Determinants of budget deficits: The effects of the COVID-19 crisis
Journal
Ekonomski anali
Date Issued
2022
Author(s)
Jolakoski, Petar
DOI
10.2298/eka2232105t
Abstract
This paper revisits the discussion on the determinants of budget balances and
investigates the change in their effect in the context of the COVID-19
crisis. The analysis uses data on 43 countries and a system generalised
method of moments approach. The results show that the overall impact of the
global pandemic has led to a disproportionate increase in the estimated
effects of the macroeconomic determinants on the budget balance. We also
find that more developed economies were able to implement higher stimulus
packages for the same relative level of primary balance. We believe that one
of the factors affecting this outcome is that more of their government debt
is held in domestic currency.
investigates the change in their effect in the context of the COVID-19
crisis. The analysis uses data on 43 countries and a system generalised
method of moments approach. The results show that the overall impact of the
global pandemic has led to a disproportionate increase in the estimated
effects of the macroeconomic determinants on the budget balance. We also
find that more developed economies were able to implement higher stimulus
packages for the same relative level of primary balance. We believe that one
of the factors affecting this outcome is that more of their government debt
is held in domestic currency.
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