Budget Deficit Sustainability of Selected Developed and Developing Countries During Covid-19 Pandemic

Findik Ozlem Alper, Ali Eren Alper () and Gurcem Ozayturk
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Findik Ozlem Alper: Nigde Omer Halisdemir University
Ali Eren Alper: Nigde Omer Halisdemir University
Gurcem Ozayturk: Nigde Omer Halisdemir University

A chapter in Effective Public Administration Strategies for Global "New Normal", 2022, pp 225-246 from Springer

Abstract: Abstract The sustainability of budget deficits is one of the determining factors regarding the sustainability of economic policies. Nevertheless, the Covid-19 pandemic, which has been effective all over the world since the first days of the year 2020, caused a rise in the public expenditures of countries, whereas a decline in public revenues, and hence, budget deficits. Based on the intertemporal budget constraint approach, this study aims to investigate the sustainability of the budget deficit in the G-7 countries as well as the selected developing countries, including Brazil, Russia, South Africa, and Turkey, during the periods before and after the Covid-19 pandemic, employing the (Quintos, Journal of Business & Economic Statistics 13:409–417, 1995) methodology. In the study, where the Fourier KPSS unit root and Fourier ADL cointegration tests, which take into account both smooth and sharp structural breaks, are performed, the existence of a cointegrated relationship is examined in all countries included in the analysis, and the long-term coefficients are determined by employing the FMOLS and DOLS estimation methods. The estimation results indicate that budget deficits sustainability is in strong form merely in Germany, Japan, Russia, and Turkey throughout both periods. It is determined that the budget deficits, which were in a strong sustainable form for Italy during the pre-Covid-19 period, have transformed into a weak sustainable form throughout the pandemic period.

Keywords: Budget deficit; Sustainability; Fourier; Covid-19; C22; G18; H61; H62 (search for similar items in EconPapers)
Date: 2022
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Persistent link: https://EconPapers.repec.org/RePEc:spr:sprchp:978-981-19-3116-1_15

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DOI: 10.1007/978-981-19-3116-1_15

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