Open research questions in Fiscal Policies and Political Economy

What the literature leaves open

• A limitation of the current study lies in the theoretical and model-based nature of the evaluation concerning the efficacy of the SGP+ strategy, which necessitates further empirical validation within a representative sample of EU nations.

  A Cluster Analysis of Public Debt Management Efficiency and Fiscal Modernisation in the European Union · 2026 · DOI

• As all the studies also, this study has some limitations. First, although the data are taken from National Bank of North Macedonia there were some complications with the data because they aren’t regularly updated or some of them are partially estimated and we had to take them from other legitimated institutions. Second, North Macedonia is an open economy which is vulnerable to external shocks which can distort the fiscal and growth outcomes, and can have an impact on the reforms and the fiscal system. Third, implementation of the reforms depends also on the political and institutional constraints, which can be faced by resistance from interest groups and realized by some other groups and depend very much on the political will.

  Fiscal Reform as a Structural Driver: Assessing Tax Structures and Economic Growth in North Macedonia · 2026 · DOI

• Firstly, the reforms are more than necessary to be focused on introducing progressive property taxation and green taxes, to reduce tax evasion and the informal economy for having more stability on the economic system. Secondly, North Macedonia has to improve the public spending efficiency for using the government spendings in effective and efficient way. Thirdly, North Macedonia has to improve transparency for strengthening fiscal rules and digitalization of the administration and services.

  Fiscal Reform as a Structural Driver: Assessing Tax Structures and Economic Growth in North Macedonia · 2026 · DOI

• constraints expressed in GDP percentage. the government’s is explained by using Bohn’s intertemporal budget 𝐷𝑡 = ∑ ∞ 𝑗=0 ( 1+𝑔 1+𝑟) 𝑗+1 GPB t+j+1 +lim 𝑗→∞ ( 𝑗+1 1+𝑔 1+𝑟) 𝐸𝑡𝐷𝑡+𝑗+1 Here Dt is Public Debt as percentages of GDP, GPBt is Government Primary Balance as percentages of GDP, g and r represents the growth rate for real GDP and the real interest rate, respectively. Et is the expectation operator conditional on the information available at time t. Therefore, assuming these last parameters as constant, the transversality (no Ponzi games) condition can be postulated as: 𝑗+1 ( lim 𝑗→∞ 1+𝑔 1+𝑟) 𝐸𝑡𝐷𝑡+𝑗+1 = 0 2026 EPRA IJMR | ISSN (Online): 2455-3662| https://eprapublishing.org/ -------------------------------758 ISSN (Online): 2455-3662 EPRA International Journal of Multidisciplinary Research (IJMR) - Peer Reviewed Journal Volume: 12| Issue: 6| June 2026|| Journal DOI: 10.36713/epra2013 || SJIF Impact Factor 2026: 8.753 || ISI Value: 1.188 The government’s fiscal policy is solvent when the expected future budget surpluses, measured as present value, coincide with its outstanding public debt. Quintos (1995) differentiates between "weak" and "strong" fiscal sustainability. He posits that public debt can either be I(1) or I(2). More specifically, he asserts that when ∆Dit is I(0), fiscal sustainability is strong, implying deficits cannot persist in the long term. However, if ∆Dit is I(1), the government can still maintain its sustainable fiscal policy but it will be achieved by running a deficit, which implies that the revenues will not be able to cover the increased need for public expenditure, thus representing a problem of the deficit financing strategy. This is the situation where the fiscal policy rule is weekly sustainable. This study centers on the policy rule proposed by Bohn. 𝐺𝑃𝐵 ∗𝑖𝑡 = ∝𝑖 + 𝛽𝐷 ∗𝑖𝑡−1 + 𝜀𝑖,𝑡 GPB∗ represents the government primary balance as a percentage of the potential GSDP and D∗ i,t−1 is the (lagged) debt- potential GSDP ratio. β is the marginal response of the primary balance to debt. A positive β, as obtained by Bohn, implies that rising public debt is associated with an increased primary surplus. This, again, tends to drive down debt and hence implies that sovereign debt will be sustainable in the long run, assuming this policy rule is also followed in the future. 5. DATA This is based on secondary data. It uses annual time series for 20 states of India from 1991 to 2021 period.

