Description of the descriptive statistics
| VARIABLE | Observations | Mean | Standard deviation | Minimum | Maximum |
|---|---|---|---|---|---|
| Fiscal Rules Strenght Index | 378 | 0.7084127 | 0.9798401 | −1.02 | 2.82 |
| public debt | 378 | 66.22778 | 37.75777 | 4.5 | 206.3 |
| debt interest | 378 | 1.956614 | 1.238837 | 0 | 7.7 |
| deficit/surplus | 378 | −3.066138 | 3.707325 | −32.1 | 4.2 |
| cyclically-adjusted budget balance | 378 | −2.365608 | 3.167287 | −30.8 | 6.2 |
| daily 10-year bond yield | 366 | 2.855295 | 3.129125 | −0.575 | 35.488 |
| bond spread | 366 | 1.758749 | 2.613217 | −0.5189998 | 33.672 |
| Voice and Accountability | 350 | 51.98492 | 29.71663 | 4.830918 | 95.77465 |
| Political Stability and Absence of Violence/Terrorism | 370 | 54.64296 | 29.54909 | 0.4716981 | 99.52607 |
| Government Effectiveness | 370 | 55.5651 | 28.28134 | 3.349282 | 98.55769 |
| Regulatory Quality | 370 | 56.19351 | 27.2911 | 3.349282 | 99.04306 |
| Rule of Law | 370 | 53.47647 | 28.92073 | 0.4694836 | 98.55769 |
| Control of Corruption | 370 | 55.74705 | 30.06113 | 0.4739336 | 96.20853 |
Correlation matrix
| No | EXPLANATORY VARIABLE | 1 | 2 | 3 | 4 | 5 | 6 | 7 | 8 | 9 | 10 | 11 |
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 1 | Fiscal Rules Strenght Index | 1 | ||||||||||
| 2 | daily 10-year bond yield | −0.5306* | 1 | |||||||||
| 3 | public debt | −0.0005 | 0.1468* | 1 | ||||||||
| 4 | deficit/surplus | 0.3031* | −0.4334* | −0.3385* | 1 | |||||||
| 5 | cyclically-adjusted budget balance | 0.2975* | −0.3578* | −0.1163* | 0.8492* | 1 | ||||||
| 6 | Voice and Accountability | −0.1824* | 0.0465 | 0.0973 | 0,0429 | 0.0858 | 1 | |||||
| 7 | Political Stability and Absence of Violence/Terrorism | −0.1825* | 0.0341 | 0.2330* | −0,0730 | −0.0011 | 0.7851* | 1 | ||||
| 8 | Government Effectiveness | −0.0833 | 0.0071 | 0.1231* | −0,0454 | −0.0395 | 0.7126* | 0.8334* | 1 | |||
| 9 | Regulatory Quality | −0.0905 | 0.0537 | 0.1503* | −0,0662 | −0.0389 | 0.6945* | 0.7549* | 0.9200* | 1 | ||
| 10 | Rule of Law | −0.1177* | 0.0827 | 0.1816* | −0.1066* | −0.0823 | 0.7711* | 0.8113* | 0.9366* | 0.9265* | 1 | |
| 11 | Control of Corruption | −0.0881 | 0.0512 | 0.1547* | −0.0953 | −0.0706 | 0.7609* | 0.8522* | 0.9165* | 0.8478* | 0.9185* | 1 |
GMM model estimation results
| EXPLANATORY VARIABLE | one step GMM debt interest Coefficient (Std. err.) | two step GMM debt interest Coefficient (Std. err.) | one step GMM debt interest Coefficient (Std. err.) | one step GMM debt interest Coefficient (Std. err.) | ||||
|---|---|---|---|---|---|---|---|---|
| L1.debt interest | 0.9308 (0.0386) | *** | 0.7037 (0.0617) | *** | 0.7673 (0.0542) | *** | 0.6979 (0.0614) | *** |
| L2.debt interest | −0.1566 (0.0309) | *** | −0.1315 (0.0443) | *** | −0.1401 (0.0409) | *** | −0.1491 (0.0446) | *** |
| Fiscal Rules Strenght Index | −0.1560 (0.0214) | *** | −0.1387 (0.0429) | *** | −0.1177 (0.0381) | *** | −0.1328 (0.0427) | *** |
| cyclically-adjusted budget balance | −0.0060 (0.0077) | −0.0378 (0.0146) | ** | −0.0410 (0.0160) | ** | |||
| daily 10-year bond yield | 0.0656 (0.0085) | *** | 0.0688 (0.0081) | *** | 0.0679 (0.0085) | *** | ||
| public debt | 0.0159 (0.0026) | *** | 0.0154 (0.0024) | *** | 0.0182 (0.0027) | *** | ||
| deficit/surplus | 0.0350 (0.0132) | *** | 0.0371 (0.0147) | *** | ||||
| bond spread | 0.0553 (0.0066) | *** | ||||||
| time effects | YES | YES | YES | YES | ||||
| country effects | YES | YES | YES | YES | ||||
| WORLDWIDE GOVERNANCE INDICATORS: | ||||||||
| Voice and Accountability | 0.0018 (0.0053) | 0.0016 (0.0053) | ||||||
| Political Stability and Absence of Violence/Terrorism | −0.0063 (0.0032) | ** | −0.0050 (0.0032) | |||||
| Government Effectiveness | −0.0053 (0.0050) | −0.0049 (0.0050) | ||||||
| Regulatory Quality | 0.0034 (0.0044) | 0.0039 (0.0043) | ||||||
| Rule of Law | 0.0050 (0.0055) | 0.0072 (0.0055) | ||||||
