H63 - National Debt; Debt Management; Sovereign DebtReturn

This study investigates the impact of public debt on economic growth in a panel of 27 EU economies over the period 2000-2022. As the preliminary analysis suggests a nonlinear relationship between these variables, the debt threshold analysis based on the dynamic panel threshold regression is employed. The results for the whole panel indicate that public debt supports growth below a threshold of 68.7%, but it has a detrimental impact on growth if it is above the threshold. The validity of the findings is confirmed by including the effects of crises, which also indicates that economic growth in countries with debt below the threshold was more resilient to crisis events. The robustness of the estimates is checked using the method of moments quantile regression. However, the analysis of subsamples based on a country's EMU membership and the indebtedness level reveals the variety of debt thresholds, which calls for different fiscal governance across countries to reduce the negative effects of debt on economic growth. Overall, the results emphasize the importance of adequate fiscal space to respond to economic disturbances.

The public finances of the Czech Republic fell into deep deficits during the pandemic, while the money supply growth rate accelerated. We make a basic comparison of monetary acceleration during the first two years of the pandemic with other countries. We verify that this acceleration in the Czech Republic was partly due to commercial banks increasing credit to the government. We argue that purchases of government bonds by non-residents have a similar effect. This is particularly true when non-residents use existing koruna deposits held by them, partly as a result of past foreign exchange interventions, to purchase government bonds. While there was an acceleration in monetary growth during the pandemic, there was a decline in monetary growth during the Great Financial Crisis (GFC). However, our analysis suggests that this was due mainly to a decline in private credit growth during the GFC. We see no fundamental reasons for a structural change in money demand as a result of the pandemic. We therefore believe that unless the observed monetary acceleration is offset by slower-than-trend monetary growth in the near term, it will translate into an increase in the price level.

The paper employs a form of the panel ARDL-based error correction model (ECM) to explore the short-run and long-run relationship between public debt (and certain macroeconomic variables) and economic growth in Central and Eastern European (CEE) countries. It covers the period 2006Q1−2018Q4. The results indicate both short-term and long-term causality (except for financial development), though the marginal effects are variable-specific. There is a negative effect of public debt, interest rate and exchange rate on growth, whereas the saving rate, trade openness, financial development, fixed capital formation and population growth contribute to economic development. Thus, a responsible and saving-oriented fiscal policy, coupled with higher private sector investment, an export-oriented private sector and undervalued real exchange rate, and population growth would contribute to economic development in CEE countries.

This paper provides a framework for conducting simulations and stress testing in the non-financial corporate sector. It relies on national accounting and uses a set of input-output tables to track the propagation of shocks between parts of the sector while staying entirely consistent with the big picture framed by the core forecasting model and the underlying scenario. The simulation framework allows standard macroeconomic developments to be captured, but one-off measures such as government wage and salary compensation and loan moratoria can also be easily implemented. The main output of the simulation is a set of industry-level performance and profitability variables. These variables can be used for various types of analysis, such as credit risk modelling and profitability and liquidity analysis. Some of them - such as forecasting portfolio default rates - are shown in the paper. The historical default rate estimates obtained are accurate and economically sensible for most industries and exhibit high reliability even under severe economic conditions. Given its national accounting framework and its level of detail, the model can be used to support decision-making processes and to evaluate the effects of existing or planned economic policies. Two different scenarios are considered to demonstrate the benefits of the proposed approach.

We analyze and quantify link between quality of the banking sector and sovereign risk in the states of the European Union (EU) using data over 1999-2014. We employ two market-based measures of the sovereign risk along with several empirically and theoretically motivated variables that characterize banking sector. We perform Bayesian estimations on several panels of countries. Our results show that higher ratio of the non-performing loans represents the most important industry-specific variable that is linked with a heightened rate of the sovereign risk. On the other hand, findings related to the size and depth of the banking sector, along with the capital adequacy ratio, are less clear-cut. Higher penetration of the foreign banks and higher degree of competition characterize a diversified structure of the banking industry that seems to be beneficial for the banking sector stability and is linked with lower sovereign risk.

The aim of this paper is to explore the influence of public debt structure on economic growth of advanced economies. The investigation mainly focuses on shifts in public debt structure which does not change the level of debt quota. Methodical approach follows similar exercises developed to evaluate the effects of tax shifts on economic growth. Debt decompositions are made according to i) original maturity of instruments; ii) currencies; iii) residency of creditors; iv) kind of instrument. The panel data regression of 24 OECD countries in the period from 2000 to 2014 is used. The main findings suggest that the structure of public debt matters to economic growth in every decomposition made. Moreover, it was found that shifts in debt structure which are neutral towards the level of debt quota could be associated with changes of economic growth rates. Hence, it is legit to deal with adequate public debt structure not only with debt level in terms of influencing the economic growth.

