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Productive development, global integration, and fiscal response functions in developed and developing countries: An empirical study

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  • Botta, Alberto
  • Yajima, Giuliano
  • Spinola, Danilo
  • Porcile, Gabriel

Abstract

This paper investigates the determinants of fiscal policy responses to public debt in developed and emerging and developing economies, focusing on the role of productive structures and international economic integration.Using data covering 1980–2018 and a two-stage least squares estimation strategy, the analysis examines cyclically adjusted primary balances and fiscal response functions. The findings highlight the importance of manufacturing development for fiscal sustainability, differences in debt responses between developed and developing economies, and the influence of international financial conditions on fiscal policy.The results suggest that productive diversification and the structure of international financial integration are important determinants of fiscal policy space, particularly in developing economies.

Suggested Citation

  • Botta, Alberto & Yajima, Giuliano & Spinola, Danilo & Porcile, Gabriel, 2026. "Productive development, global integration, and fiscal response functions in developed and developing countries: An empirical study," CAFE Working Papers 17288, Centre for Accountancy, Finance and Economics (CAFE), Birmingham City Business School, Birmingham City University.
    • Handle: RePEc:akf:cafewp:17288
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