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Fiscal Sustainability in the PALOP Economies

Author

Listed:
  • António Afonso

    (Universidade de Lisboa, ISEG, REM/UECE)

  • Emanuel Reis Leão

    (ISCTE-IUL, Department of Economics, ISCTE Business School)

  • Dilson Tiny

    (Central Bank of São Tomé and Príncipe, Research Department)

  • Diptes C. P. Bhimjee

    (ISCTE-IUL, Department of Economics, ISCTE Business School, DINÂMIA’CET-IUL)

Abstract

The Global Financial Crisis has typically led to a significant widening of fiscal positions (i.e. higher budget deficits and public debt), an issue that has been addressed by many re-searches on fiscal sustainability. Our aim in this study is to extend the extensive knowledge about fiscal policy sustainability in advanced economies by analysing the sustainability in the African continent. In particular, we examine the sustainability of public finance in Portuguese-speaking African countries (PALOP), using stationarity tests of external public debt-to-GDP ratios and cointegration tests between public revenue and public expenditure (as a percentage of GDP). Our findings for the period 1975-2019 suggest that some of the PALOP countries have endangered the sustainability of their corresponding fiscal positions. In fact, in our sample the solvency requirement seems to have been met only by Angola. In the context of a financial crisis, stemming from the COVID-19 pandemic, such sustainability issues are bound to be further challenged.

Suggested Citation

  • António Afonso & Emanuel Reis Leão & Dilson Tiny & Diptes C. P. Bhimjee, 2022. "Fiscal Sustainability in the PALOP Economies," Notas Económicas, Faculty of Economics, University of Coimbra, issue 54, pages 57-70, July.
    • Handle: RePEc:gmf:journl:y:2022:i:54:p:57:70
    DOI: 10.14195/2183-203X_54_3
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    More about this item

    Keywords

    Debt sustainability; global financial crisis; fiscal policy; PALOP; stationarity; cointegration; time series.;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • H62 - Public Economics - - National Budget, Deficit, and Debt - - - Deficit; Surplus

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