  FISCAL SUSTAINABILITY IN THE INDIAN STATES: A PANEL ARDL APPROACH · 2026 · DOI

• Future research could explore the effects of the green transition using total debt indicators, extend the scope to include non-EU countries, and use longer time periods to achieve a more comprehensive understanding.

  Does Green Transition Harm EU Public Debt? · 2026 · DOI

• literature, namely, neoclassical, Ricardian, and Keynesian theories the research adopted a Keynesian framework. Methodologically, the study employed a Vector Error Correction Model (VECM) to analyze long-run causality. The significance of key model statistics (Wald and error correction term coefficients) confirmed a unidirectional causal relationship from budget deficits to the human development index, a finding the study discovered to be consistent with the Keynesian theory. The study concluded that for budget planning to be an effective fiscal policy instrument, the long-run and more permanent effects of deficits on human development must be a primary consideration. Monogbe and Okah (2017) examined the effect of deficit financing on Nigeria’s economic development within the context of theoretical debates between Keynesian, neoclassical, schools. The study is prompted by the paradox of Nigeria’s and Ricardian 2 https://journals.e-palli.com/home/index.php/jgesd Page J. Glob. Econ. Sustain. Dev. 2(1) 1-9, 2026 high debt accumulation not translating into tangible development outcomes. Employing an error correction model and Granger causality tests for the period 1981 to 2015, the analysis revealed that the external debt exhibited a statistically significant positive relationship with economic development, albeit with a minimal coefficient (0.0173). Conversely, neither domestic debt nor the budget deficit itself demonstrates a causal link to development. The study, therefore, concluded that deficit financing, specifically through external debt, can act as a vital developmental stimulus, affirming the Keynesian postulate. The study recommended the prudent and coordinated management of borrowed funds, ensuring they are invested in capital and productive sectors to foster sustainable economic development. Employing a dual-methodological framework, Udeaja and Akanni (2024) examined the nexus between fiscal deficits and human development in Nigeria from 1990 to 2021. Their application of an ARDL model found no statistically significant linear relationship in the short run or the long run. In contrast, a multivariate adaptive regression spline analysis uncovered a critical nonlinear threshold: deficits enhanced human development below 1.34% of GDP but constrained it beyond that point, which suggested fiscal sustainability constraints. They believed that this negative effect could be reversed with robust economic capacity. The research emphasized electrification as a pivotal determinant of development and advocated for a policy framework of targeted deficit spending in priority sectors, fiscal rule enforcement, and sustained investment in infrastructure to promote sustainable human development. Suotor et al (2025) adopted key variables such as the human development index (a proxy for economic development), broad money supply, deficit budget, domestic debt, and external debt as they investigated the relationship between deficit financing and economic development in Nigeria from 1980 to 2024. They employed cointegration and error correction analysis. Their findings indicated that all the variables are integrated of order 1(0). The application of an Error Correction Mechanism (ECM) further revealed a significant short-run relationship and quantified the rate of adjustment back to the long-run equilibrium. The study concludes that budget deficits, by negatively correlating with the HDI, can act as a constraint on government expenditure. Consequently, the authors recommended a comprehensive fiscal approach, emphasizing prudent management of domestic and external debt, to safeguard Nigeria’s economic well-being. However, it should be noted that if all variables are integrated to order zero, I(0), the problem the ECM is designed to solve simply does not exist. This is because the entire theoretical foundation of the ECM is built on the concept of cointegration, a long-run equilibrium relationship between variables that are non-stationary (I(1)) but move together over time. Hence, using ECM to model I(0) variables is inappropriate. MATERIAL AND METHODS The study adopts the ex post research design. This implies analyzing and understanding the consequences of a particular event after it has occurred. It is fitting that the study seeks to analyze the effect of fiscal deficit financing strategies on human development in Nigeria.

