegration vectors of these fiscal variables in Fully Modified Ordinary Least Squares (FMOLS), Dynamic Ordinary Least Squares (DOLS) and a generic cointegration framework following Gregory and Hansen (1996) with structural shifts confirm the sustainability of India’s fiscal management. However, a less-than-unity estimate of the DOLS cointegrating slope parameter with few exogenous breakpoints signifies a weak form of sustainability and hence emphasises a credible commitment to fiscal consolidation going forward for India. JEL Codes: C32, H50, E62, H62

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Section: Methodology and Data Sourcementioning

confidence: 99%

Evaluating the Long-run Sustainability of India’s Fiscal Management with Structural Change

Shankar

Trivedi

2022

Margin: The Journal of Applied Economic Research

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“…The Indian regime could be interpreted as "more flexible" during normal market conditions with the accent shifting to "management" when the market turns disorderly (Pattanaik and Sahoo, 2003). However, recently, the Indian currency has been quite volatile [1]. More importantly, it seems that the government is in mood to a frequent intervention in the exchange rate market [2].…”

Section: Jfep 74mentioning

confidence: 99%

Macroeconomic fundamentals and dynamics of the Indian rupee-dollar exchange rate

Sharma

Setia

2015

Journal of Financial Economic Policy

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Purpose – This paper aims to examine the relationship between Indian rupee-US dollar exchange rate and the macroeconomic fundamentals for the post-economic reform period. Design/methodology/approach – The authors have used an empirical model which includes a range of important macroeconomic variables based on the basic monetary theories of exchange rate determination. At the first stage of the analysis, they have tested structural break in the data. Subsequently, they have employed the fully modified ordinary least square, Wald’s coefficient restriction and impulse response functions (IRF) to estimate the monetary model in the long- and short-run horizons. Findings – Results of analyses indicate that the macroeconomic fundamentals determine exchange rate in a significant way, but their effect varies sizably across the periods. The IRF illustrate the importance of interest rate in controlling exchange rate volatility. Practical implications – The analysis of the behavior of inter-relationship among macroeconomic variables will help policymakers in a deep-rooted understanding of this complex and time-varying relationship. Originality/value – Most of the existing studies have tested the impact of a single or a few macroeconomic fundamentals on exchange rate. But in the present study, we have tested the impact of a range of important variables, i.e. money supply, real income or output, price level and trade balance. Further, considering the importance of structural breaks in data, they authors have employed standard tests of structural break and incorporated the issue in the cointegration analysis.

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Policy asymmetries and fiscal sustainability: evidence from Nigeria

Adeosun

Ayodele

Jongbo

2021

AJEMS

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PurposeThis study examines and compares different specifications of the fiscal policy rule in the fiscal sustainability analysis of Nigeria.Design/methodology/approachThis is methodologically achieved by estimating the baseline constant-parameter and Markov regime switching fiscal models. The asymmetric autoregressive distributed lag fiscal model is also employed to substantiate the differential responses of fiscal authorities to public debt.FindingsThe baseline constant-parameter fiscal model provides mixed results of sustainable and unsustainable fiscal policy. The inconclusiveness is adduced to instability in primary fiscal balance–public debt dynamics. This makes it necessary to capture regime switches in the fiscal policy rule. The Markov switching estimations show a protracted fiscal unsustainable regime that is inconsistent with the intertemporal budget constraint (IBC). The no-Ponzi game and debt stabilizing results of the Markov switching fiscal model further revealed that the transversality and debt stability conditions were not satisfied. Additional findings from the asymmetric autoregressive model estimation show that fiscal consolidation responses vary with contraction and expansion in output and spending, coupled with downturns and upturns in public debt dynamics in both the long and short run. These findings thus confirm the presence of asymmetries in the fiscal policy authorities' reactions to public debt. Further, additional evidences show the violation of the IBC which is exacerbated by the deleterious effect of the pro-cyclical fiscal policy response in boom on the improvement of the primary fiscal balance.Originality/valueThis study deviates from the extant literature by accommodating time variation, periodic switches and fiscal policy asymmetries in the fiscal sustainability analysis of Nigeria.

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Fiscal sustainability in the presence of structural breaks: Does overconfidence on resource exports hurt government’s ability to finance debt? Evidence from Nigeria

Cited by 5 publications

References 69 publications

Evaluating the Long-run Sustainability of India’s Fiscal Management with Structural Change

Evaluating the Long-run Sustainability of India’s Fiscal Management with Structural Change

Macroeconomic fundamentals and dynamics of the Indian rupee-dollar exchange rate

Policy asymmetries and fiscal sustainability: evidence from Nigeria

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