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References Milman N, Steig T, Koefoed P, Pedersen P, Fenger K, Nielsen FC. Frequency of the hemochromatosis HFE mutations C282Y, H63D, and S65C in blood donors in the Faroe Islands. Ann Hematol 2005; 84(3): 146-149. Feder JN, Gnirke A, Thomas W, Tsuchihashi Z, Ruddy DA, Basava A, Dormishian F, Domingo R Jr, Ellis MC, Fullan A, Hinton LM, Jones NL, Kimmel BE, Kronmal GS, Lauer P, Lee VK, Loeb DB, Mapa FA, McClelland E, Meyer NC, Mintier GA, Moeller N, Moore T, Morikang E, Prass CE, Quintana L, Starnes SM, Schatzman RC, Brunke KJ, Drayna DT, Risch NJ, Bacon BR

Abstract

While the literature on determinants of sovereign default is voluminous, the links between private indebtedness and the probability of public bankruptcy have not been studied extensively. In this paper we aim to fill this gap and to shed more light on the influence of the size and structure of private debt on sovereign default probability. We focus on developing and emerging market economies over the years 1970–2012. The main conclusions are that both the size and the structure of private borrowings affect the probability of a sovereign default.

Abstract

Public debt management represents an important part of public finance in each economy and in most countries is in administrative authority within the Ministry of Finance. The Public Debt Administration is the holder of public debt policy, presenting one of the most important branches of macroeconomic policy and has stabilization and developmental function. The Public Debt Management determines the schedule, scope and currency structure of the security issuance in the domestic and international financial markets and directly affects the level of indebtedness of the country and the level of foreign exchange risk. The main objective of public debt management is to ensure that the government’s financing needs and its payment obligations are met at the lowest possible cost over the medium to long run, consistent with a prudent degree of risk. Adequate public debt management is crucial in view of the severe macroeconomic consequences of non-enforcement of public debt and the potential expansion of instability to other sectors in an economy. All this indicates the need for an adequately setting up current and future public debt management strategy and the development of instruments to reduce borrowing costs and foreign exchange risk levels. The aim of this paper is to present public debt management in selected Central East Europe countries (Serbia, Hungary, Croatia, Albania and Slovenia) and to recommend further improvement of its public debt strategies.

Abstract

Purpose: The article analyzes the possible methods of public debt management, which not only aim to meet regulatory requirements but also obtain a market premium in the form of an optimal level of the yield on government bond yields that will be profitable for the issuer. The study analyzes the situation in the public finance sector in the countries that form the Visegrád Group (V4). The authors evaluate the main regulatory requirements of EU law in the area of numerical fiscal rules and their impact on the yield on basic securities such as ten-year government bonds, which directly influences the cost of servicing long-term public debt.

Methodology: The study uses desk research method for theoretical reasoning to verify the research hypothesis. The study seeks to answer the question of whether the application of national and EU fiscal rules in V4 budgetary frameworks contributes to lower yields on ten-year bonds and thereby reduces the cost of public debt. The authors utilize time series and cause-effect analysis as well as quantitative research for the systematization of statistical information and regression analysis for the examination of statistical dependencies.

Findings: The basic parameters subject to financial assessment within the fiscal rules index are (1) the deficit of public finance sector and (2) public debt with its servicing costs. In 2005–2016, the ratio of the public finance sector deficit to GDP was shaped in such a way that most V4 countries required the institution of excessive deficit procedures and further disciplinary regulations. The assessment of the situation in the public finance sector in the area of budget deficit and public debt does not translate into the yield on government bonds of non-Eurozone countries. Model-based testing indicates that the financial markets – when deciding to evaluate or purchase government bonds of non-Eurozone countries – failed to acknowledge the implementation of fiscal rules in these countries and its possible effects.

Originality: The study focuses on a unique comprehensive analysis of national fiscal rules employed in individual V4 countries and their impact on the yield on government bonds throughout the entire EU membership of the V4. What holds the greatest cognitive value in this article is the answer to the question of whether Eurozone membership impacts the valuation of a country’s public debt.

