(2017), it is sufficient in practice to consider m = 1 or m = 2. Instead of channeling the borrowed funds to productive purposes, the governments choose to use the funds to pay previous debts, or to finance operating expenditures which are normally non-productive in nature. When testing the existence of the non-linear relationship, two main findings emerged. The findings from the current systematic review have led to several suggestions for policymakers. But this method involves a fall in the value of the monetary standards of the country. Create a link to share a read only version of this article with your colleagues and friends. On the determinants of local government debt: Does one size fit all? Secondly, this study applies a different estimation technique, panel smooth transition regression (PSTR) proposed by González et al. The government should carefully analyze the economic condition of the country by considering the purposes of the borrowings, the sources of the borrowings along with the ability of the country to pay back. Spain, Greece, EU, UK, Israel, Japan, US, Autoregressive Distributed Lag Model (ARDL), VAR, impulse response & structural variance decomposition analysis, OLS, Autoregressive moving average (ARMA), Regression model with multiple thresholds, Least square and autoregressive AR(p) model. It shows that any government spending incurs a successive cycle of spending. This study applies panel smooth transition regression approach advanced by González et al. Our mission is to provide an online platform to help students to discuss anything and everything about Economics. Nevertheless, the government should implement progressive tax system, in which the imposition of tax is only for individuals and firms who earned higher income. In an already inflationary situation, since people’s disposable income tends to rise, their purchasing potential also rises. Public debt includes Treasury bills, notes, and bonds, which are bought by large investors. When the government offers its securities to the public, persons are free to purchase them. (2011) use quadratic and spline model estimated using fixed effects and system Generalized Method of Moments (GMM), while Chudik et al. The studies that found the threshold to be 90% and above were conducted in Lebanon (Taher, 2017), Israel (Shahor, 2018) and Greece (Pegkas, 2018, 2019). (2013), Mijiyawa (2013) and Thanh (2015) also find that investment has a significant positive effect on growth, Vinayagathasan (2013) finds that openness to trade enhances economic growth; and Seleteng et al. The estimated PSTR model for middle-income countries, and resource intensive countries is therefore valid.
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