Stock Flow Adjustments in Sovereign Debt Dynamics: The Role of Fiscal Frameworks

Antonio Afonso and Joao Jalles

No 2019/66, Working Papers REM from ISEG - Lisbon School of Economics and Management, REM, Universidade de Lisboa

Abstract: We assess, via system GMM, how Stock Flow Adjustments (SFA) affect the debt-to-GDP ratio in 65 countries (covering developed and emerging and low-income countries) between1985-2014. We find that SFAs positively contribute to the change in the debt-to-GDP ratio with a coefficient close to one. The existence of fiscal rules with monitor compliance contributes to lower the debt level. The fall in the debt ratio due to fiscal rules before the crisis was between 1.7%-4.2% of GDP while after the crisis, revenue and debt-based rules did not contribute to the reduction of debt, which was reinforced with large SFAs.

Keywords: government debt; budget deficit; structural deficit; intertemporal government budget constraint; fiscal rules; panel data; system GMM; filtering (search for similar items in EconPapers)
JEL-codes: E62 F32 F41 H87 (search for similar items in EconPapers)
Date: 2019-01
New Economics Papers: this item is included in nep-mac
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Related works:
Journal Article: Stock flow adjustments in sovereign debt dynamics: The role of fiscal frameworks (2020)
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Persistent link: https://EconPapers.repec.org/RePEc:ise:remwps:wp0662019

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