Determinants of Government and External Debt: Evidence from the Young Democracies of South America
AbstractWe investigate in this paper what are the main determinants of government and external debt in South America. Our sample purposely includes all nine South American countries that re-democratised in the last thirty years or so, and the data cover the period 1970-2007. The results, based on principal component and dynamic panel (time-series) data analyses (we use the Pooled OLS, Fixed Effects, Fixed Effects with Instrumental Variables, DIF-GMM and SYS-GMM estimators), suggest that economic growth has had the ability of significantly reduce debt in the region. Other important candidates suggested by the literature, such as inflation, in-equality and constraints on the executive (variables that some would deem important within the rather turbulent South American context), do not present the expected nor clear-cut estimates on government and external debt. Essentially, the results suggest firstly that the (neoclassical) tax-smoothing model holds in South America, or that the continent is, after all, countercyclical, and secondly they highlight the importance of such case studies in order to avoid unwarranted generalisations about the continent's recent history. All in all, in times of a renewed spell of populism in the region and of a severe debt crisis in Europe, these conclusions are suggestive of the importance of an economic environment geared towards generating economic activity and prosperity in, at least, keeping debt under control.
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 Economic Research Southern Africa in its series Working Papers with number 341.
Length: 30 pages
Date of creation: 2013
Date of revision:
Contact details of provider:
Postal: Newlands on Main, F0301 3rd Floor Mariendahl House, cnr Campground and Main Rds, Claremont, 7700 Cape Town
Phone: 021 671-3980
Fax: +27 21 671 3912
Web page: http://www.econrsa.org/
More information through EDIRC
Government anf External Debt; Democracy; South America;
Find related papers by JEL classification:
- H60 - Public Economics - - National Budget, Deficit, and Debt - - - General
- N16 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations - - - Latin America; Caribbean
- O11 - Economic Development, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
- O54 - Economic Development, Technological Change, and Growth - - Economywide Country Studies - - - Latin America; Caribbean
This paper has been announced in the following NEP Reports:
You can help add them by filling out this form.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Yoemna Mosaval).
If references are entirely missing, you can add them using this form.