Stock flow adjustments in sovereign debt dynamics: the role of fiscal frameworks

António Afonso, João Tovar Jalles

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We assess, by means of system GMM, how Stock Flow Adjustments (SFA) affect the debt-to-GDP ratio in a panel of 65 countries (covering both developed and emerging and low-income countries) between 1985-2014. In addition, we inspect the role of fiscal rules in affecting SFAs. We find that SFAs positively contribute to the change in the debt-to-GDP ratio with a coefficient close to one. Fiscal rules in general did not led governments to a systematic use of SFAs to lower budget deficits; however, the existence of fiscal rules with monitor compliance contributes to lower the debt level, although the cyclical deficit partly counteracts this desirable effect. The time period matters: the fall in the debt ratio due to the presence of fiscal rules before the crisis was between 1.7 and 4.2 percent of GDP while after the Global Financial Crisis, revenue and debt-based rules did not contribute to the reduction of debt, which was reinforced with large SFAs.

Original languageEnglish
Pages (from-to)1-16
Number of pages16
JournalInternational Review of Economics and Finance
Publication statusPublished - 1 Jan 2020


  • Budget deficit
  • Filtering
  • Fiscal rules
  • Government debt
  • Intertemporal government budget constraint
  • Panel data
  • Structural deficit
  • System GMM


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