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Assessing the sustainability of fiscal policies: Empirical evidence from the Euro Area and the United States

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Author Info
Luigi Landolfo (University of Warwick)
Abstract

This paper provides a formal theoretical framework for analyzing the sustainability of fiscal policy based on the government intertemporal budget constraint, and derives conditions that determine whether a fiscal stance is sustainable in the medium and long term. In contrast to previous studies, it uses a log-linearization of the public debt identity and generalizes the results obtained in the literature by using a multivariate test. The analysis is applied to the fiscal position of the United States and the Euro Area. On the basis of infinite horizon-tests the broad conclusion is that both regions have a sustainable fiscal policy.

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File URL: http://www4.cema.edu.ar/pjae/m/172landolfo200811
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Publisher Info
Article provided by Universidad del CEMA in its journal Journal of Applied Economics.

Volume (Year): XI (2008)
Issue (Month): (November)
Pages: 305-326
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Handle: RePEc:cem:jaecon:v:11:y:2008:n:2:p:305-326

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Related research
Keywords: fiscal policy; sustainability of fiscal policy; VAR; VECM;

Find related papers by JEL classification:
C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions
E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy

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This page was last updated on 2009-11-2.

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