IDEAS home Printed from https://ideas.repec.org/a/mes/emfitr/v51y2015i3p463-472.html
   My bibliography  Save this article

Determinants of Government and External Debt: Evidence from the Young Democracies of South America

Author

Listed:
  • Manoel Bittencourt

Abstract

I investigate the main determinants of government and external debt in the young democracies of South America between 1970 and 2007. The results, based on dynamic panel time-series analysis, suggest that economic growth has significantly reduced the debt ratios in the region. Other candidates suggested by the literature—for example, inflation, inequality, and constraints on the executive—do not present the expected or clear-cut estimates on government and external debt. The results suggest that an economic environment geared toward generating economic activity and prosperity is an important factor in keeping the debt ratios under control in the region.

Suggested Citation

  • Manoel Bittencourt, 2015. "Determinants of Government and External Debt: Evidence from the Young Democracies of South America," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 51(3), pages 463-472, May.
    • Handle: RePEc:mes:emfitr:v:51:y:2015:i:3:p:463-472
    DOI: 10.1080/1540496X.2015.1025667
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1080/1540496X.2015.1025667
    Download Restriction: Access to full text is restricted to subscribers.
    File URL: https://libkey.io/10.1080/1540496X.2015.1025667?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to look for a different version below or search for a different version of it.

    Other versions of this item:

