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Sustainable Financing for Sustainable Development: Understanding the Interrelations between Public Investment and Sovereign Debt

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  • Ibrahim Ari

    () (Division of Sustainable Development, College of Science and Engineering, Hamad bin Khalifa University, Qatar Foundation (QF), Education City, Doha 34110, Qatar)

  • Muammer Koc

    () (Division of Sustainable Development, College of Science and Engineering, Hamad bin Khalifa University, Qatar Foundation (QF), Education City, Doha 34110, Qatar)

Abstract

This study investigates the causal relationship between public investment and sovereign debt (i.e., external and domestic public debt) with respect to the limits of public-debt sustainability for four countries with the highest GDP (i.e., the United States, China, Japan, Germany) during the period of 2000–2015. In summary, this study establishes quantitative evidence based on empirical findings to support the claim that sovereign debt is harmful to the financing of public infrastructure if it breaches certain thresholds, as proposed in this study, and according to the literature. By this approach, the findings enable us to make recommendations about the need for mobilizing domestic resources and innovating new financial models to promote sustainable development within the limits of sustainable public debt. In short, this paper concludes that performing a project for sustainable development by implementing unsustainable financing models will always end up with unsustainable economic outcomes.

Suggested Citation

  • Ibrahim Ari & Muammer Koc, 2018. "Sustainable Financing for Sustainable Development: Understanding the Interrelations between Public Investment and Sovereign Debt," Sustainability, MDPI, Open Access Journal, vol. 10(11), pages 1-25, October.
  • Handle: RePEc:gam:jsusta:v:10:y:2018:i:11:p:3901-:d:178596
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    1. repec:gam:jsusta:v:11:y:2019:i:7:p:1967-:d:219446 is not listed on IDEAS
    2. repec:gam:jsusta:v:11:y:2019:i:3:p:831-:d:203745 is not listed on IDEAS
    3. repec:gam:jsusta:v:11:y:2019:i:4:p:1059-:d:206851 is not listed on IDEAS

    More about this item

    Keywords

    sustainable economics; sustainable finance; national debt; public investment; causality; structural breaks;

    JEL classification:

    • Q - Agricultural and Natural Resource Economics; Environmental and Ecological Economics
    • Q0 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - General
    • Q2 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation
    • Q3 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation
    • Q5 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics
    • Q56 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environment and Development; Environment and Trade; Sustainability; Environmental Accounts and Accounting; Environmental Equity; Population Growth
    • O13 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products

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