The paper examines the quantitative easing as a policy contributing to government debt sustainability in the context of government debt cycle. Thus, the emphasis is primarily not put on the rescue of financial system after the collapse of Lehman Brothers. Instead, the attention is paid to a role of central bank as a lender of last resort in government bond markets and quasi-fiscal motivation of the quantitative easing programs. The theoretical part of the analysis defi nes quasi-fiscally motivated QE program, government adjusted net debt position plus its determinants and a rate of debt monetization. Empirical analysis focuses on the case of three large economies - United States, United Kingdom and Japan, empirical defi nition of quasi-fiscally motivated quantitative easing, net debt position of their governments as well as the explanation of significant empirical relationships between its determinants. The paper concludes that the most important factor infl uencing net debt position dynamics is economic growth which cannot be relied on in bust phase of debt cycle. Thus, the decisive role is played by quantitative easing and related interest transmission channel as remaining factor influencing dynamics of government fnancial assets and liabilities.

The fundamental premise for the regular performance of economic policy, fulfilment of the revenues of the state budget and thus creating optimal conditions for efficient fiscal policy realization, is to minimize state receivables after maturity, as the theoretical planning of the revenue side of the state budget is irrelevant considering that tax payers and other entities fail to fulfil their liabilities towards the state, more precisely state budget, and conversely the state is not able to provide the approved income in the state budget. The objective of this paper is to: analyse the development of state receivables in years 2001-2014; identify the causes of the state receivables origin; test econometrically the dependence of formation of the state receivables after maturity on the economic cycle, the tax rate change and entry of the Czech Republic to the European Union; evaluate the results of the long-term research of implementation of an experimental model, during which the possibility of reaching incomparably higher efficiency was verified and proven in the management process of state receivables recovery; highlight this important negative determinant of the state fiscal policy. With regard to aforesaid, this text is structured in the following way. First, the author took into consideration the theories which are connected with surveyed matters, following by the characteristic and causes of state receivables development for the period of 1991 to 2014. The economic testing of dependence comes after. Next chapter characterizes the development of two experimental models for management process of recovery of state receivables after maturity, research results included. The last chapter provides all the research results, evaluates the economic policy significance of this destructive factor of fiscal policy and suggests some solutions.

The article in the context of the current Greek crisis analyses the consequences of forced unification, occurring in the European Union, at least since the Maastricht Treaty, which is now associated mainly with the process of monetary union. The current stage of European integration is based on political constructivism and it is characterized by the dominance of politics over economy, which in some aspects of the system resembles the communist economy system, which was an extreme distortion of the relationship between politics and economy. The unification model of European integration does not help the weaker European Union countries, for it forces them to use various forms of standardization that brings high (often hidden) costs (exceeding profits). The article notes that the main prize in the economy is the exchange rate. The reason for the imbalances within the monetary union is a non-optimal exchange rate for each member country - too overvalued rate of Greece, but also too undervalued rate of Germany. The text also discusses limitations (systemic and political) and inability to perform adequate internal devaluation and systematic (not just partial, parametric) reforms in Greece. The congenital structural differences among the EU countries and the impossibility of the exchange rate adaptation lead to a systemic Eurozone defect, which results in a fact, that it is not (and, in the present composition, it even cannot be) an optimal currency area.

This article focuses on the development and resolution of Czechoslovak state debt from 1945 to 1953. It describes two distinct periods. Between 1945 and 1948, the budget followed a prewar structure where debt constituted a separate part. These times were characterized by an increase of state debt as a result of a postwar economic reconstruction. From 1949 to 1953 the structure of the state budget was adapting to its new function in the economy and the amount of the debt appeared to stabilize. The most important subject of controversy is the solution chosen in 1953. The monetary reform imposed in that year brought an overall nullification of internal state liabilities. There were two reasons for this decision: to substantively break away from the past and to substantially reduce the value of financial assets held by the wealthier segment of society.

The interpretation of the relation between a budget deficit and a government debt in the standard economic theory is based on its unilateral causality, where the government debt comes into being due to the accumulation of budget deficits. The logic of the development of the government indebtedness is, in this approach, unambiguously determined by public finance processes monitored by Parliament in the framework of the course of fiscal years. The main objective of this paper is to stress that in reality the development of government indebtedness is significantly influenced by off-budgetary factors. The presented results endorse the hypothesis that the influence of stock-flow adjustment on the development of the debt/GDP ratio in a number of cases surpasses the influence of the budget balance. This trend significantly amplifies in the period of a financial crisis in context of the massive shift of the debt burden, occurring in the course of them.

This article aims to argue with the wide-spread perception of discretionary fiscal policy as a poor macroeconomic stabilization tool, especially in comparison with the contemporary performance of monetary policy. European Monetary Union Member States are hit by the asymmetric shocks or respond dissimilarly to a common shock. This is the strongest reasoning for the rehabilitation of active fiscal macroeconomic stabilization. Prudent fiscal and debt management policies are powerful to mitigate the economic impacts of various shocks at a national level and thus to replace the loss of autonomous monetary and exchange rate policy. The resurrection of fiscal policy is contingent on the efective institutional framework for its implementation. The principle of proposed reforms in fiscal policy stems from political economics background and corresponds to recent reforms in monetary and public debt management institutions. The only way how to address the traditional incentive constraints of policy discretion is to set up an independent fiscal agency outside of Ministry of Finance.