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Off-Budgetary Reasons of the Growing Public Indebtedness

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  • Pavel Dvořák
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    Abstract

    The interpretation of the relation between a budget deficit and a government debt in the standard economic theory is based on its unilateral causality, where the government debt comes into being due to the accumulation of budget deficits. The logic of the development of the government indebtedness is, in this approach, unambiguously determined by public finance processes monitored by Parliament in the framework of the course of fiscal years. The main objective of this paper is to stress that in reality the development of government indebtedness is significantly influenced by off-budgetary factors. The presented results endorse the hypothesis that the influence of stock-flow adjustment on the development of the debt/GDP ratio in a number of cases surpasses the influence of the budget balance. This trend significantly amplifies in the period of a financial crisis in context of the massive shift of the debt burden, occurring in the course of them.

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    Bibliographic Info

    Article provided by University of Economics, Prague in its journal Politická ekonomie.

    Volume (Year): 2010 (2010)
    Issue (Month): 4 ()
    Pages: 522-541

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    Handle: RePEc:prg:jnlpol:v:2010:y:2010:i:4:id:745:p:522-541

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    Keywords: stock-flow; public debt; budget deficit; adjustment;

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    References

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    1. Marco Buti & Jo�o Nogueira Martins & Alessandro Turrini, 2007. "From Deficits to Debt and Back: Political Incentives under Numerical Fiscal Rules," CESifo Economic Studies, CESifo, vol. 53(1), pages 115-152, March.
    2. Fabrizio Balassone & Daniele Franco & Stefania Zotteri, 2007. "The Reliability of EMU FIscal Indicators: Risks and Safeguards," Temi di discussione (Economic working papers) 633, Bank of Italy, Economic Research and International Relations Area.
    3. Reinhart, Carmen M. & Rogoff, Kenneth S., 2009. "The Aftermath of Financial Crises," Scholarly Articles 11129155, Harvard University Department of Economics.
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