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Determinants of budget deficits: Focus on the effects from the COVID-19 crisis

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  • Dragan Tevdovski
  • Petar Jolakoski
  • Viktor Stojkoski

Abstract

This paper revisits the discussion on determinants of budget balances and investigates the change in their effect in light of the COVID-19 crisis by utilizing data on 43 countries and a system generalized method of moments approach. The results show that the overall impact of the global pandemic led to a disproportionate increase in the magnitude of the estimated effects of the macroeconomic determinants on the budget balance. However, we also find that more developed economies were able to undertake higher stimulus packages for the relatively same level of primary balance. We believe that one of the factors affecting this outcome is that that they exhibit a higher government debt position in domestic currency denomination.

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  • Dragan Tevdovski & Petar Jolakoski & Viktor Stojkoski, 2021. "Determinants of budget deficits: Focus on the effects from the COVID-19 crisis," Papers 2105.14959, arXiv.org.
    • Handle: RePEc:arx:papers:2105.14959
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    Cited by:

    1. Heimberger, Philipp, 2023. "This time truly is different: The cyclical behaviour of fiscal policy during the Covid-19 crisis," Journal of Macroeconomics, Elsevier, vol. 76(C).

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    JEL classification:

    • H10 - Public Economics - - Structure and Scope of Government - - - General
    • H12 - Public Economics - - Structure and Scope of Government - - - Crisis Management
    • P0 - Political Economy and Comparative Economic Systems - - General

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