Clustering of Russian Regions by Level of Debt Sustainability

Abstract

The subject of the paper is the assessment of regional debt sustainability in accordance to the Budget Code of the Russian Federation. The relevance of the study is due to the aggravation of the regional debt problems at the end of 2020 and the need to have an assessment system that allows to timely respond to a decrease in the level of regional debt sustainability. The novelty of the study consists in the analysis of the system of debt sustainability indicators and their threshold values using the methods of cluster analysis. The article aims to examine if the current assessment system allows to classify regions by the level of debt sustainability quite clearly. As a result of the study, it was shown that the used debt sustainability indicators partially duplicate each other, and the methods of their calculation and the established threshold values discriminate against subsidized regions. In addition, it was shown that the grouping of regions based on the current assessment system does clearly distinguish between regions with high and medium levels of debt sustainability. The conclusion of the study is that in order to improve the system for assessing debt sustainability, it is necessary to change the set of debt sustainability indicators and the procedure for calculating them, as well as to set appropriate new threshold values for the new set of indicators. The prospect of the study is to conduct a similar analysis based on data for 2020 and refine new thresholds for debt sustainability indicators.

Keywords

• subject of the russian federation
• debt sustainability
• cluster analysis
• ward’s method
• k-means clustering
• regional debt
• debt service
• debt repayment