  Fiscal Deficit Financing Strategies and Human Development Outcomes in Nigeria · 2026 · DOI

• The study is limited to PMC (Pune Municipal Corporation) data from 2016–2025 and does not compare findings with other municipal corporations or validate the model's generalizability across different urban contexts.

  Predicting the Path of Progress: A Trend and Forecast Analysis of PMC Expenditure · 2026 · DOI

• The analysis relies on the assumption that future expenditure will stabilize around heightened 2025 levels unless new large-scale infrastructure projects are undertaken, but does not account for unpredictable external shocks or policy changes.

  Predicting the Path of Progress: A Trend and Forecast Analysis of PMC Expenditure · 2026 · DOI

• This research is original as it fills a gap in the literature by focusing on the fiscal dynamics of Western Balkan countries, contributing to a better understanding of how macroeconomic determinants influence tax revenue and offering valuable guidance for policy design in similar transitional economies.

  Tax revenue insights: Analysis of determinants in Western Balkan countries · 2025 · DOI

• The economic crisis began in 2019, yet the financial regulator’s failure to engage in mitigating tactics to combat the rapid decrease in foreign reserves, rise in sovereign debt, financial mismanagement and political interference is underexplored.

  Tracing Colonial Entrenchments in the Development of the Central Bank of Sri Lanka · 2023 · DOI

• The results of this framework implementation were limited by the lax implementation and the different developments in Euro Area and Non-euro member states prove not only that one size fits all measures are not suitable, but also that the Economic and Monetary Union needs changes in order to smoothly function in the future.

  Twenty years of Stability and Growth Pact · 2017

• The leading studies of post-Confederation fiscal policy (Perry 1955; Gillespie 1991) have assumed that both political parties favoured deficits to build public works, notably railroads, but these studies’ research, which looked only at selected budget speeches, was inconclusive and misleading.

  Revisiting Post-Confederation Fiscal Policy: Liberal Dissent from Conservative Deficits · 2013 · DOI

• We find that in such a long‐run framework, public investment has a significant and permanently positive effect on GDP; this result runs counter to the most recent literature on the topic using SVAR, which was limited to a short‐run specification.

  ON THE LONG‐TERM EFFECTS OF FISCAL POLICY IN THE UNITED KINGDOM: THE CASE FOR A GOLDEN RULE · 2009 · DOI

• An attempt is made to distinguish between the major theoretic achievements and open problems of the influence as a basis first for the vindication of some already rejected ideas by the theoretic community; second to mark the lines for a more productive methodological approach to clarification of open problems, and further to a more effective state influence on the qualitatively new economic and political realities of the Twenty First Century.

  Achievements and open problems of contemporary budget policy · 2002

• In order to succeed in this undertaking, EU governments and institutions have to tackle a number of open issues in the implementation of the pact while recreating the political drive which made Maastricht a success.

  Maastricht’s Fiscal Rules at Ten: An Assessment · 2002 · DOI

• It remains to be seen whether the stability and growth pact — which aims to lock EMU members into a permanent fiscal discipline commitment while allowing for flexibility to cushion cyclical fluctuations — will work.

  Maastricht’s Fiscal Rules at Ten: An Assessment · 2002 · DOI

• A reconciliation of these opposing views is not impossible if the author illuminates a source of deviation from the equivalence theorem, which has not been explored so far: the possibility that consumption decisions in each country are affected by the level of its indebtedness, when private agents operate under a debt illusion.

  HOW RIVAL ARE THE RICARDIAN EQUIVALENCE PROPOSITION AND THE FISCAL POLICY POTENCY VIEW? · 1992 · DOI

• Research limitations/implications The study focuses specifically on highly indebted countries, and the findings may not be generalizable to countries with different debt profiles or economic structures.

  Unraveling the social development impact of internal and external debt in highly indebted countries · 2026 · DOI

• The study acknowledges that expenditure patterns are likely influenced by project timing, budget approvals, or changes in development priorities, but does not explicitly model or control for these factors.

