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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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Cited by:
  1. Niklas Potrafke & Markus Reischmann, 2012. "Fiscal Equalization Schemes and Fiscal Sustainability," Ifo Working Paper Series Ifo Working Paper No. 141, Ifo Institute for Economic Research at the University of Munich.
  2. Niklas Potrafke & Markus Reischmann, 2014. "Fiscal Transfers and Fiscal Sustainability," CESifo Working Paper Series 4716, CESifo Group Munich.

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