National fiscal rules, Maastricht fiscal criteria and non-linear public debt dynamics in Serbia

The aim of the paper is to assess the reaction of fiscal policymakers in Serbia when the public debt-to-GDP ratio is above the 45% limit set in the national fiscal rules. The paper proposes a two-regime nonlinear self-exciting threshold autoregressive (SETAR) model as an appropriate econometric framework for modeling the asymmetries in the dynamics of the public debt/GDP ratio with respect to the 45% public debt limit. The empirical evidence suggests that fiscal policymakers in Serbia do not adhere to the 45% public debt/GDP ceiling and instead use the Maastricht limit of 60% as a target reference point for public debt management. The article contributes to the current policy debate by providing empirical evidence to support the claim that the behavior of fiscal policymakers in Serbia between 2001Q1 and 2023Q2 could jeopardize the credibility of fiscal policy and increase the probability of default by the Serbian government on its maturing public debt.