PUBLIC DEBT AND ECONOMIC TRAJECTORIES: A DUAL LENS ANALYSIS WITH AND WITHOUT GOVERNMENT MEDIATION

Abstract

We study the governmental and non governmental factors, alongside the sociopolitical and socioeconomic structures, influencing the sustainability and efficiency of debt. We found a negative correlation of 3.9bps in 10 Year Government Treasury Bond Yields for every percentile increase in governance indicators. Furthermore, we created The Fully Modified World Governance Index, which was better acclimatised to predict the impact of governance on bond yields, which is used as a proxy for the sustainability and efficiency of government debt, and has a negative coefficient of 5.9bps for every marginal increase on The Fully Modified World Governance Index. Additionally, the non governmental factors provided significant and strong negative correlations with the bond yields,  however, the regression with fundamental rights pertained to the conclusion that sociopolitical austerity and the centralisation of authority lead to lower bond yields, which, in turn, reflect greater sustainability and efficiency of government debt.