Fiscal Sustainability in Developing Asia
48 Pages Posted: 15 Jul 2010 Last revised: 17 Nov 2010
Date Written: June 1, 2010
Abstract
The central objective of this paper is to empirically examine the issue of fiscal sustainability in developing Asia. To do so, we first diagnose the region’s public finances by analyzing the evolution of key fiscal indicators over time and across subregions. We then estimate fiscal policy response functions that measure the adjustment of the primary fiscal balance to public debt positions. Overall, our results indicate that the region’s public finances are in good shape as a result of responsible fiscal behavior. Nevertheless, failure to withdraw the region’s anticrisis fiscal stimulus in a timely manner may jeopardize fiscal sustainability, bolstering the case for strong medium-term fiscal policy frameworks.
Keywords: Fiscal sustainability, Asia, fiscal policy, fiscal balance, public debt
JEL Classification: E62, H62, h63
Suggested Citation: Suggested Citation
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