On democracy and debt

Balkan, Erol; Greene, Kenneth V.

doi:10.1007/bf00224681

Cited by 9 publications

(5 citation statements)

References 7 publications

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“…For instance, Gary Anderson [1988] using a simple model supports the thesis that the external public debt levels will be higher in dictatorship. Next, Balkan and Greene [1990] denying the Anderson's contribution and using larger, but still limited, sample of countries and the statistical analysis found little empirical support for the thesis that democracy or autocracy infl uence foreign debt [Balkan, Greene 1990] On the other hand, Oatley [2010] provides the statistical evidences that the autocratic governments accumulated substantially larger foreign debt relative to their national income than democratic governments. Moreover, the studies have shown that the direct democracy (fi nancial referendum) contributes to a reduction of public debt in Switzerland [Feld, Kirchgässner 2001, pp.…”

Section: Public Debt -Reasons Of Public Debt and Strategies To Public...mentioning

confidence: 94%

Can Democracy Harm Public Finance? Some Evidences from Europe

Zawadzka-Pąk¹,

Jamróz²

2022

Investments and Public Finance

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James Buchanan and Richard Wagner in their famous book “Democracy in Deficit” note that democracy has not enough fiscal discipline because the citizens’ representatives are chosen in the election and they take the budgetary decisions seeking the re-election. Their theory of public choice may suggest the existence of a positive relationship between the democracy’s quality and the public debt level reflecting the long-lasting consequences of the budgetary decisions of policy-makers. Thus, we formulate the following research question: Is democratic system harmful for public finance? To operationalize the democratic system, we use five democracy indices (i.e., electoral, liberal, participatory, deliberative, and egalitarian), and the public debt to operationalize the threat for public finance. Conclusions put in a new light the theory, as first the study confirmed that there are statistically significant relationships between democracy’s quality and public debt and, however not in case of every democracy index and every European country.

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Section: Public Debt -Reasons Of Public Debt and Strategies To Public...mentioning

confidence: 94%

Can Democracy Harm Public Finance? Some Evidences from Europe

Zawadzka-Pąk¹,

Jamróz²

2022

Investments and Public Finance

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“…Lastly, Tarek and Ahmed (2017) find that the corruption index is significant, with a positive sign at a 99% confidence interval on public debt accumulation. Balkan & Greene (1990) claim that autocratic regimes tend to issue more debt, estimating a negative causality between democracy and debt, while Schragger (2012) argues that being backed up by the Federal Reserve and pursuing the aim of advancing democracy and expanding opportunities, the relevant institutions have failed to alleviate state overspending. On the other hand, undeveloped and fragile democracies in their earlier stages are associated with higher debt issuance.…”

Section: Review Of the Scientific Literaturementioning

confidence: 99%

Assessment of Public Debt Drivers in the Balkans

Bica,

Imeraj

2024

ISF

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This study investigates the main drivers of public debt and assesses the overall debt structure in the Balkan countries. Regardless of a close to 50% average debt level, there is no immediate threat of escalation compared to developed countries. The empirical analysis leverages three advanced econometric techniques to control for cross-country specifics and potential biases due to data disruptions. Sourced from the World Bank and the International Monetary Fund, the data are of quantitative type collected from 2000- 2021. Empirical evidence suggests that Real GDP Growth and Current Account balance are crucial determinants of economic performance, with political regimes also exerting a notable influence. As the time frame of the research consists of the COVID-19 pandemic, it is essential to consider structural breakdowns to avoid any coefficient biases. Unsurprisingly, the dummy variable COVID-19 depicts a significant effect as public debt increased by 2.51 percentage points once the pandemic occurred. The rest of the variables, including interest rates, government expenditure, and unemployment rate, are statistically insignificant. Empirical evidence from the present study supports the hypothesis that pursuing genuine economic development through the advocacy of domestic production and trade, coupled with the consolidation of democratic institutions, can act as a check on the spiraling growth of public debt.

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“…The constitutional form of government has been linked to sovereign default. Balkan and Greene (1990), for instance, discuss the relationship between democracy and debt. Strong economic fundamentals and parliamentary systems in democracies with sufficient checks and balances lower the risks of external debt defaults, as reported in Van Rijckeghem and Weder (2009).…”

Section: Overview Of the Literaturementioning

confidence: 99%

Convergence in Sovereign Debt Defaults: Quantifying the Roles of Institutions

Bhattacharya

Inekwe

2021

Oxf Bull Econ Stat

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In this study, using an ex ante measure, we examine the convergence patterns in sovereign defaults among 101 developing countries for the period from 1990 to 2015. We employ the club convergence algorithm to determine convergence paths across countries and examine the role of institutions in shaping the observed convergence patterns. The merging of clubs reveals three distinct convergent sub‐clubs. Countries in each of these sub‐clubs tend to exhibit a similar pattern of long‐run convergence in cases of sovereign debt default. Countries with better institutions are less likely to belong to a club with greater risks of sovereign defaults by 7% points. Unlike trade openness, levels of external debt, inflation and current account balance increase the probability of default in these economies.

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On democracy and debt

Cited by 9 publications

References 7 publications

Can Democracy Harm Public Finance? Some Evidences from Europe

Can Democracy Harm Public Finance? Some Evidences from Europe

Assessment of Public Debt Drivers in the Balkans

Convergence in Sovereign Debt Defaults: Quantifying the Roles of Institutions

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