Fiscal Reaction Function: An Empirical Model for Bulgaria
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Academic Publishing UNWE (AP-UNWE)
Abstract
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The study presents the systematic response of fiscal policy to public debt developments, aiming to reveal its crucial importance in determining whether the debt-to-GDP dynamics leads to a desired equilibrium or not. On this basis, we will show that the values ??of the debt-to-GDP ratio in Bulgaria close to 55-60% are an acceptable boundary where debt can be considered as manageable and sustainable. These calculations contribute as they give new directional ideas when measuring the fiscal effects of fiscal policy, they can also serve as an anchor for various stress testing scenarios as well as an analysis of the social expenditures outweighing in the future.
Keywords
Fiscal reaction function, Deficits, Public debt, H62 - Deficit • Surplus, H63 - Debt • Debt Management • Sovereign Debt