Optimal Public Debt Level under Fiscal Sustainability Framework

Authors

  • Passarapa Tangkanjanapas Department of Economics, Faculty of Economics, Kasetsart University
  • Rewat Thamma-Apiroam
  • Siwapong Dheera-aumpon

Keywords:

Fiscal Space, Public Debt to GDP Ratio, The Optimal Public Debt level.

Abstract

This paper aims to estimate the optimal public debt to GDP ratio in Thailand using the concept of “fiscal space.” The fiscal reaction function curve and growth-adjusted interest payment curve are estimated with the use of time series quarterly data from 1998 to 2017. The regression results conclude that the relationship between primary balance to GDP ratio and lagged public debt to GDP ratio is a cubic function, enabling the government to increase expenditure, economic activities, and tax revenue. The optimal public debt ratio to GDP is 42%, the debt limit 44% and fiscal space of Thailand is 2.92%. The optimal public debt level and debt limit are controlled under a suitable fiscal sustainability framework.

References

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Published

2020-12-29

Issue

Vol. 24 No. 2 (2020): Vol.24 No.2 (2020) : July - December

Section

Articles

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All opinions and contents in the CMJE are the responsibility of the author(s). Chiang Mai University Journal of Economics reserves the copyright for all published materials.  Papers may not be reproduced in any form without the written permission from Chiang Mai University Journal of Economics.

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