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Sovereign debt
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Debt, Economic Growth and Data Adequacy
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Vighneswara Swamy, World Economics, June 2018
The effects of government debt on economic growth has become of immense importance in the backdrop of the Eurozone sovereign debt crisis and Reinhart & Rogoff’s related research. This study is based on a sizeable dataset which extends the horizon of analysis to country groupings and makes it inclusive of economic, political, and regional diversities. The study overcomes issues related to data adequacy, coverage of countries, heterogeneity, endogeneity, and non-linear relationships by conducting a battery of robustness tests. An increase in the debt-to-GDP ratio is found to be associated with a reduction in average growth, but the relationship is nonlinear.
Government Accounting
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Ian Ball & Gary Pflugrath, World Economics, March 2012
As the current sovereign debt crisis engulfing Europe broadens and threatens to bring down more governments and lead the world into another, potentially very serious, economic slowdown, minimal commentary and public debate has focused on a fundamental problem, and the need to address it. That problem is the deficient – and sometimes fraudulent – accounting practices employed by many governments around the world. A major shortcoming of many governments has been highlighted by the crisis – that is, the poor quality of public financial management and the lack of public accountability. And, while robust public-sector financial management would not alone solve the crisis, it is clear that the problems presented by the crisis will not be solved without it. Shareholders, debt providers and regulators of publicly listed companies would not tolerate for a minute the poor levels of reporting and disclosure evidenced by governments. Yet while governments recognise the need to impose stringent regulations on companies accessing funds from the public, many – indeed most – make little or no effort to meet such high standards in their own reporting. This is despite the fact that governments seek to raise hundreds of billions – indeed trillions – of dollars from the public. Improved financial reporting, disclosure and financial management of the public sector cannot be achieved until there is recognition that the incentives faced by politicians promote decision-making that works contrary to the public interest and appropriate institutional reforms are implemented.

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