    References listed on IDEAS

    as
    1. Akhmed Akhmedov & Ekaterina Zhuravskaya, 2004. "Opportunistic Political Cycles: Test in a Young Democracy Setting," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 119(4), pages 1301-1338.
    2. Easterly William R., 2001. "Growth Implosions and Debt Explosions: Do Growth Slowdowns Cause Public Debt Crises?," The B.E. Journal of Macroeconomics, De Gruyter, vol. 1(1), pages 1-26, February.
    3. Robert J. Barro, 1991. "Economic Growth in a Cross Section of Countries," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 106(2), pages 407-443.
    4. Easterly, william, 2001. "Growth implosions, debt explosions, and my Aunt Marilyn : do growth slowdowns cause public debt crises?," Policy Research Working Paper Series 2531, The World Bank.
    5. Kenneth Rogoff & Anne Sibert, 1988. "Elections and Macroeconomic Policy Cycles," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 55(1), pages 1-16.
    6. Kiviet, Jan F., 1995. "On bias, inconsistency, and efficiency of various estimators in dynamic panel data models," Journal of Econometrics, Elsevier, vol. 68(1), pages 53-78, July.
    7. Gonzalez, Maria de los Angeles, 2002. "Do Changes in Democracy Affect the Political Budget Cycle? Evidence from Mexico," Review of Development Economics, Wiley Blackwell, vol. 6(2), pages 204-224, June.
    8. Stephen Bond, 2002. "Dynamic panel data models: a guide to microdata methods and practice," CeMMAP working papers CWP09/02, Centre for Microdata Methods and Practice, Institute for Fiscal Studies.
    9. David Roodman, 2009. "How to do xtabond2: An introduction to difference and system GMM in Stata," Stata Journal, StataCorp LP, vol. 9(1), pages 86-136, March.
    10. M. Hashem Pesaran, 2006. "Estimation and Inference in Large Heterogeneous Panels with a Multifactor Error Structure," Econometrica, Econometric Society, vol. 74(4), pages 967-1012, July.
    11. Peter C. B. Phillips & Hyungsik R. Moon, 1999. "Linear Regression Limit Theory for Nonstationary Panel Data," Econometrica, Econometric Society, vol. 67(5), pages 1057-1112, September.
    12. Georgy Egorov & Konstantin Sonin, 2013. "A Political Theory of Populism," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 128(2), pages 771-805.
    13. Barro, Robert J, 1979. "On the Determination of the Public Debt," Journal of Political Economy, University of Chicago Press, vol. 87(5), pages 940-971, October.
    14. Alesina, Alberto & Hausmann, Ricardo & Hommes, Rudolf & Stein, Ernesto, 1999. "Budget institutions and fiscal performance in Latin America," Journal of Development Economics, Elsevier, vol. 59(2), pages 253-273, August.
    15. Michael Gavin & Roberto Perotti, 1997. "Fiscal Policy in Latin America," NBER Chapters, in: NBER Macroeconomics Annual 1997, Volume 12, pages 11-72, National Bureau of Economic Research, Inc.
    16. Meltzer, Allan H & Richard, Scott F, 1981. "A Rational Theory of the Size of Government," Journal of Political Economy, University of Chicago Press, vol. 89(5), pages 914-927, October.
    17. Alesina, Alberto & Drazen, Allan, 1991. "Why Are Stabilizations Delayed?," American Economic Review, American Economic Association, vol. 81(5), pages 1170-1188, December.
    18. Roubini, Nouriel, 1991. "Economic and political determinants of budget deficits in developing countries," Journal of International Money and Finance, Elsevier, vol. 10(1, Supple), pages 49-72, March.
    19. Brender, Adi & Drazen, Allan, 2005. "Political budget cycles in new versus established democracies," Journal of Monetary Economics, Elsevier, vol. 52(7), pages 1271-1295, October.
    20. Judson, Ruth A. & Owen, Ann L., 1999. "Estimating dynamic panel data models: a guide for macroeconomists," Economics Letters, Elsevier, vol. 65(1), pages 9-15, October.
    21. Arellano, Manuel & Bover, Olympia, 1995. "Another look at the instrumental variable estimation of error-components models," Journal of Econometrics, Elsevier, vol. 68(1), pages 29-51, July.
    22. Manoel Bittencourt, 2011. "Is Copacabana Still the ‘Little Princess of the Sea’?," CESifo Forum, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 12(01), pages 11-16, March.
    23. Roubini, Nouriel & Sachs, Jeffrey D., 1989. "Political and economic determinants of budget deficits in the industrial democracies," European Economic Review, Elsevier, vol. 33(5), pages 903-933, May.
    24. Stephen R. Bond, 2002. "Dynamic panel data models: a guide to micro data methods and practice," Portuguese Economic Journal, Springer;Instituto Superior de Economia e Gestao, vol. 1(2), pages 141-162, August.
    25. Blundell, Richard & Bond, Stephen, 1998. "Initial conditions and moment restrictions in dynamic panel data models," Journal of Econometrics, Elsevier, vol. 87(1), pages 115-143, August.
    26. Jeffrey D. Sachs, 1985. "External Debt and Macroeconomic Performance in Latin America and East Asia," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 16(2), pages 523-573.
    27. Giovanni S. F. Bruno, 2005. "Estimation and inference in dynamic unbalanced panel-data models with a small number of individuals," Stata Journal, StataCorp LP, vol. 5(4), pages 473-500, December.
    28. International Monetary Fund, 2010. "A Historical Public Debt Database," IMF Working Papers 2010/245, International Monetary Fund.
