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Russia’s Fiscal Sustainability. What Bohn’s Test Has Revealed

Boris I. Alekhin ()
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Boris I. Alekhin: Russian State University for the Humanities, Moscow 125993, Russian Federation

Finansovyj žhurnal — Financial Journal, 2019, issue 5, 21-36

Abstract: Sustainability of Russia’s fiscal policy in 1999–2018 was explored by applying Bohn’s test to 20 annual observations and 79 quarterly observations. Budget policy is sustainable as long as primary surpluses positively and significantly respond to changes in the debt-GDP ratio. The test revealed that in both samples the fiscal reaction is positive and significant for total and external debt ratios, and negative and significant for domestic debt ratio. So, overall Russia’s fiscal policy was sustainable in 1999–2018. Large revenues from oil and gas exports secured a modest budget surplus, on average, over the period, thus reducing the demand for borrowed funds and producing a very low domestic debt ratio. As Bohn notes,“an inefficiently low level of public debt” may explain why the test fails in certain economies.

Keywords: government debt; fiscal policy; fiscal sustainability; Bohn’s test (search for similar items in EconPapers)
JEL-codes: E62 F34 F41 H6 H68 (search for similar items in EconPapers)
Date: 2019
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DOI: 10.31107/2075-1990-2019-5-21-36

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