Fragmented Politics and Public Debt

Ernesto Crivelli (), Sanjeev Gupta, Carlos Mulas-Granados and Carolina Correa-Caro

No 2016/190, IMF Working Papers from International Monetary Fund

Abstract: In this paper, we study the impact of fragmented politics on public debt—in particular, between two consecutive legislative elections. Using data for 92 advanced and developing countries during 1975-2015, we find a positive association between political fragmentation and public debt changes. Corruption magnifies the effects; with higher perceived corruption, political fragmentation has a bigger sway on debt increases. The influence of political fragmentation on debt dynamics is somewhat asymmetric, with larger and more significant effects during periods of debt reduction. Establishment of fiscal councils helps attenuate the negative impact of political fragmentation on public debt dynamics.

Keywords: WP; center; fiscal policy; veto player; dummy variable; Public debt; political fragmentation; common pool; veto players; debt accumulation; government debt dynamics; debt episode; debt issuance; accumulation rate; debt creation; debt increase; government term; Debt sustainability analysis; Corruption; Fiscal councils; Debt reduction (search for similar items in EconPapers)
Pages: 31
Date: 2016-09-19
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Citations: View citations in EconPapers (7)

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