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Economic, Political and Institutional Determinants of Budget Deficits Volatility: A Panel Data Analysis

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  • Asma Arif
  • Mujahid Hussain

Abstract

This study has a major motivation to empirically find the fundamentals of budget deficit instability for the period 1984 to 2016 using panel data for South Asia and ASEAN countries. As main determinants the study has considered the role of institutions, governance variables like corruption, political instability, military in politics and conflicts. The economic data is collected from international financial statistics and world development indicators. The data on political variables are collected from International Country Risk Data Guide (ICRG). Panel data models like Fixed Effect and Random Effect Model are used to test the volatility of budget deficit. To make a comparison between results of panel data models and time series analysis this study also makes an arrangement analysing individual countries, using time series data. The results of panel data models and time series models of individual countries both confirm that corruption and political stability are important indicators of budget deficit. To avoid high and unstable deficit attention should be diverted to improve the institutional setup of the economy.

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  • Asma Arif & Mujahid Hussain, 2018. "Economic, Political and Institutional Determinants of Budget Deficits Volatility: A Panel Data Analysis," International Journal of Economics & Business Administration (IJEBA), International Journal of Economics & Business Administration (IJEBA), vol. 0(3), pages 98-114.
    • Handle: RePEc:ers:ijebaa:v:vi:y:2018:i:3:p:98-114
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    More about this item

    Keywords

    Pubic Policy; Macroeconomic stability; Fiscal deficit; Panel data; South Asia & ASEAN.;
    All these keywords.

    JEL classification:

    • H5 - Public Economics - - National Government Expenditures and Related Policies
    • H6 - Public Economics - - National Budget, Deficit, and Debt
    • H3 - Public Economics - - Fiscal Policies and Behavior of Economic Agents
    • H4 - Public Economics - - Publicly Provided Goods

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