Economic Annals 2022 Volume 67, Issue 232, Pages: 105-126
https://doi.org/10.2298/EKA2232105T
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Determinants of budget deficits: The effects of the COVID-19 crisis
Tevdovski Dragan (Faculty of Economics, University Ss. Cyril and Methodius in Skopje, Skopje, North Macedonia)
Jolakoski Petar (Association for Research and Analysis - ZMAI, Skopje, North Macedonia)
Stojkoski Viktor (Faculty of Economics, University Ss. Cyril and Methodius in Skopje, Skopje, North Macedonia + Association for Research and Analysis - ZMAI, Skopje, North Macedonia), vstojkoski@eccf.ukim.edu.mk
This paper revisits the discussion on the determinants of budget balances and
investigates the change in their effect in the context of the COVID-19
crisis. The analysis uses data on 43 countries and a system generalised
method of moments approach. The results show that the overall impact of the
global pandemic has led to a disproportionate increase in the estimated
effects of the macroeconomic determinants on the budget balance. We also
find that more developed economies were able to implement higher stimulus
packages for the same relative level of primary balance. We believe that one
of the factors affecting this outcome is that more of their government debt
is held in domestic currency.
Keywords: budget deficits, economic determinants, COVID-19
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