Determinants of Public Debt for middle income and high income group countries using Panel Data regression
AbstractTo be able to predict when a nation will go bust has been one of toughest challenges in macroeconomics. Considerable research and effort has been put into this direction but still we are not in a position to say anything with certainty. This paper analyzes panel pool data on 31 countries across the world for the past 30 years on the basis of which the possibility of a sovereign default can be explored. The aim of this study is to understand which all factors influence the public debt in middle and high income group countries using Panel regression. Total effects model, Cross section fixed effects model, Cross section random effects model have been used to understand the factors whereas Autoregressive multiple regression model has been used to forecast the debt figures. The research findings suggest that the most important determinant of debt situation is GDP growth rate for both high and middle income group countries. In addition to this, Central government expenditure, education expenditure and Current account balance are also seen to influence the debt situation for both groups. FDI and Inflation have no impact on debt to GDP ratios among high income group countries but are found to be of more relevance when determining debt situation of middle income group countries. Population density and population above 65 years of age do not have any impact whatsoever on debt to GDP ratios of high and middle income group countries. Forecasts for weighted average public debt for high income group countries indicate steady increase. Debt situation of countries including Switzerland, Korea, Slovak rep, France and Japan is likely to worsen over the next 5 years. The debt situation of Greece and Spain is unlikely to change much whereas Ireland, USA, Canada, Italy, Hungary are expected to get better till 2015.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 32079.
Date of creation: 18 Mar 2011
Date of revision:
Public debt; panel data; debt forecasting; Cross section fixed effects; cross section random effects;
Find related papers by JEL classification:
- C5 - Mathematical and Quantitative Methods - - Econometric Modeling
- F3 - International Economics - - International Finance
- C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
- H6 - Public Economics - - National Budget, Deficit, and Debt
This paper has been announced in the following NEP Reports:
- NEP-ALL-2011-07-13 (All new papers)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Jushan Bai & Serena Ng, 2004.
"A PANIC Attack on Unit Roots and Cointegration,"
Econometric Society, vol. 72(4), pages 1127-1177, 07.
- Jushan Bai & Serena Ng, 2001. "A Panic Attack on Unit Roots and Cointegration," Economics Working Paper Archive 469, The Johns Hopkins University,Department of Economics.
- Jushan Bai & Serena Ng, 2001. "A PANIC Attack on Unit Roots and Cointegration," Boston College Working Papers in Economics 519, Boston College Department of Economics.
- Choi, In, 2001. "Unit root tests for panel data," Journal of International Money and Finance, Elsevier, vol. 20(2), pages 249-272, April.
- Christian Broda & David E. Weinstein, 2004. "Happy News from the Dismal Science: Reassessing the Japanese Fiscal Policy and Sustainability," NBER Working Papers 10988, National Bureau of Economic Research, Inc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Ekkehart Schlicht).
If references are entirely missing, you can add them using this form.