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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. Sandra Poncet & Jérôme Héricourt, 2013. "Exchange Rate Volatility, Financial Constraints and Trade: Empirical Evidence from Chinese Firms," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) halshs-00960664, HAL.
  2. 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.
  3. Heericourt, Jerome & Poncet, Sandra, 2013. "Exchange rate volatility, financial constraints, and trade : empirical evidence from Chinese firms," Policy Research Working Paper Series 6638, The World Bank.
  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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