The Effect of Global Economic Policy Uncertainty on Public Spending: A Perspective on the External Debt and Shadow Economy

Canh Nguyen and Christophe Schinckus ()
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Christophe Schinckus: University of Economics Ho Chi Minh City (UEH)

Review of Development Finance Journal, 2022, vol. 12, issue 1, 16-30

Abstract: This study examines the effects of global uncertainty and its associations with each country’s external debt and shadow economy on the government expenditures for a sample of 69 low and middle-income economies. Firstly, a higher external debt and a higher shadow economy reduce the ratio of government consumption to output. Secondly, an increase in the Global Economic Policy Uncertainty decreases government expenditures suggesting a negative effect of uncertainty on public spending in low and middle-income economies. Thirdly, the effect of the global EPU on public spending is weaker in countries with high external debt or shadow economy.

Keywords: Government consumption; Economic policy uncertainty; Shadow economy; External debt; Low and middle income (search for similar items in EconPapers)
JEL-codes: D81 E62 F34 H63 O17 (search for similar items in EconPapers)
Date: 2022
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Persistent link: https://EconPapers.repec.org/RePEc:afj:journ3:v:12:y:2022:i:1:p:16-30

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