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Fiscal fatigue, public debt limits and fiscal space in some MENA countries

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  • Hela Ben Hassine Khalladi

    (Faculté des Sciences Economiques et de Gestion de Tunis- Université Tunis El Manar)

Abstract

In the light of the evolution of public debt in some emerging countries during recent years, we have tried to assess debt limits, i.e the threshold from which debt starts to follow an explosive path, according to Ganiko, Melgarejo & Montoro (2016) model. This model was largely inspired from Gosh, Kim Mendoza, Ostry et Qureshi (2013). We have assessed the determinants of the public debt dynamics, the government primary balance as well as the effective cost of debt for 27 emerging countries during the 2000- 2017 period. Results show the existence of a fiscal fatigue, namely the loss of control of the debt accumulation using fiscal adjustments when debt increases. The debt ratio is an important determinant of the effective cost of public debt, since the level of debt increases EMBI Global spreads. Finally, debt limits range between 160 and 220% of GDP for our sample giving evidence of positive fiscal spaces for the four MENA countries used in this paper.

Suggested Citation

  • Hela Ben Hassine Khalladi, 2019. "Fiscal fatigue, public debt limits and fiscal space in some MENA countries," Economics Bulletin, AccessEcon, vol. 39(2), pages 1005-1017.
    • Handle: RePEc:ebl:ecbull:eb-19-00193
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    References listed on IDEAS

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    1. Atish R. Ghosh & Jun I. Kim & Enrique G. Mendoza & Jonathan D. Ostry & Mahvash S. Qureshi, 2013. "Fiscal Fatigue, Fiscal Space and Debt Sustainability in Advanced Economies," Economic Journal, Royal Economic Society, vol. 0, pages 4-30, February.
    2. Falilou Fall & Jean-Marc Fournier, 2015. "Macroeconomic uncertainties, prudent debt targets and fiscal rules," OECD Economics Department Working Papers 1230, OECD Publishing.
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    5. Luiz de Mello, 2008. "Estimating a fiscal reaction function: the case of debt sustainability in Brazil," Applied Economics, Taylor & Francis Journals, vol. 40(3), pages 271-284.
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    7. Andrei G. Simonassi & Ronaldo A. Arraes & Augusto Marcos C. de Sena, 2014. "Fiscal reaction under endogenous structural changes in Brazil," Economia, ANPEC - Associação Nacional dos Centros de Pós-Graduação em Economia [Brazilian Association of Graduate Programs in Economics], vol. 15(1), pages 68-81.
    8. Ganiko, Gustavo & Melgarejo, Karl & Montoro, Carlos, 2016. "How much is too much? The fiscal space in emerging market economies," Working Papers 2016-014, Banco Central de Reserva del Perú.
    9. Gerdie Everaert & Stijn Jansen, 2017. "On The Estimation Of Panel Fiscal Functions: Heterogeneity Or Fiscal Fatigue?," Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium 17/930, Ghent University, Faculty of Economics and Business Administration.
    10. Fournier, Jean-Marc & Fall, Falilou, 2017. "Limits to government debt sustainability in OECD countries," Economic Modelling, Elsevier, vol. 66(C), pages 30-41.
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    Cited by:

    1. Ryota Nakatani, 2021. "Fiscal Rules for Natural Disaster- and Climate Change-Prone Small States," Sustainability, MDPI, vol. 13(6), pages 1-26, March.

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    More about this item

    Keywords

    Public debt sustainability; fiscal fatigue; fiscal space; fiscal reaction function; MENA;
    All these keywords.

    JEL classification:

    • F3 - International Economics - - International Finance
    • E6 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook

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