DETERMINANTS OF PUBLIC DEBT: AN INTEGRATED FISCAL, ECONOMIC, INSTITUTIONAL AND CLIMATE-RISK FRAMEWORK
DOI:
https://doi.org/10.35631/AIJBES.829131Keywords:
Climate Risk, Conceptual Framework, Corruption, Fiscal Sustainability, Economic Growth, Government Consumption, Military Expenditure, Public DebtAbstract
Public debt is shaped by more than the size of a government's fiscal deficit. Spending decisions, economic performance, institutional quality and increasingly climate-related shocks can all alter borrowing requirements and debt sustainability. This conceptual paper develops an integrated framework linking public debt with five determinants: government consumption, military expenditure, economic growth, corruption and climate risk. The framework draws on Keynesian Theory, Growth Theory, Institutional Theory and Fiscal Policy Theory, while a climate-fiscal perspective is used to explain how physical and transition risks enter debt dynamics. A structured narrative review of recent and foundational literature is used to identify the main transmission mechanisms and areas of disagreement. The review suggests that government consumption and military expenditure can raise debt when additional spending is deficit-financed; economic growth can strengthen fiscal capacity and reduce the relative burden of debt; corruption can increase fiscal costs through weak governance; and climate risk can create simultaneous pressure through disaster losses, reconstruction expenditure, weaker output, lower revenue and sovereign-risk repricing. The paper develops five propositions from these relationships. The paper contributes by bringing conventional fiscal, economic and institutional determinants together with climate risk in a single framework and by identifying the conditions under which the proposed relationships may strengthen or weaken.
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