| Control of Corruption | 0.0037 (0.0040) | 0.0026 (0.0040) | ||||||
| _cons | 0.4305497 | *** | 46.40693 | ** | 7.103621 | 29.67862 | ||
| number of observations | 314 | 286 | 314 | 286 | ||||
| number of groups | 27 | 27 | 27 | 27 | ||||
| number of instruments | 92 | 111 | 106 | 112 | ||||
| Wald test | 3339.07 | *** | 4205.08 | *** | 4632.3 | *** | 4258.97 | *** |
| Sargan test | 144.8554 | 0.0001 | 99.02662 | 0.0331 | 105.1826 | 0.0123 | 94.16071 | 0.0666 |
| Arellano–Bond test AR(1) | −1.7885 | 0.0737 | ||||||
| Arellano–Bond test AR(2) | −0.9867 | 0.3238 | ||||||
Definition of variables
| VARIABLE | DEFINITION | DATA SOURCE |
|---|---|---|
| debt interest (% of GDP) | a dependent variable representing the government’s gross debt servicing costs (interest, payable, according to ESA 2010). | EUROSTAT, European Commission |
| Fiscal Rules Strenght Index (FRSI) | an indicator providing a synthetic measure of the quality of fiscal rules, covering all types of numerical fiscal rules (budget balance rules, debt rules, expenditure rules and revenue rules) in EU Member States, at all levels of government (central, regional and local, general government and social security). | Fiscal rules database, DG ECFIN, European Commission |
| cyclically-adjusted budget balance (CAB) (% of potential GDP) | the structural budget balance adjusted for one-off and temporary measures, which represents a hypothetical value indicating what the value of the budget balance would be if actual output were equal to potential output, while accounting for interest payments. | AMECO, DG ECFIN, European Commission |
| deficit/surplus (% of GDP) | the actual budget balance, that is the difference between total revenue and total expenditure (the government net lending(+)/net borrowing(−), according to ESA 2010). | EUROSTAT, European Commission |
| public debt (% of GDP) | the government gross debt (the government consolidated gross debt, according to ESA 2010). | EUROSTAT, European Commission |
| daily 10-year bond yield | a return on capital invested in 10-year government bonds (the value of the 10-year government bond yield for a calendar year was determined on the last working day of the last calendar month). | investing.com |
| bond spread | a risk premium that signifies the difference between the yield on a 10-year government bond of an EU Member State and the yield on a 10-year government bond of Germany, which is considered highly secure. | investing.com |
| Worldwide Governance Indicators: | aggregate indicators to assess individual countries, including EU Member States, on the quality of institutional governance in the following six dimensions: | World Bank, WGI |
| Voice and Accountability | measures perceptions of the extent to which citizens participate in electing their government, as well as freedom of speech, freedom of association and freedom of the media; | |
| Political Stability and Absence of Violence/Terrorism | measures perceptions of the likelihood of political instability and/or politically motivated violence, including terrorist acts; | |
| Government Effectiveness | measures perceptions of the quality of public services and their degree of its independence from political pressures, the quality of policy formulation and implementation, and the credibility of the government; | |
| Regulatory Quality | measures perceptions of the government’s ability to formulate and implement stable policies and regulations conducive to private sector development; | |
| Rule of Law | measures perceptions of levels of trust and compliance with the rule of law, in particular contract enforcement, property rights, and the quality of justice; | |
| Control of Corruption | measures perceptions of the extent of all forms of corruption perpetrated by public authorities, as well as the ‚capture’ of the state by elites and private interests. |