Essays in Applied Econometrics: Global Fiscal Dynamics, Spillovers, and Debt Sustainability

Ghayas, Sehrish (2025) Essays in Applied Econometrics: Global Fiscal Dynamics, Spillovers, and Debt Sustainability. Doctoral thesis, University of East Anglia.

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Abstract

In an era of rising public debt, tightening fiscal space, and growing global economic interdependence, understanding the design, sustainability, and cross-border effects of fiscal policy has become more urgent than ever. This thesis explores three critical dimensions of fiscal policy in both advanced and emerging economies: (i) the role of fiscal rules in shaping social sector spending; (ii) the sustainability of public debt under uncertainty and changing policy environments; and (iii) the international transmission of fiscal policy shocks, with a focus on China and its trade partners. Together, these chapters offer novel empirical insights using advanced econometric frameworks and rich cross-country datasets.

Chapter 1 examines the causal effects of fiscal rules on four categories of social sector spending across 34 advanced economies (AEs) and 33 emerging and developing economies (EMDEs) from 1985 to 2020. Using dynamic panel estimation, the study finds that in (EMDEs), balanced budget and debt rules tend to reduce education and health spending highlighting a trade-off between fiscal discipline and long-term human capital investment. In contrast, (AEs) manage to improve their budgetary position without compromising social expenditure. A fiscal rule index further reveals that stronger institutional quality and better-designed rules enhance the effectiveness and equity of fiscal policy.

Chapter 2 develops a stochastic debt sustainability analysis SDSA framework that combines a time-varying fiscal reaction function with a time-varying parameter VAR model. This approach captures shifts in fiscal behavior and macroeconomic conditions, enabling probabilistic projections using simulation-based fan charts. Applied to high-debt advanced and emerging and developing economies, the results show that fiscal responsiveness varies widely: (AEs) exhibit signs of fiscal fatigue at high debt levels, while (EMDEs) demonstrate more consistent responses. The framework improves upon traditional DSAs by incorporating uncertainty and changing policy dynamics.

Chapter 3 explores fiscal spillovers from China to the ASEAN-5 (Malaysia, Indonesia, the Philippines, Singapore, and Thailand) and to other regions using a Global VAR framework. The analysis finds that output expansions in China generate significant cross-border effects, particularly in ASEAN-5 and the broader Asia-Pacific, due to trade linkages and proximity. Spillovers to the Euro Area are temporary, while those to South America are negligible. Importantly, shocks to Chinese output and revenue produce stronger spillovers than expenditure shocks, highlighting China’s growing influence on regional fiscal dynamics.

Overall, these chapters provide new evidence on the design, effectiveness, and international transmission of fiscal policy in an increasingly uncertain global landscape.

Item Type:	Thesis (Doctoral)
Faculty \ School:	Faculty of Social Sciences > School of Economics
Depositing User:	Chris White
Date Deposited:	12 Aug 2026 09:37
Last Modified:	12 Aug 2026 09:37
URI:	https://ueaeprints.uea.ac.uk/id/eprint/104102
DOI:

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