Fiscal Sustainability and Fiscal Soundness
AbstractThis paper tackles fiscal sustainability and fiscal soundness. In contrast to the existing literature, our analysis is in a general equilibrium framework. We obtain three results. First, we endogenize growth rate and interest rate, the two key rates for any study of fiscal sustainability; second, we illustrate that fiscal sustainability in general equilibrium should not be measured by a one-dimension indicator, e.g., debt-to-GDP ratio as in conventional studies, rather it is a line¡ªa fiscal sustainability frontier¡ªin two dimensions, namely, debt-to-GDP ratio and expenditure-to-GDP ratio; third, we obtain a novel and useful index of aggregate fiscal soundness.
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Bibliographic InfoArticle provided by Society for AEF in its journal Annals of Economics and Finance.
Volume (Year): 9 (2008)
Issue (Month): 2 (November)
Fiscal sustainability; Sustainability frontier; Fiscal soundness;
Find related papers by JEL classification:
- E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
- E61 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Policy Objectives; Policy Designs and Consistency; Policy Coordination
- C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
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