Fiscal strategies for sustainable debt management in developing economies: dynamic common correlated effects approach

Asad Nisar () and Rabia Rafique ()
Additional contact information
Asad Nisar: Central University of Finance and Economics
Rabia Rafique: Central University of Finance and Economics

Economic Change and Restructuring, 2025, vol. 58, issue 4, No 16, 31 pages

Abstract: Abstract In the aftermath of the COVID-19 pandemic, public debt in emerging and developing economies surged to a historic high, averaging nearly 67% of GDP by 2021. As soaring debt levels cast a long shadow over macroeconomic stability and sustainable growth, finding effective strategies is more urgent than ever. This study offers fresh insights by exploring the role of fiscal consolidation, public–private partnerships (PPPs), and resource productivity in reducing public debt using a panel of 45 emerging and developing economies from 2001 to 2021. Employing the Dynamic Common Correlated Effects estimator, this study accounts for heterogeneous cross-sectional dependence and long-run debt dynamics. The findings reveal that fiscal consolidation and public–private partnerships reduce the public debt, whereas resource productivity posits weaker significant influence toward public debt reduction. These findings are further confirmed by Augmented Mean Group Estimation approach. Furthermore, this study finds that all three factors are robust to negatively influence public debt in upper-middle-income economies, whereas only fiscal consolidation and public–private partnership are effective to reduce public debt in lower-middle-income economies. These insights underscore the importance of tailored fiscal frameworks, institutional reforms for PPP efficiency, and long-term strategies to enhance resource productivity in ensuring debt sustainability and macroeconomic stability.

Keywords: Fiscal consolidation; Public–private partnerships; Resource productivity; Public debt (search for similar items in EconPapers)
JEL-codes: C33 E62 H63 O23 (search for similar items in EconPapers)
Date: 2025
References: Add references at CitEc
Citations:

Downloads: (external link)
http://link.springer.com/10.1007/s10644-025-09909-9 Abstract (text/html)
Access to the full text of the articles in this series is restricted.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:kap:ecopln:v:58:y:2025:i:4:d:10.1007_s10644-025-09909-9

Ordering information: This journal article can be ordered from
http://www.springer. ... nt/journal/10644/PS2

DOI: 10.1007/s10644-025-09909-9

Access Statistics for this article

Economic Change and Restructuring is currently edited by George Hondroyiannis

More articles in Economic Change and Restructuring from Springer
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().