Too Much Debt and Budget Deficit on Fiscal Sustainability: Do Institutions Matter?

The current study estimates threshold levels of the public debt-to-gross domestic product (GDP) ratio and budget deficit for 106 developing 36 developed countries from 1996 to 2018. A PCA-based fiscal sustainability indicator is also constructed a dynamic panel regression employed. main findings reveal effect in debt-to-GDP nexus. are beneficial maintaining at lower or upper different institutional indicators. highest level was 59.56% 64.87% countries. deficit-to-GDP 0.41% 3.34% Three indicators contribute significantly estimation: regulatory quality, rule law control corruption. Policymakers advised maintain certain points ensure fiscally sustainable level. quality enforcement corruption should be improved.