Regional Economics: Theory and Practice

Abstracting and Indexing

Referativny Zhurnal VINITI RAS
LCCN Permalink
Google Scholar

Online available



Cyberleninka (12 month OA embargo)

Is the public debt of the regions of Russia sustainable?

Vol. 17, Iss. 4, APRIL 2019

Received: 4 February 2019

Received in revised form: 25 February 2019

Accepted: 19 March 2019

Available online: 15 April 2019


JEL Classification: E61, E62, H11, H72, H77

Pages: 763–778

Alekhin B.I. Russian State University for the Humanities (RSUH), Moscow, Russian Federation

Subject This article considers the issues related to the accumulation of public debt of the Russian Federation subjects.
Objectives To test for debt sustainability at the regional level, we use a model-based approach proposed by Bohn and the panel data of the Russian Federation fifty constituent entities for 2006–2017. Bohn's test looks for positive reaction of the primary surplus to the debt at the start of the period. Such a reaction confirms the debtor's fiscal solvency.
Methods The article estimates the model of panel data with fixed effects by least squares with dummy variables involving diagnostic tests.
Results Bohn's test resulted in negative and statistically insignificant reaction, which indicated fiscal insolvency at the regional level. The primary surplus reacts positively to the regional output and negatively to temporary budget expenditures.
Conclusions Fiscal insolvency is not manifested in real default on securities and expenditure commitments of regional governments. It is absorbed by the federal budget through the system of soft budget constraints at both levels of government.

Keywords: fiscal sustainability, Bohn's test


  1. Hamilton J.D., Flavin M.A. On the Limitation of Government Borrowing: A Framework for Empirical Testing. The American Economic Review, 1986, vol. 76, iss. 4, pp. 808–819. URL: Link
  2. Bohn H. The Sustainability of Budget Deficits in a Stochastic Economy. Journal of Money, Credit, and Banking, 1995, vol. 27, iss. 1, pp. 257–271. URL: Link
  3. Bohn H. The Behavior of U.S. Public Debt and Deficits. The Quarterly Journal of Economics, 1998, vol. 113, iss. 3, pp. 949–963. URL: Link
  4. Bohn H. The Sustainability of Fiscal Policy in the United States. CESifo Working Paper, April, 2005, no. 1446. URL: Link
  5. Mendoza E.G., Ostry J.D. International Evidence on Fiscal Solvency: Is Fiscal Policy “Responsible”? Journal of Monetary Economics, 2008, vol. 55, iss. 6, pp. 1081–1093. URL: Link
  6. Claeys P., Ramos R., Suriñach J. Fiscal Sustainability Across Government Tiers. International Economics and Economic Policy, 2008, vol. 5, iss. 1-2, pp. 139–163. URL: Link
  7. Rodden J.A., Eskeland G.S., Litvack J. Fiscal Decentralization and the Challenge of Hard Budget Constraints. Cambridge, MA, MIT Press, 2003, 486 p.
  8. Kornai J., Maskin E., Roland G. Understanding the Soft Budget Constraint. Journal of Economic Literature, 2003, vol. 41, iss. 4, pp. 1095–1136. URL: Link
  9. Oates W.E. On the Theory and Practice of Fiscal Decentralization. IFIR Working Paper, no. 2006-05, May 2006. URL: Link
  10. Sinel'nikov-Murylev S.G., Kadochnikov P.A., Trunin I.V. et al. Problema myagkikh byudzhetnykh ogranichenii rossiiskikh regional'nykh vlastei: monografiya [The problem of soft budget constraints of the Russian regional authorities: a monograph]. Moscow, Institute for Economy in Transition Publ., 2006, 300 p.
  11. Levin A., Lin Ch.-F., Chu Ch.-S.J. Unit Root Tests in Panel Data: Asymptotic and Finite-Sample Properties. Journal of Econometrics, 2002, vol. 108, iss. 1, pp. 1–24. URL: Link00098-7
  12. Torres-Reyna O. Panel Data Analysis. Fixed and Random Effects Using Stata (v. 4.2). Princeton, Princeton University, 2007. URL: Link

View all articles of issue


ISSN 2311-8733 (Online)
ISSN 2073-1477 (Print)

Journal current issue

Vol. 17, Iss. 4
April 2019