Growth-Maximising budget deficit in BRICS-T: A panel threshold approach

The budget deficit affects the sustainability of macroeconomic stability for both developed and developing countries, although the reasons for their occurrence differ. The importance of budget deficit varies depending on whether it supports or hinders economic growth. This paper aims to estimate the growth-maximising budget deficit ratio in BRICS-T countries empirically. To calculate the growth-maximising budget deficit ratio, the panel threshold approach was used from 1990–2021. According to findings, the BRICS-T countries can maximise economic growth by keeping their budget deficit between 0.66% and 3.30% of GDP. The findings of this research point to the importance of fiscal discipline and support for moderate budget deficits for fiscal policymakers of BRICS-T countries. Moreover, it can be stated that the Maastricht Criteria has an extremely critical value not only for the European Union but also for the BRICS-T countries.