JEL classification: E62, H62, H63;
Keywords: public debt, budget deficit, panel data analysis;
Abstract: The aim of the article is to investigate the fiscal determinants of stock-flow adjustment (SFA). Previous
literature suggests that SFA may be used strategically to reduce budget deficit and public debt.
As such, SFA impairs fiscal transparency and may endanger fiscal sustainability. Therefore, special
attention should be paid by economists and policymakers. The study pertains to the European
Union countries in the years 2005-2016. The empirical analysis supports the hypothesis that SFA is
inversely related to public debt, whereas the inverse relationship between budget balance and SFA
is not confirmed. The article contains additional analyses for selected components of SFA as well as
narrower time and space coverage.