Economies

This study examines public debt sustainability in the Eurozone by estimating fiscal reaction functions that assess how fiscal balances respond to rising public debt under heterogeneous macroeconomic conditions. Using annual panel data for 20 EU countries from 2000 to 2024, we employ fixed effects, system Generalized Method of Moments (GMM), and nonlinear specifications grounded in the intertemporal budget constraint framework. The results indicate that, under fixed effects, fiscal balances respond negatively to higher debt levels, consistent with the presence of fiscal fatigue. In contrast, dynamic GMM estimates reveal weak or statistically insignificant debt responses, while confirming strong fiscal persistence and a positive role for economic growth. Nonlinear specifications suggest that fiscal responsiveness weakens at high debt levels, with adjustment capacity further strained during major crisis episodes. Inflation and interest rates exert adverse effects on fiscal balances, whereas GDP growth supports fiscal sustainability. In summary, the findings highlight substantial cross-country heterogeneity and raise doubts about the effectiveness of uniform fiscal rules in the European Union, lending support to calls for more flexible and country-specific fiscal frameworks.

In emerging markets, stock markets play a crucial role in supporting long-term growth. This study explores the causal relationship between stock market development and economic growth in the Fragile Five countries—Brazil, India, Indonesia, South Africa, and Turkey—covering the period from 2001 to 2024. To ensure robust findings, it uses second-generation panel cointegration and causality tests that account for cross-sectional dependence and structural heterogeneity. The model includes three parameters representing financial depth, liquidity, and efficiency. Results indicate significant long-term cointegration, suggesting causality from stock market development to economic growth, supporting the supply-led growth hypothesis. This aligns with recent evidence highlighting the importance of institutional quality and sectoral interconnectedness in emerging markets. Furthermore, Panel DOLS and FMOLS analyses reveal that stock market capitalization has a notable positive effect on domestic productivity. Overall, these findings underscore that stock market parameters are vital for accurate economic forecasting and that strengthening capital markets is essential for sustainable growth in the Fragile Five.

The worldwide move toward renewable energy indicates a fundamental change that is particularly important in the MENA region, which has abundant renewable resources and has depended on hydrocarbon economies. This study presents an empirical examination of key macroeconomic determinants—inflation, fiscal policy, and economic volatility—on renewable energy security in MENA countries from 2000 to 2023. Applying a Panel Autoregressive Distributed Lag (ARDL) model of 16 countries, we assess the short-run dynamic and long-run equilibrium relationships, where renewable energy security is measured using the share of renewable electricity in total generation. These results support the existence of a significant long-run cointegrating relationship. We find fiscal policy to have a positive effect on renewable energy security, while inflation and economic volatility have significant negative short- and long-term effects. The error-correction term of −0.421 signaled a relatively fast return to long-run equilibrium. We conclude that sound management of these macroeconomic variables—especially price stability and counter-cyclical fiscal policies—is an essential precondition for achieving renewable energy security in the MENA region. Our policy implications highlight the need to support stable investment inquiries led by coordinated monetary, fiscal, and energy policies aimed at creating the conditions for renewable energy security.