    29. Arellano, Manuel, 2003. "Panel Data Econometrics," OUP Catalogue, Oxford University Press, number 9780199245291, Decembrie.
    30. Windmeijer, Frank, 2005. "A finite sample correction for the variance of linear efficient two-step GMM estimators," Journal of Econometrics, Elsevier, vol. 126(1), pages 25-51, May.
    31. Maria de los Angeles Gonzalez, 2002. "Do Changes in Democracy Affect the Political Budget Cycle? Evidence from Mexico," Review of Development Economics, Wiley Blackwell, vol. 6(2), pages 204-224, June.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Monoj Kumar Majumder & Mala Raghavan & Joaquin Vespignani, 2020. "Commodity price volatility, external debt and exchange rate regimes," CAMA Working Papers 2020-110, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
    2. Monoj Kumar Majumder & Mala Valliammai Raghavan & Joaquin L. Vespignani, 2021. "Impact of commodity price volatility on external debt: the role of exchange rate regimes," Applied Economics, Taylor & Francis Journals, vol. 53(57), pages 6626-6640, December.
    3. Bilal Mehmood & Syed Hassan Raza & Rizwan Baqar, 2015. "Defence, Debt and Democracy: The 3D in South Asia," International Journal of Economics and Empirical Research (IJEER), The Economics and Social Development Organization (TESDO), vol. 3(7), pages 312-319, July.
    4. N. Mhlaba & A. Phiri, 2019. "Is public debt harmful towards economic growth? New evidence from South Africa," Cogent Economics & Finance, Taylor & Francis Journals, vol. 7(1), pages 1603653-160, January.
    5. Halebić Jasmin & Moćević Amina, 2020. "Analysis of Public Debt at Subnational Government Levels: Evidence from Cantons in the Federation of Bosnia and Herzegovina," South East European Journal of Economics and Business, Sciendo, vol. 15(2), pages 109-123, December.
    6. Chukwuebuka Bernard Azolibe, 2021. "Determinants of External Indebtedness in Heavily Indebted Poor Countries: What Macroeconomic and Socio-Economic Factors Matter?," The American Economist, Sage Publications, vol. 66(2), pages 249-264, October.
    7. Wang, Wencheng & Ning, Zinan & Shu, Yang & Riti, Joshua Sunday & Riti, Miriam-Kamah J., 2023. "Natural resource rents and public debts nexus in African resource-rich and most indebted nations: Issues with aggregation bias," Resources Policy, Elsevier, vol. 82(C).
    8. Waheed, Abdul & Abbas, Shujaat, 2021. "Determinants and Sustainability of External Debt: A Panel Data Analysis for Selected Islamic Countries," MPRA Paper 107486, University Library of Munich, Germany.
    9. Ilhèm Gargouri & Majdi Ksantini, 2016. "The Determinants Of Public Debt," Romanian Economic Journal, Department of International Business and Economics from the Academy of Economic Studies Bucharest, vol. 18(59), pages 111-124, March.
    10. Ngasamiaku, Wilhelm M. & Ngong'ho, Sende, 2022. "Macroeconomic Determinants of Public Debt in Tanzania: Empirical Evidence and lessons for Post COVID-19 Recovery," African Journal of Economic Review, African Journal of Economic Review, vol. 10(5), December.
    11. Ziogas, Thanasis & Panagiotidis, Theodore, 2021. "Revisiting the political economy of fiscal adjustments," Journal of International Money and Finance, Elsevier, vol. 111(C).
    12. Abdul Waheed, 2017. "Determinants of External Debt: A Panel Data Analysis for Oil and Gas Exporting and Importing Countries," International Journal of Economics and Financial Issues, Econjournals, vol. 7(1), pages 234-240.
    13. Zahir Mohamed Omar & Mohamed Isse Ibrahim, 2021. "Determinants of External Debt: The Case of Somalia," Asian Development Policy Review, Asian Economic and Social Society, vol. 9(1), pages 33-43, March.
    14. Ampofo, Gideon Minua Kwaku & Jinhua, Cheng & Bosah, Philip Chukwunonso & Ayimadu, Edwin Twum & Senadzo, Patrick, 2021. "Nexus between total natural resource rents and public debt in resource-rich countries:A panel data analysis," Resources Policy, Elsevier, vol. 74(C).
    15. Carrera, Jorge & de la Vega, Pablo, 2021. "The impact of income inequality on public debt," The Journal of Economic Asymmetries, Elsevier, vol. 24(C).
    16. Bougharriou, Nouha & Benayed, Walid & Gabsi, Foued Badr, 2022. "Democratic transition and fiscal policy in the Arab world," Economic Systems, Elsevier, vol. 46(2).
    17. Zeineb Gouasmi & Houda Haffoudhi, 2020. "Analysis of Sustainability of Fiscal Policy and Democratic Transition: Case of Tunisia," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 11(2), pages 512-529, June.
    18. Abdul Aziz Bin Karia, 2021. "Are there any turning points for external debt in Malaysia? Case of adaptive neuro-fuzzy inference systems model," Journal of Economic Structures, Springer;Pan-Pacific Association of Input-Output Studies (PAPAIOS), vol. 10(1), pages 1-16, December.
    19. Amjad S. Qwader & Sulieman D. Aloshaibat, 2020. "Components of the Public Budget and their Effects on Public Debt in Jordan," International Journal of Economics and Financial Issues, Econjournals, vol. 10(3), pages 88-96.
    20. Korwatanasakul, Upalat & Sirivunnabood, Pitchaya & Majoe, Adam, 2021. "Demographic Transition and its Impacts on Fiscal Sustainability in East and Southeast Asia," ADBI Working Papers 1220, Asian Development Bank Institute.
