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Debt sustainability in East Asia after the financial crisis

Author

Listed:
  • Hyeon-seung Huh
  • Raghbendra Jha
  • Chung Mo Koo

Abstract

For the East Asian countries, the total amount of government debt has risen sharply over the following several years in the wake of the Asian financial crisis. The purpose of this paper is to assess whether the current levels of government debt are sustainable for those severely attacked countries, namely, Korea, Malaysia, Indonesia, the Philippines, and Thailand. Under the inter-temporal budget constraint model, we test for fiscal sustainability and examine whether there was any discernible change in the behaviour of government debt following the Asian crisis. Empirical analysis indicates that the levels of government debt are not sustainable in all counties under study. It also shows that the crisis contributes significantly to push the government debt in excess of its sustainable level. This urges policy attention for fiscal consolidation.

Suggested Citation

  • Hyeon-seung Huh & Raghbendra Jha & Chung Mo Koo, 2005. "Debt sustainability in East Asia after the financial crisis," CAMA Working Papers 2005-23, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
    • Handle: RePEc:een:camaaa:2005-23
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    File URL: https://cama.crawford.anu.edu.au/sites/default/files/publication/cama_crawford_anu_edu_au/2021-06/23_huh_jha_koo_2005.pdf
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    More about this item

    JEL classification:

    • E6 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook
    • H5 - Public Economics - - National Government Expenditures and Related Policies
    • H6 - Public Economics - - National Budget, Deficit, and Debt

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