Pasinetti, debt sustainability and structural change in an era of global finance: an emerging and developing countries’ perspective
Botta, Alberto and Spinola, Danilo and Yajima, Giuliano and Porcile, Gabriel (2025) Pasinetti, debt sustainability and structural change in an era of global finance: an emerging and developing countries’ perspective. Review of Keynesian Economics, 13 (2). pp. 216-248. ISSN 2049-5323
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Abstract
This paper studies the relationship between financial integration, external debt sustainability and fiscal balance in emerging and developing economies (EDEs). We do so by applying Pasinetti’s ‘geometry of debt sustainability’ to EDEs and analysing how it is shaped by exposure to global financial cycles. Through the lenses of Pasinetti’s theoretical framework, we study whether global finance opens ‘windows of opportunities’ or creates more constraints for EDEs in offering fiscal support for structural change, including green structural transformations. We suggest EDEs may face a ‘gridlock’. Global finance and pressures to keep external debt sustainable make them struggle to maintain vital public investment and enact counter-cyclical fiscal actions. This, in turn, exacerbates technological backwardness, which feeds back in the form of more binding external constraints and tighter ‘surveillance’ by international creditors. We support our theoretical analysis with an econometric study over a sample of 55 countries from 1980 to 2018. Capital controls and external macroprudential policy emerge as fundamental policies enabling EDEs to adeptly manoeuvre through debt challenges without falling into the pitfalls of stagnation and enduring technological underdevelopment.
| Item Type: | Article |
|---|---|
| Identification Number: | 10.4337/roke.2025.02.04 |
| Dates: | Date Event 20 January 2024 Accepted 14 April 2025 Published Online |
| Uncontrolled Keywords: | Financial globalisation, fiscal space, structural change |
| Subjects: | CAH15 - social sciences > CAH15-02 - economics > CAH15-02-01 - economics |
| Divisions: | Faculty of Business, Law and Social Sciences > College of Accountancy, Finance and Economics |
| Depositing User: | Danilo Sartorello Spinola |
| Date Deposited: | 29 Apr 2025 08:55 |
| Last Modified: | 29 Apr 2025 08:56 |
| URI: | https://www.open-access.bcu.ac.uk/id/eprint/16309 |
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