Abstract

This paper explores the causality between public debt, public debt service and economic growth in South Africa covering the period 1970 – 2017. The study employs the autoregressive distributed lag (ARDL) bounds testing approach to cointegration and the multivariate Granger-causality test. The empirical results indicate that there is unidirectional causality from economic growth to public debt, but only in the short run. However, the study fails to establish any causality between public debt service and economic growth, both in the short run and long run. In line with the empirical evidence, the study concludes that it is economic growth that drives public debt in South Africa, and that the causal relationship between public debt and economic growth is sensitive to the timeframe considered. The paper recommends policymakers in South Africa to consider growth-enhancing policies in the short run, since poor economic performances may lead to high public debt levels.

Abstract

The aim of this article is to present the analysis of treasury bonds issued by the Ministry of Finance on international financial markets to finance debt. The author identifies the structure of bonds on the domestic and international markets. The study attempts to answer the question of whether the Ministry of Finance should issue bonds on foreign markets and what kinds of risk should be understood in the process of managing issues.

Abstract

The aim of the article is to investigate the fiscal determinants of stock-flow adjustment (SFA). Previous literature suggests that SFA may be used strategically to reduce budget deficit and public debt. As such, SFA impairs fiscal transparency and may endanger fiscal sustainability. Therefore, special attention should be paid by economists and policymakers. The study pertains to the European Union countries in the years 2005-2016. The empirical analysis supports the hypothesis that SFA is inversely related to public debt, whereas the inverse relationship between budget balance and SFA is not confirmed. The article contains additional analyses for selected components of SFA as well as narrower time and space coverage.

Abstract

The aim of this paper is to analyze fiscal sustainability in Poland after joining EU between 2004-2017. Unlike previous studies, which analyzed weak measures of fiscal sustainability, we analyze fiscal sustainability measures in the strong sense. Contrary to previous studies we estimate individual, not panel, fiscal reaction functions which allows us to provide possibly a more accurate picture of fiscal policy outcomes in Poland. Moreover, our empirical analysis takes a closer look at the series of structural breaks that occurred after the global crisis. Based on our analysis we may tentatively conclude that despite cyclical fiscal deterioration during the crisis fiscal policy in Poland has been sustainable in the strong sense up until 2017.

Abstract

The aim of the paper is to empirically estimate the growth-maximizing debt-to-GDP ratio in the case of Turkey. To calculate the growth-maximizing debt-to-GDP ratio FMOLS, DOLS, and CCR estimators are used for the period from 1960–2013. According to the empirical findings the growth-maximizing debt-to-GDP ratio varies between 34.3% and 38.7%. Based on a comparison of these ratios to current data (29.1% for 2018), Turkey has the capacity for additional borrowing to achieve a growth-maximizing debt-to-GDP ratio. If this additional borrowing capacity is used for public investment with a return greater than the interest cost of the additional debt economic growth will be maximized and public debt sustainability supported.

Abstract

Research background: Public debt arises mainly from debt-financed deficits. More and more countries are resorting to additional public indebtedness to raise additional financial resources to meet government funding needs, which are unattainable by the usual tax means. As a result, increasingly, government spending is rising faster than revenue is received, and the excess is financed mainly through domestic and external borrowings. Expensive borrowings by a government (in an environment of increasing interest rates) may be harmful to inflation and the macroeconomic stabilisation process. This trend is raising concerns among policymakers as it undermines macroeconomic stability, especially in developing economies with relatively weak and dependent monetary authorities in the formulation and implementation of monetary policies. Hence, the association between public debt and inflation is of importance in the inflationary process of an economy.

Purpose: In this paper, theoretical and empirical literature on the link between public debt and inflation has been surveyed in detail. The focus of the paper was centred on the review of literature on the link between total public debt, external public debt, domestic public debt and inflation.

Research methodology: This paper presents an extensive review of scholarly studies on the link between public debt and inflation based on their results. The paper analysed, synthesised, and critically evaluated previous studies on the relationship between public debt and inflation on both the theoretical and empirical fronts.

Results: The literature reviewed revealed the association between public debt and inflation. The surveyed literature shows that the relationship between public debt and inflation varies from country to country, with either a positive or negative relationship. However, in the majority of the literature, the link between public debt and inflation tilts towards a positive relationship. This finding is more prominent in indebted countries with higher levels of public debt and a less-developed financial market. Although there is no consensus on the positive or negative relationship between public debt and inflation, the study found that a positive relationship between public debt and inflation tends to predominate among the studies reviewed.

Novelty: The study provides an insight into the relationship between public debt and inflation based on a detailed review of literature on the subject in both developed and developing economies.