Fiscal solvency of Asian developing countries using ad hoc and model-based sustainability tests

Syed Munawar Shah, Syed Haider Shah, Md. Anowar Zahid, Abdul Rahman Nizamani

Research output: Contribution to journalArticle

Abstract

Background and Objective: This study assesses the sustain ability of fiscal policy of Asian developing countries by both the Ad hoc and Model-Based tests. The standard tests of unit root applied to debt-GDP ratio and cointegration between expenditures and revenues might produce contradictory results, however, a careful investigation can help in describing sustainability. The Model-Based test, on the other hand, disregards the time series properties and depends only on the response of primary-surplus to debt-GDP ratio. Material and Methods: Panel unit root and cointegration tests as Ad hoc tests while a pooled estimation technique is applied as Model-Based Tests. Results: The primary surplus and debt are stationary in levels for the sample. The existence of cointegration between primary-surplus-GDP ratio and debt-GDP ratio determines the sustainability of fiscal policy. Conclusion: This fiscal policy is sustainable according to Ad Hoc tests, however, the Model-Based test produce mixed results. The two test are helpful if applied simultaneously in order to have more faith in the results.

Original languageEnglish
Pages (from-to)345-353
Number of pages9
JournalAsian Journal of Scientific Research
Volume10
Issue number4
DOIs
Publication statusPublished - 2017

Fingerprint

Fiscal
Asia
Sustainability
Ad hoc
Solvency
Developing countries
Debt
Fiscal policy
Surplus
Cointegration
Expenditure
Panel unit root and cointegration tests
Revenue
Unit root
Faith

Keywords

  • Deficit surplus
  • Fiscal policy
  • Panel data models
  • Sovereign debt
  • Time-series models

ASJC Scopus subject areas

  • General

Cite this

Fiscal solvency of Asian developing countries using ad hoc and model-based sustainability tests. / Shah, Syed Munawar; Shah, Syed Haider; Zahid, Md. Anowar; Nizamani, Abdul Rahman.

In: Asian Journal of Scientific Research, Vol. 10, No. 4, 2017, p. 345-353.

Research output: Contribution to journalArticle

Shah, Syed Munawar ; Shah, Syed Haider ; Zahid, Md. Anowar ; Nizamani, Abdul Rahman. / Fiscal solvency of Asian developing countries using ad hoc and model-based sustainability tests. In: Asian Journal of Scientific Research. 2017 ; Vol. 10, No. 4. pp. 345-353.
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