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The role of fiscal policy rating variables on economic growth in the LDCs

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  • António Afonso
  • M. Carmen Blanco-Arana

Abstract

We assess empirically the role of the World Bank’s Country Policy so-called fiscal policy rating variables (fiscal rating, debt rating and revenue rating) on economic growth in the 46 Least Developed Countries (LDCs) in the world, during the period 1990-2022. We also investigate the role of key fiscal variables on economic growth (government debt, expenditure and tax revenue). The empirical evidence suggests that better fiscal policy rating strongly and positively affects economic growth. We also find that the influence of government debt and tax revenue can contribute to influence economic growth. Results are robust by applying a fixed effects model and GMM model.

Suggested Citation

  • António Afonso & M. Carmen Blanco-Arana, 2024. "The role of fiscal policy rating variables on economic growth in the LDCs," Working Papers REM 2024/0331, ISEG - Lisbon School of Economics and Management, REM, Universidade de Lisboa.
    • Handle: RePEc:ise:remwps:wp03312024
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    More about this item

    Keywords

    economic growth; LDCs; fiscal policy; fixed effects model.;
    All these keywords.

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • O10 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - General
    • O43 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Institutions and Growth

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