top of page
Asian Institute of Research, Journal Publication, Journal Academics, Education Journal, Asian Institute
Asian Institute of Research, Journal Publication, Journal Academics, Education Journal, Asian Institute

Economics and Business

Quarterly Reviews

ISSN 2775-9237 (Online)

asian institute research, jeb, journal of economics and business, economics journal, accunting journal, business journal, managemet journal
asian institute research, jeb, journal of economics and business, economics journal, accunting journal, business journal, managemet journal
asian institute research, jeb, journal of economics and business, economics journal, accunting journal, business journal, managemet journal
asian institute research, jeb, journal of economics and business, economics journal, accunting journal, business journal, managemet journal
crossref
doi
open access

Published: 12 August 2020

Public Debt Dynamics and Fiscal Sustainability in Namibia: An Intertemporal Budget Constraint Analysis

Jacob M. Nyambe, Teresa Kaulihowa

University of Namibia, Namibia University of Science and Technology

asian institute research, jeb, journal of economics and business, economics journal, accunting journal, business journal, management journal

Download Full-Text Pdf

doi

10.31014/aior.1992.03.03.265

Pages: 1095-1104

Keywords: Debt Dynamics, Fiscal Sustainability, Inter-Temporal Budget Constraint

Abstract

The paper examines Namibia’s salient issues of public debt-dynamics and fiscal sustainability from 1980 to 2018. Time series data for the same study period was used. Of interest is the aspect of demystifying the dearth surrounding the trend of increasing public debt in Namibia when it is economically concerning that the existing capacity to mobilise needed resources is inadequate. The inter-temporal budget constraints model was used to examine the various fiscal reaction functions, debt dynamics and fiscal policy adjustment to debt. The study found that the intertemporal budget constraint does not hold for Namibia. This is for the period under review, confirming that no surplus exists or somewhat too little to offset the accumulated debt from the previous period. The fiscal reaction functions are consistent with the intertemporal budget constraint with resounding results for both fiscal reaction and extended fiscal reaction functions. The debt dynamics function exposition is that in the short-run, Namibia’s public debt is unsustainable. The government can address debt and fiscal sustainability issues by adjusting its expenditure through resources-wise matching. While government expenditure-containment amidst a global down turn could be complicated there is scope to design workable approaches for generating needed revenues while seeking to balance up expenditure concerns.

References

  1. Auerbach, A. and Gorodnichenko, Y. (2017). Fiscal stimulus and fiscal sustainability. Working Paper 23789, National Bureau of Economic Research. Available at: https://www.nber.org/papers/w23789.pdf

  2. Baglioni A. & Cherubini, U. (1993). intertemporal budget constraint and public debt sustainability: the case of Italy, Applied Economics, 25:2, 275-283.

  3. Barro, R. J. (1974). Are government bonds net wealth? Journal of Political Economy, 82 (6), 1095-1117.

  4. Barro, R. J. (1986). U.S. deficits since World War I. The Scandinavian Journal of Economics, 88(1), pp195-222.

  5. Bohn, Henning (1995). “The Sustainability of Budget Deficits in a Stochastic Economy”. In: Journal of Money, Credit and Banking 27.1, pp. 257–271.

  6. Bonh, H. (1998). The behavior of US public debt and deficits. The Journal of Economics, 113(3), pp.949-963

  7. Bossone, B. (2019). The portfolio theory of inflation and policy (in) effectiveness. Economics, 13(33): 1-25. Available at: https://www.econstor.eu/

  8. Chandia, K. E., Javid, A. Y. (2013). An analysis of debt sustainability in the economy of Pakistan. Procedia Economics and Finance, 5, 133–142.

  9. Chibi, A., Chekouri, S.M. and Benbouziane, M. (2019). The dynamics of fiscal policy in Algeria: Sustainability and structural change. Journal of Economic Structures, 8(28).

  10. Chudik, A., Mohaddes, K., Hashem Pesaran, M., & Raissi, M. (2017). Is there a debt-Threshold effect on output growth? Review of Economics and Statistics, 99(1), 135–150.

  11. Elliott, G and Kearney, C. (1988). The Intertemporal government budget constraints and tests for bubbles. Research Discussion Paper 8809, Reserve Bank of Australia. Available at: www.rba.gov.au.

  12. Hamilton, J. D. and Flavin, M. A (1986). On the limitation of government borrowing: a framework for empirical testing. American Economic Review, 76, 808-19.

  13. Ministry of Finance (2017). Fiscal strategy for the 2017/18- 2019/20 MTEF. Windhoek

  14. Pattichis, C. (2010). The Intertemporal Budget Constraint and current account sustainability in Cyprus: Evidence and policy implications. Journal of Applied Economics, 42(4): 463 – 473.

  15. Shastri, S., Giri, A.K. and Mohapatra, G. (2017). Budget deficit sustainability and revenue expenditure linkages in major South Asian Economies. Eurasian Journal of Business and Economics, 10 (19): 37 – 59.

  16. Sherbourne, R., Nampila, T., & du Preez, R. (2002). Maintaining economic independence: government debt and fiscal sustainability. IPPR Briefing Paper No. 13.

  17. Tronzano, M. (2017). Testing fiscal sustainability in the transition economies of Eastern Europe: The case of Poland (1999-2015). International Economics, 70 (1): 103 – 132.

  18. Vural, G. (2018). Sustainability of fiscal policy : Estimating a fiscal reaction function for Turkey. International Journal of Management Economics and Business, 14(2): 357 – 362.

  19. Zaaruka, B. B., Ndove, T., & Tjipe, T. (2004). Central government debt sustainability. Bank of Namibia Working Paper Series 1/2004. Windhoek: Bank of Namibia Research Department.

bottom of page