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Sustainability of Public Debt: Empirical Analysis for Bahrain

Abstract

This paper analyzes the sustainability of public debt of Bahrain over the period 1990 to 2014. The debt sustainability has been estimated through fiscal reaction function. The ARDL bound testing results confirmed the existence of cointegration between fiscal balance and public debt. The estimation results of the fiscal reaction function also showed that the sufficiency condition for public debt to be sustainable cannot be rejected. The finding confirmed that the fiscal policy measures during the period under study were appropriate in maintaining fiscal solvency and public debt sustainability. The study concludes that the constraints on revenue generation forces the policy makers to relook the economic policy measures to maintain public debt sustainability in future.

ABDUL WAHEED

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