H63 - National Debt; Debt Management; Sovereign DebtReturn

Government debt has increased not only in times of economic stress, but it has become a com- mon manifestation of government expenditure funding. The aim of the paper is to inspect the effect of government debt on economic freedom in ten CEE countries between 1995 and 2020 using a panel model approach. Selected quantitative and qualitative variables were examined to validate the hypothesis, including public governance indicators, besides the economic ones. Based on a robust panel setting, we conclude that government debt has a negative impact on economic freedom. A causality from government debt to economic freedom is detected to- gether with a long-term equilibrium relationship between them, with both a long-run and a short-run negative impact of debt on economic freedom. For the considered countries, the gross debt impacts economic freedom and not vice-versa.

This study aims to estimate a dynamic fiscal reaction function in a state-space setting to obtain time-varying reaction parameters for appraising the evolution of public debt sustainability in Turkey. The data set used for estimation is the longest for Turkey in the literature. Succinctly speaking, this function quantifies the corrective fiscal efforts exerted to preserve the stability of public debt. The time-varying estimation findings in this study suggest that the recent fiscal history of Turkey can be divided into two subperiods in terms of fiscal stability. Before the mid-1990s, no systematic fiscal response existed to restore the stability of public debt, whereas after the mid-1990s, a remarkable effort was evidenced by the positive fiscal reaction parameters. Notwithstanding some 20 years of strong positive reactions, the former performance appears to be far-off in recent years, and the strength of fiscal reaction has waned gradually, which is perturbing for the future course of fiscal sustainability.

This paper analyses uncertainty as one of the factors that affect the public debt-growth nexus. We put forward a hypothesis that uncertainty mediates the effect of public debt on economic growth. The empirical examination of the mediating effect is based on the neoclassical growth equation and consistent with specifications previously used to analyse the sources of heterogeneity in the debt-growth relationship. Since one part of the uncertainty is financial risk, which is closely related to the financial sector stability, we use interest rate spread as a main variable, and the risk premium on lending as an alternative one to proxy financial risk and thus, to some extent, uncertainty. Our results show that lower uncertainty is related to a bigger positive effect of debt on growth and a higher turning point in the debt-growth nexus. On the contrary, higher uncertainty leads to a lower positive and more considerable negative effect of debt on growth in both linear and quadratic specifications.

Tax evasion can have important consequences for the macroeconomic and social balance of a country, as well as for its monetary and fiscal development. A limited number of studies dealing with the consequences for fiscal imbalance are present, but their objectives vary a lot. This analysis has been conducted with the purpose to empirically assess the impact of the tax evasion changes on the public debt in the 28 EU countries. The research considers the dynamics of public debt during the period of 21 years. The research is based on a probabilistic sensitivity analysis approach that was conducted individually for four clusters using @Risk of Palisade Decision Tools Package. The analysis showed a negative correlation between the tax evasion and the public debt, where the growth of the tax evasion is connected with the decrease of the public debt in a given country. The extent of the effect varies depending on the country, or more precisely on the groups of countries and is conditioned by other macroeconomic variables.

The primary balance has influenced the unit costs of debt servicing in 10 postsocialist members of the EU. The effects of the GDP growth and the inflation are equally robust and significant. The coefficients of lagged debt are at variance with the expectations from Bohn's 1998 paper, and one cannot speak until now about the corrective actions of fiscal authorities in these countries. Only Poland has had on average a higher real long-term interest rate than the growth rate. Other countries could stabilize their debt-GDP ratio by running a primary deficit. But comparing the level of investment with profits only in Slovenia one can speak about the dynamic inefficiency. Especially in the Czech Republic and Slovakia the relationship between debt and deficit is blurred by high negative stock-flow adjustments.

In the immediate period before adoption of euro many debates in Slovenia deal with fulfillment of Maastricht criteria. Slovenia has never had any significant problems with Maastricht fiscal criteria, but this does not mean that it has long-term sustainable fiscal situation. The purpose of this analysis is analyze (non)sustainability of Slovenia's fiscal stance. The methodology is based on objective analysis of long-term public finance's stability/sustainability. The analysis shows that Slovenia exceeded several times the level of sustainability in previous years. In next period the circumstances could only worsen unless necessary fiscal reform and other policy measures (especially reform of public-debt management) are introduced.

The article examines the impact of the budget deficit upon the term structure of Czech interest rates. An important feature of the model is that it enables us to directly test the predictions of the three alternative paradigms, the Keynesian, neoclassical and the Ricardian, concerning the long-term and short-term impact of deficit on interest rates. The result of the study, obtained by the IV method suggests that the budget deficit is negatively related to the interest rate level in the short-run. Therefore, the long-run Ricardian proposition cannot be rejected in favour of any alternative hypothesis.

This paper describes the development and the current state of debt management in the Czech Republic. The basic principles on which it was built during the1990s and the importance of the monetary and fiscal policy co-ordination in effective debt management implementation are discussed. The authors try to explain the main factors that are behind the substantial state debt increases in the course of several recent years and to discuss some of the topical issues connected to the debt management targets and procedures. The paper provides a basic description of the instruments used and the conceptual and institutional framework of the Czech Republic debt management system with a particular emphasis on the role of the central bank.

The prevailing view in the literature is that the cost of debt servicing depends on the variables that determine the debt dynamics: primary balance, outstanding debt, economic growth and inflation. Several papers devoted to advanced market economies show that a stronger primary balance is associated with a lower cost of debt servicing. The interest cost of servicing the public debt is key both to its sustainability and to the burden it places on the public finances and the economy. A panel of four transition economies: the Czech Republic, Hungary, Poland and Slovakia in the time period 1994 - 2002 has been analyzed. The question is if also in these countries much of the variation in the costs of servicing public debt can be explained in terms of fundamentals that determine the debt dynamics. Last but not least country-specific effects are discussed.