Institution, external debts, and fiscal policy: an empirical investigation in Asia Pacific countries

Abstract

Fiscal policy attracts attentions from public, in which the quality and the responses of fiscal policy are seen as the determined factors of its efficiency. This paper investigates the impacts of external debts and governance quality on fiscal policy through the taxation and government expenditures in Asia Pacific countries from 2002 to 2013. Through the panel data estimations, we find that both institution and long-term external debts have negative impacts while short-term debts have no effect on fiscal policy. This paper has significant contribution to the practice by the useful implications for international financial organization such as IMF, Worldbank in arranging their agreements with governments to implement the conservative fiscal policies in the long-run.