TAILIEUCHUNG - State budget balance, public debt, and international norms

The findings, on the ground of analyzing institutional factors, demonstrate that no sustainability, as well as potential risk, is reflected by Vietnam’s public debt and fiscal policy. | Bui Thi Mai Hoai et. al. / Journal of Economic Development 22(4) 51-75 51 State Budget Balance, Public Debt, and International Norms BUI THI MAI HOAI University of Economics HCMC – maihoai@ SU DINH THANH University of Economics HCMC – dinhthanh@ BUI DUY TUNG University of Economics HCMC – tungbd@ ARTICLE INFO ABSTRACT Article history: A fiscal sustainability model requires that budget revenues and expenditures be in balance while government budget constraints, ensured. Yet, it becomes problematic while failing to address the dynamism of the budget constraints, associated with the government’s role (. extending its intervention may affect public debt and finance). On adopting approaches by Trehan and Walsh (1991) and Hakkio and Rush (1991), which empirically tests cointegration between government revenues and its spending, this study’s aim is to assess the issue of public debt and fiscal sustainability in Vietnam. The findings, on the ground of analyzing institutional factors, demonstrate that no sustainability, as well as potential risk, is reflected by Vietnam’s public debt and fiscal policy. Received: Aug. 27 2015 Received in revised form: Jan. 30 2015 Accepted: Sep. 15 2015 Keywords: Budget balance, fiscal sustainability, public debt, cointegration. 52 Bui Thi Mai Hoai et. al. / Journal of Economic Development 22(4) 51-75 1. Introduction The issue of budget balance and public debt has attracted rapt attention of economists. The 2008’s financial crisis and European sovereign debt crisis have sparked off numerous debates over the sustainability of budget balance and public debt, as well as budget control in accordance with international practices. Amid the context of public debt of countries in Europe Catrina (2012) argued that implementing the budget balance policy by means of budget cuts is economically unfeasible. Sustainability of public finance demands a mix of macro policies intended to limit the arbitrary .

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