Fiscal space and government debt sustainability: empirical analysis based on Chinese national debt

Anotacija

Grounded  in the  intertemporal  budget  constraint  theory , this  paper  defines  'fiscal space' as a core indicator of debt sustainability  and employs a VECM  model to analyze China's national debt data from 1994 to 2023. The findings reveal that economic growth is the most critical factor for expanding fiscal space, exerting a rapid and sustained positive effect in both the short and long term. The tax burden and population aging have a limited positive impact on fiscal space but may exert long-term pressure on its growth. The effect of inflation on fiscal space is minor and inconsistent. A mismatch between the fiscal revenue and expenditure significantly hinders the expansion of fiscal space. Fostering the high-quality economic growth , enhancing fiscal revenues , and optimizing the management of fiscal revenues and expenditures are crucial for safeguarding China's government debt sustainability.