Driving Factors of Fiscal Stress: Panel Data Analysis for Emerging Countries

Haleema Sadia, Jawad Ahmad Azeez and Kainat Shehzadi
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Haleema Sadia: International Islamic University, Islamabad
Jawad Ahmad Azeez: International Islamic University, Islamabad
Kainat Shehzadi: Quaid-i-Azam University

Journal of Economic Sciences, 2025, vol. 4, issue 1, 91-104

Abstract: This study analyzes potential driving factors of fiscal stress for a panel of emerging countries from 2000 to 2020. It considers various factors that affect fiscal stress, such as contingent liabilities, macroeconomic shocks, fiscal shocks, non-fiscal vulnerabilities, political risk, and other factors. The study develops indices for institutional quality and fiscal and financial stress by applying principal component analysis. The authors use several static and dynamic panel data techniques to ensure the robustness of the results. The findings underscore the vital role of fiscal fundamentals in determining fiscal stress. Moreover, unsustainable public debt significantly intensifies fiscal stress. In addition, a high level of political risk and contractual contingent liabilities exert upward pressure on rollover risk in these countries. The authors propose more effective management of public debt, particularly external debt, and advocate for fiscal discipline as a critical strategy to mitigate fiscal stress. Policy coordination may serve as a potential means to reduce the impact of financial crises on escalating rollover risk. The fourth-generation theoretical models of crises inspire the extension of the fiscal monitoring framework.

Keywords: Tourism, Fiscal stress; Emerging economies; Transmission; Political risk; Fiscal sustainability (search for similar items in EconPapers)
JEL-codes: D64 Q20 Q22 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:azm:journl:v:4:y:2025:i:1:p:91-104

DOI: 10.55603/jes.v4i1.a6

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