The threshold effect of institutional quality on sovereign debt and economic stability

IF 3.5 2区经济学 Q1 ECONOMICS Journal of Policy Modeling Pub Date : 2024-01-01 DOI:10.1016/j.jpolmod.2023.12.001

Mohammad Ashraful Ferdous Chowdhury , Ehsanur Rauf Prince , Mohammad Shoyeb , Mohammad Abdullah

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Abstract

This study examines the threshold effect of institutional quality on the sovereign debt-macroeconomic stability nexus using panel data from 133 countries covering the period from 2002 to 2020. We measure macroeconomic stability using principal component analysis of budget deficit, annual inflation rate, official exchange rate, real interest rate, and unemployment rate. The dynamic GMM result shows that institutional quality has a positive effect on macroeconomic stability, while government debt has a negative effect. However, the interaction between institutional quality and government debt changes the direction of the effect of debt on macroeconomic stability. Moreover, in dynamic panel threshold regression, we document the evidence of the threshold effect of institutional quality on sovereign debt-macroeconomic stability nexus and suggest that before (after) the threshold level of institutional quality, there is a negative (positive) impact of debt on macroeconomic stability. Our result suggest that better institutions can use debt more efficiently and productively to enhance economic performance. The findings of this study have significant implications for policymakers in formulating policies to promote macroeconomic stability.

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机构质量对主权债务和经济稳定的门槛效应

本研究使用 133 个国家的面板数据，涵盖 2002 年至 2020 年期间，研究了制度质量对主权债务-宏观经济稳定性关系的门槛效应。我们使用预算赤字、年通货膨胀率、官方汇率、实际利率和失业率的主成分分析来衡量宏观经济稳定性。动态 GMM 结果显示，制度质量对宏观经济稳定性有正向影响，而政府债务则有负向影响。然而，制度质量与政府债务之间的交互作用改变了债务对宏观经济稳定性的影响方向。此外，在动态面板阈值回归中，我们记录了制度质量对主权债务-宏观经济稳定性关系的阈值效应证据，并表明在制度质量阈值水平之前（之后），债务对宏观经济稳定性有负（正）影响。我们的研究结果表明，更好的机构可以更有效、更有成效地利用债务来提高经济表现。这项研究的结果对决策者制定促进宏观经济稳定的政策具有重要意义。

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来源期刊

Journal of Policy Modeling ECONOMICS-

CiteScore

6.20

自引率

11.40%

发文量

期刊介绍： The Journal of Policy Modeling is published by Elsevier for the Society for Policy Modeling to provide a forum for analysis and debate concerning international policy issues. The journal addresses questions of critical import to the world community as a whole, and it focuses upon the economic, social, and political interdependencies between national and regional systems. This implies concern with international policies for the promotion of a better life for all human beings and, therefore, concentrates on improved methodological underpinnings for dealing with these problems.

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