Cover Image

Fiscal sustainability in an emerging market economy: when does public debt turn bad?

This paper proposes a Markov-switching model to assess the sustainability of fiscal policy in Malaysia for the period 1980–2014. Our results indicate the policymakers in the past have followed a sustainable fiscal policy, except during the brief periods of economic difficulty. The empirical analysis...

Full description

Saved in:
Bibliographic Details
Main Authors: Baharumshah, Ahmad Zubaidi, Soon, Siew Voon, Lau, Evan
Format: Article
Language:English
Published: Elsevier 2017
Online Access:http://psasir.upm.edu.my/id/eprint/61893/1/Fiscal%20sustainability%20in%20an%20emerging%20market%20economy.pdf
http://psasir.upm.edu.my/id/eprint/61893/
https://www.sciencedirect.com/science/article/pii/S0161893816300990
Tags: Add Tag
No Tags, Be the first to tag this record!
id my.upm.eprints.61893
record_format eprints
spelling my.upm.eprints.618932019-02-26T03:34:40Z http://psasir.upm.edu.my/id/eprint/61893/ Fiscal sustainability in an emerging market economy: when does public debt turn bad? Baharumshah, Ahmad Zubaidi Soon, Siew Voon Lau, Evan This paper proposes a Markov-switching model to assess the sustainability of fiscal policy in Malaysia for the period 1980–2014. Our results indicate the policymakers in the past have followed a sustainable fiscal policy, except during the brief periods of economic difficulty. The empirical analysis reveals that the government should cut the deficits only if they exceed a certain level, to ensure their sustainability in the long-run. Specifically, we find that after public debt exceeds a certain threshold level (above 55% of the gross domestic product), it is negatively correlated with economic activity. In addition to the threshold effect, we confirm the presence of a unidirectional causal relation between debt and growth. Elsevier 2017 Article PeerReviewed text en http://psasir.upm.edu.my/id/eprint/61893/1/Fiscal%20sustainability%20in%20an%20emerging%20market%20economy.pdf Baharumshah, Ahmad Zubaidi and Soon, Siew Voon and Lau, Evan (2017) Fiscal sustainability in an emerging market economy: when does public debt turn bad? Journal of Policy Modeling, 39 (1). 99 - 113. ISSN 0161-8938; ESSN: 1873-8060 https://www.sciencedirect.com/science/article/pii/S0161893816300990 10.1016/j.jpolmod.2016.11.002
institution Universiti Putra Malaysia
building UPM Library
collection Institutional Repository
continent Asia
country Malaysia
content_provider Universiti Putra Malaysia
content_source UPM Institutional Repository
url_provider http://psasir.upm.edu.my/
language English
description This paper proposes a Markov-switching model to assess the sustainability of fiscal policy in Malaysia for the period 1980–2014. Our results indicate the policymakers in the past have followed a sustainable fiscal policy, except during the brief periods of economic difficulty. The empirical analysis reveals that the government should cut the deficits only if they exceed a certain level, to ensure their sustainability in the long-run. Specifically, we find that after public debt exceeds a certain threshold level (above 55% of the gross domestic product), it is negatively correlated with economic activity. In addition to the threshold effect, we confirm the presence of a unidirectional causal relation between debt and growth.
format Article
author Baharumshah, Ahmad Zubaidi
Soon, Siew Voon
Lau, Evan
spellingShingle Baharumshah, Ahmad Zubaidi
Soon, Siew Voon
Lau, Evan
Fiscal sustainability in an emerging market economy: when does public debt turn bad?
author_facet Baharumshah, Ahmad Zubaidi
Soon, Siew Voon
Lau, Evan
author_sort Baharumshah, Ahmad Zubaidi
title Fiscal sustainability in an emerging market economy: when does public debt turn bad?
title_short Fiscal sustainability in an emerging market economy: when does public debt turn bad?
title_full Fiscal sustainability in an emerging market economy: when does public debt turn bad?
title_fullStr Fiscal sustainability in an emerging market economy: when does public debt turn bad?
title_full_unstemmed Fiscal sustainability in an emerging market economy: when does public debt turn bad?
title_sort fiscal sustainability in an emerging market economy: when does public debt turn bad?
publisher Elsevier
publishDate 2017
url http://psasir.upm.edu.my/id/eprint/61893/1/Fiscal%20sustainability%20in%20an%20emerging%20market%20economy.pdf
http://psasir.upm.edu.my/id/eprint/61893/
https://www.sciencedirect.com/science/article/pii/S0161893816300990
_version_ 1643837618810519552
score 13.211869

Similar Items