    21. Constance de Soyres & Anna Rogantini Picco & Miss Randa Sab, 2019. "Debt Build-up in Frontier Low-Income Developing Countries (LIDCs) since 2012: Global or Country-specific Factors and Way Forward?," IMF Working Papers 2019/037, International Monetary Fund.
    22. Blessy Augustine & Lakshmi Kumar, 2020. "Original Sin, Currency Depreciation and External Debt Burden: Evidence from India," International Journal of Economics and Financial Issues, Econjournals, vol. 10(3), pages 58-68.
    23. Bougharriou, Nouha & Benayed, Walid & Gabsi, Foued Badr, 2018. "How does democracy affect public debt? Evidence from the Arab world," Economics Discussion Papers 2018-54, Kiel Institute for the World Economy (IfW Kiel).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Manoel Bittencourt, 2018. "Young Democracies and Government Size: Evidence from South America," Working Papers 329, Economic Research Southern Africa.
    2. Manoel Bittencourt, 2012. "Economic Growth and Government Debt: Evidence from the Young Democracies of Latin America," Working Papers 201203, University of Pretoria, Department of Economics.
    3. Manoel Bittencourt, 2011. "Young Democracies and Government Size: Evidence from Latin America," Working Papers 201113, University of Pretoria, Department of Economics.
    4. Aidt, Toke S. & Mooney, Graham, 2014. "Voting suffrage and the political budget cycle: Evidence from the London Metropolitan Boroughs 1902–1937," Journal of Public Economics, Elsevier, vol. 112(C), pages 53-71.
    5. Alesina, A. & Passalacqua, A., 2016. "The Political Economy of Government Debt," Handbook of Macroeconomics, in: J. B. Taylor & Harald Uhlig (ed.), Handbook of Macroeconomics, edition 1, volume 2, chapter 0, pages 2599-2651, Elsevier.
    6. Roberto Dell'Anno & Adalgiso Amendola, 2015. "Social Exclusion and Economic Growth: An Empirical Investigation in European Economies," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 61(2), pages 274-301, June.
    7. Toke Aidt & Graham Mooney, 2014. "Voter suffrage and the political budget cycle: evidence from the London Metropolitan Boroughs 1902-1937," Cambridge Working Papers in Economics 1401, Faculty of Economics, University of Cambridge.
    8. Georgios Efthyvoulou, 2012. "Political budget cycles in the European Union and the impact of political pressures," Public Choice, Springer, vol. 153(3), pages 295-327, December.
    9. Samargandi, Nahla & Fidrmuc, Jan & Ghosh, Sugata, 2015. "Is the Relationship Between Financial Development and Economic Growth Monotonic? Evidence from a Sample of Middle-Income Countries," World Development, Elsevier, vol. 68(C), pages 66-81.
    10. Dilla, Diana, 2017. "Staatsverschuldung und Verschuldungsmentalität [Public Debt and Debt Mentality]," MPRA Paper 79432, University Library of Munich, Germany.
    11. Scott, K. Rebecca, 2015. "Demand and price uncertainty: Rational habits in international gasoline demand," Energy, Elsevier, vol. 79(C), pages 40-49.
    12. Armey, Laura E. & McNab, Robert M., 2018. "Expenditure decentralization and natural resources," The Quarterly Review of Economics and Finance, Elsevier, vol. 70(C), pages 52-61.
    13. Kilman, Josefin, 2020. "Monetary Policy and Income Inequality in the United States: The Role of Labor Unions," Working Papers 2020:10, Lund University, Department of Economics, revised 20 Sep 2022.
    14. Castro, Vítor & Martins, Rodrigo, 2021. "Government ideology and economic freedom," Journal of Comparative Economics, Elsevier, vol. 49(1), pages 73-91.
    15. Mohcine Bakhat & José M. Labeaga & Xavier Labandeira & Xiral Lñpez, 2013. "Economic Crisis and Elasticities of Car Fuels: Evidence for Spain," Working Papers fa15-2013, Economics for Energy.
    16. Canarella, Giorgio & Miller, Stephen M., 2022. "Firm size, corporate debt, R&D activity, and agency costs: Exploring dynamic and non-linear effects," The Journal of Economic Asymmetries, Elsevier, vol. 25(C).
    17. Huang, Yongfu, 2010. "Political Institutions and Financial Development: An Empirical Study," World Development, Elsevier, vol. 38(12), pages 1667-1677, December.
    18. Marcela Eslava, 2011. "The Political Economy Of Fiscal Deficits: A Survey," Journal of Economic Surveys, Wiley Blackwell, vol. 25(4), pages 645-673, September.
    19. Bakhat, Mohcine & Labandeira, Xavier & Labeaga, José M. & López-Otero, Xiral, 2017. "Elasticities of transport fuels at times of economic crisis: An empirical analysis for Spain," Energy Economics, Elsevier, vol. 68(S1), pages 66-80.
    20. Yongfu Huang, 2005. "Will political liberalisation bring about financial development?," Bristol Economics Discussion Papers 05/578, School of Economics, University of Bristol, UK.

    More about this item

    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, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • O54 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Latin America; Caribbean

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:mes:emfitr:v:51:y:2015:i:3:p:463-472. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Chris Longhurst (email available below). General contact details of provider: http://www.tandfonline.com/MREE20 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.