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Analysis of the Financial Fragility Hypothesis Applied to the Public Sector by Means of Structural Equations

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posted on 05.02.2022, 01:23 by Cláudio CaríssimoCláudio Caríssimo, Eduardo Gomes Carvalho, Francisval Melo Carvalho, carlos eduardo Stefaniak Aveline

This study analysed the effects of public debt interest and charges through on Financial Fragility Hypothesis (FFH), in relation to Brazilian states’ public debt. Structural equation modelling was used as the empirical procedure. The effects of the structural model’s constructs explained 90.2% of the Public Sector Financial Position. The proposed model showed significance and relevance of the formative indicators. The results show that financial fragility is caused by excessive current spending but is aggravated by interest and amortisation costs that exceed the Current Revenue/Current Expenditure balance. This evidence confirms the assumptions of the FFH when applied to the public sector.

History

Declaration of conflicts of interest

No

Corresponding author email

claudio.carissimo@unifal-mg.edu.br

Lead author country

Brazil

Lead author job role

Career College Faculty

Lead author institution

Federal University of Alfenas

Human Participants

No

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