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The challenge of controlling public debt and restoring budget equilibrium
[Le défi de la maitrise de la dette publique et du retour à l'équilibre]

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  • Jean-Marie Monnier

    (CES - Centre d'économie de la Sorbonne - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique)

Abstract

The objective of the Communication is to highlight the developments affecting the main factors explaining changes in government debt and deficit between 1998 and 2017. Based on a simplified representation in term of the "snowball effect", three forces belonging to public policy and influencing the dynamics of public debt are studied: the interest rates on public loans, the GDP growth rate and the budget balance (the difference between public expenditures and revenues). This shows that debt dynamics are essentially long-term in nature, even if breaks occurred during the 2008-2012 shock. The importance of economic growth in this dynamic is emphasized. Moreover, two factors of risk for public finances are stressed: the risk linked to a possible reversal of the interest rate trend and the growing inability of tax revenues to cover public expenditures.

Suggested Citation

  • Jean-Marie Monnier, 2018. "The challenge of controlling public debt and restoring budget equilibrium [Le défi de la maitrise de la dette publique et du retour à l'équilibre]," Post-Print hal-01906551, HAL.
    • Handle: RePEc:hal:journl:hal-01906551
    Note: View the original document on HAL open archive server: https://hal.science/hal-01906551
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