  Predicting the Path of Progress: A Trend and Forecast Analysis of PMC Expenditure · 2026 · DOI

• But more remarkable is the fact that the current account balance also caused a change in military expenditure, while the reverse causality has not been established.

  The impact of military expenditure on external debt in Armenia · 2023 · DOI

• Given the lack of consensus amongst researchers from different countries, several research outputs on external public debt have yielded conflicting results.

  External public debt and economic growth relationship: Evidence from developing Sub-Saharan African countries, 1980-2018 · 2023 · DOI

• Due to insufficient research in previous studies in this respect, findings presented in this article may provide for a useful hint for policymakers in further design of optimal tax system that would provide for stable and predictable sources of income to the government.

  Unstable government revenues in uncertain times: which taxes are especially volatile? · 2023 · DOI

• However, given the fact that private investments and productivity stay rather low in the non-tradable sector of the domestic economy, real convergence to Western efficiency and living standards remain elusive.

  The Tragedy of Transition: Development, Deterioration, Decay. The Case of Hungary, 1990-2020 · 2021 · DOI

• It was found that in times of economic growth tax and non-tax revenues form the necessary fiscal resources in the budget while during a crisis the revenues are insufficient, which in turn leads to the formation of a budget deficit and a subsequent increase in government debt.

  TAX STRUCTURE AND ECONOMIC GROWTH: EMPIRICAL EVIDENCE FROM BULGARIA · 2019 · DOI

• In conclusion, more targeted measures are warranted in order to enhance further the penetration of electronic payments, which would yield even greater fiscal benefits.

  Penetration of Digital Payments in Greece after Capital Controls: Determinants and Impact on VAT Revenues · 2019 · DOI

Most-cited papers in Fiscal Policies and Political Economy

• The Forgotten History of Domestic Debt · The Economic Journal · 2011 · 154 citations
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• SOVEREIGNS VERSUS BANKS: CREDIT, CRISES, AND CONSEQUENCES · Journal of the European Economic Association · 2015 · 123 citations
• Do fiscal rules cause better fiscal balances? A new instrumental variable strategy · European Journal of Political Economy · 2020 · 115 citations
• Do fiscal rules constrain political budget cycles? · Public Choice · 2020 · 92 citations
• Beliefs about public debt and the demand for government spending · Journal of Econometrics · 2021 · 77 citations
• A Framework to Assess Debt Sustainability under the Belt and Road Initiative · Journal of Development Economics · 2020 · 71 citations
• Maastricht’s Fiscal Rules at Ten: An Assessment · JCMS Journal of Common Market Studies · 2002 · 51 citations
• The politics of fiscal consolidation revisited · Journal of Public Policy · 2015 · 50 citations
• Do fiscal rules need budget transparency to be effective? · European Journal of Political Economy · 2022 · 50 citations

Most recent work

• Generationengerechte (Staats-)Schulden: Replik und Erwiderung · Wirtschaftsdienst · 2026
• Predicting the Path of Progress: A Trend and Forecast Analysis of PMC Expenditure · International Journal of Mathematics And Computer Research · 2026
• Puzzling or powering? How fiscal communication reflects the politicisation of the European Central Bank · Journal of European Public Policy · 2026
• The Paradox of Austerity · Zenodo (CERN European Organization for Nuclear Research) · 2026
• Fiscal Deficit Financing Strategies and Human Development Outcomes in Nigeria · Journal of Global Economics & Sustainable Development · 2026
• Financial markets and mass political attitudes: evidence from the 2022 Brazilian election · Review of International Political Economy · 2026
• FISCAL MANAGEMENT AND FISCAL SUSTAINABILITY: A COMPARATIVE STUDY OF ODISHA AND WEST BENGAL · ShodhKosh: Journal of Visual and Performing Arts · 2026
• Two-pronged approach versus opposite approach: local government debt governance and risk premium of urban investment bonds · Journal of the Asia Pacific Economy · 2026
• Fiscal Rules and Public Spending Efficiency · Public Finance Review · 2026
• EFICIÊNCIA DA GESTÃO POR RESULTADOS: · Revista Mineira de Contabilidade · 2026

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