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Public Debt Sustainability in Tunisia: Empirical Evidence Estimating Time-Varying Parameters

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  • Samia Omrane Belguith

    (Faculty of Economics and Management of Sfax, Research Unit Development Economics (URED))

  • Foued Badr Gabsi

    (Faculty of Economics and Management of Sfax)

Abstract

In this paper, we use the Bohn (1998) test inspired by Fincke and Greiner (Studies in Nonlinear Dynamics & Econometrics, 15(3), 1–21, 2011b) to study whether the primary surplus relative to the gross domestic product (GDP) is a positive function of the public debt to GDP ratio in order to detect the sustainability of debt policies in Tunisia for the period 1965–2013. Using time-varying parameter model, we find that the primary balances respond positively to the debt increase showing that fiscal policy is sustainable in Tunisia. Moreover, we show that the budget deficit is stationary, which suggests that the inter-temporal budget constraint holds. Since revolution, the Tunisian government has put more weight on debt stabilization. In particular, reducing budget deficits and recovering economic growth will remain essential to maintain debt sustainability.

Suggested Citation

  • Samia Omrane Belguith & Foued Badr Gabsi, 2019. "Public Debt Sustainability in Tunisia: Empirical Evidence Estimating Time-Varying Parameters," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 10(2), pages 550-560, June.
  • Handle: RePEc:spr:jknowl:v:10:y:2019:i:2:d:10.1007_s13132-017-0482-0
    DOI: 10.1007/s13132-017-0482-0
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    Cited by:

    1. Amine Lahiani & Ameni Mtibaa & Foued Gabsi, 2022. "Fiscal Consolidation, Social Sector Expenditures and Twin Deficit Hypothesis: Evidence from Emerging and Middle-Income Countries," Comparative Economic Studies, Palgrave Macmillan;Association for Comparative Economic Studies, vol. 64(4), pages 710-747, December.

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    More about this item

    Keywords

    Public debt; Sustainability; Fiscal reaction function; Tunisia; Time-varying parameters;
    All these keywords.

    JEL classification:

    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • H62 - Public Economics - - National Budget, Deficit, and Debt - - - Deficit; Surplus
    • H63 - Public Economics - - National Budget, Deficit, and Debt - - - Debt; Debt Management; Sovereign Debt

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