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...
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| Format: | Article |
| Language: | English |
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Elsevier B.V.
2017
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| Online Access: | http://ir.unimas.my/id/eprint/15340/ http://ir.unimas.my/id/eprint/15340/2/ScienceDirectFiscal%20sustainability%20in%20an%20emerging%20market%20economy%20%28abstract%29.pdf |
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| author | Baharumshah, A.Z Soon, Siewvoon Lau, Evan |
| author_facet | Baharumshah, A.Z Soon, Siewvoon Lau, Evan |
| author_sort | Baharumshah, A.Z |
| building | UNIMAS Institutional Repository |
| collection | Online Access |
| 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. © 2016 The Society for Policy Modeling |
| first_indexed | 2025-11-15T06:45:58Z |
| format | Article |
| id | unimas-15340 |
| institution | Universiti Malaysia Sarawak |
| institution_category | Local University |
| language | English |
| last_indexed | 2025-11-15T06:45:58Z |
| publishDate | 2017 |
| publisher | Elsevier B.V. |
| recordtype | eprints |
| repository_type | Digital Repository |
| spelling | unimas-153402017-10-10T03:29:13Z http://ir.unimas.my/id/eprint/15340/ Fiscal sustainability in an emerging market economy: When does public debt turn bad? Baharumshah, A.Z Soon, Siewvoon Lau, Evan HG Finance 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 Elsevier B.V. 2017-03-23 Article PeerReviewed text en http://ir.unimas.my/id/eprint/15340/2/ScienceDirectFiscal%20sustainability%20in%20an%20emerging%20market%20economy%20%28abstract%29.pdf 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 https://www.scopus.com/inward/record.uri?eid=2-s2.0-85008313687&doi=10.1016%2fj.jpolmod.2016.11.002&partnerID=40&md5=747fb39ea9becdfbf141f3ac82fd5e5d DOI: 10.1016/j.jpolmod.2016.11.002 |
| spellingShingle | HG Finance Baharumshah, A.Z Soon, Siewvoon Lau, Evan Fiscal sustainability in an emerging market economy: When does public debt turn bad? |
| title | 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_short | 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? |
| topic | HG Finance |
| url | http://ir.unimas.my/id/eprint/15340/ http://ir.unimas.my/id/eprint/15340/ http://ir.unimas.my/id/eprint/15340/ http://ir.unimas.my/id/eprint/15340/2/ScienceDirectFiscal%20sustainability%20in%20an%20emerging%20market%20economy%20%28abstract%29.pdf |