Fiscal Policy and Institutional Quality Integration on Public Debt Sustainability: A Conceptual Analysis

Abstract

This study aims to analyze the relationship between fiscal policy, institutional quality, and public debt sustainability using a literature review approach to the scientific literature published in the last five years. This study examines various empirical studies that show that expansionary fiscal policies are indeed able to drive economic growth in the short term, but have the potential to increase fiscal risks if not balanced with strong and transparent institutional governance. Institutional quality has proven to be a key factor in determining the effectiveness of fiscal policy through the mechanisms of budget transparency, public accountability, and bureaucratic efficiency. Institutional reforms that focus on improving governance, law enforcement, and corruption control can strengthen fiscal discipline, reduce moral hazards, and support the sustainability of public debt in the long term. Thus, this study confirms that the balance between fiscal discipline and institutional quality is a fundamental element in maintaining macroeconomic stability. The integration of fiscal policy and institutional reform is an important foundation for the achievement of sustainable and equitable development.