Baharumshah, A.Z and Soon, Siewvoon and Lau, Evan (2017) Fiscal sustainability in an emerging market economy: When does public debt turn bad? Journal of Policy Modeling, 39 (1). pp. 99-113. ISSN 01618938
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Abstract
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. © 2016 The Society for Policy Modeling
| Item Type: | Article |
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| Uncontrolled Keywords: | Debt; Economic growth; Endogenous multiple breaks; Fiscal sustainability, research, Universiti Malaysia Sarawak, unimas, university, universiti, Borneo, Malaysia, Sarawak, Kuching, Samarahan, ipta, education |
| Subjects: | H Social Sciences > HG Finance |
| Divisions: | Academic Faculties, Institutes and Centres > Faculty of Economics and Business Faculties, Institutes, Centres > Faculty of Economics and Business |
| Depositing User: | Ibrahim |
| Date Deposited: | 17 Feb 2017 02:17 |
| Last Modified: | 10 Oct 2017 03:29 |
| URI: | http://ir.unimas.my/id/eprint/15340 |
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