Fiscal uncertainty with donor herding and domestic debt crisis

Yohane Khamfula ()

No 07/2006, Working Papers from Stellenbosch University, Department of Economics

Abstract: This study attempts to analyse how uncertainty about future government spending affects the representative individual’s lifetime utility by using a discrete inter-temporal optimizing model. Intuitively, the study shows that the overall effect of a highly positive domestic-debt repayment gap is such that the expected government spending for the next period will go down. The implication of the reduction in government spending due to uncertainty about future debt servicing is that the output and the corresponding investment for the next period will be expected to go down. This outcome is further reinforced by the higher taxes imposed on consumers in an attempt to minimise the next period’s domestic-debt repayment gap.

Keywords: Donor herding behavior; domestic debt crisis; fiscal uncertainty; domestic-debt; repayment gap; government spending (search for similar items in EconPapers)
JEL-codes: E6 F3 (search for similar items in EconPapers)
Date: 2006
New Economics Papers: this item is included in nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
https://www.ekon.sun.ac.za/wpapers/2006/wp072006/wp-07-2006.pdf First version, 2006 (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:sza:wpaper:wpapers21

Access Statistics for this paper

More papers in Working Papers from Stellenbosch University, Department of Economics Contact information at EDIRC.
Bibliographic data for series maintained by Melt van Schoor ().