Fiscal Solvency of Asian Developing Countries Using Ad Hoc and Model-based Sustainability Tests

摘要

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.