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The global dimension to fiscal sustainability

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  • Byrne, Joseph P.
  • Fiess, Norbert
  • MacDonald, Ronald

Abstract

This paper provides a new perspective of fiscal sustainability and financial globalization in emerging and industrial countries. We highlight the importance of global capital market shocks for fiscal sustainability, a relationship which has hitherto been ignored in the empirical literature. Using a factor model we demonstrate that the relationship between deficit and debt is conditional upon a global factor and we suggest that this global factor is related to world-wide liquidity. We also demonstrate that this acts as a constraint on emerging market economies' fiscal policy.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Macroeconomics.

Volume (Year): 33 (2011)
Issue (Month): 2 (June)
Pages: 137-150

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Handle: RePEc:eee:jmacro:v:33:y:2011:i:2:p:137-150

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Web page: http://www.elsevier.com/locate/inca/622617

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Keywords: Fiscal policy Sustainability;

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Citations

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Cited by:
  1. Jérôme Héricourt & Sandra Poncet, 2012. "Exchange Rate Volatility, Financial Constraints and Trade: Empirical Evidence from Chinese Firms," Working Papers 2012-35, CEPII research center.
  2. Niklas Potrafke & Markus Reischmann, 2014. "Fiscal Transfers and Fiscal Sustainability," CESifo Working Paper Series 4716, CESifo Group Munich.
  3. Niklas Potrafke & Markus Reischmann, 2012. "Fiscal Equalization Schemes and Fiscal Sustainability," CESifo Working Paper Series 3948, CESifo Group Munich.
  4. Escobari, Diego & Mollick, André Varella, 2013. "Output Growth and Unexpected Government Expenditures," MPRA Paper 48969, University Library of Munich, Germany.

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