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Fiscal Policy, Government Debt and Economic Performance

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  • Willi Leibfritz
  • Deborah Roseveare
  • Paul van den Noord

Abstract

This paper reviews fiscal policy, government indebtedness and its implications for economic performance in OECD countries. Government debt, expenditure and revenue relative to GDP have all risen significantly over the past 15 years and in several countries these trends are unsustainable. The macroeconomic implications of high fiscal deficits and debt levels are considered and the paper finds that while monetary policy played a clear role in generating recovery, the effects of fiscal policy are more mixed. Looking forward, Member countries’ plans for fiscal consolidation are ambitious, but if sustained economic growth is achieved, these plans are achievable. However, if growth is slower, then further fiscal consolidation efforts would be required to keep public debt under control. Finally, the paper considers ways of improving the control over expenditure and the budget process, so as to achieve better fiscal outcomes ... Cet article examine la politique budgétaire, l’endettement public et son incidence sur les résultats économiques dans les pays de l’OCDE. Au cours des quinze dernières années, la dette, les dépenses et les recettes des administrations publiques exprimées en proportion du PIB ont toutes augmenté de façon significative et ces tendances sont devenues insoutenables dans plusieurs pays. Les implications macroéconomiques de ces déficits budgétaires et de cette dette élevés sont étudiées et il en ressort qu’alors que la politique monétaire a joué un rôle évident dans la reprise économique, les effets de la politique budgétaire sont plus mitigés. Pour l’avenir, les programmes d’assainissement budgétaires des pays Membres sont ambitieux. Mais, dans l’hypothèse d’une reprise économique soutenue, ces programmes sont réalisables. Toutefois, si la reprise économique s’avère plus modeste, des efforts supplémentaires d’assainissement budgétaire s’imposeront pour contenir la dette publique. En ...

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File URL: http://dx.doi.org/10.1787/038702083230
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Bibliographic Info

Paper provided by OECD Publishing in its series OECD Economics Department Working Papers with number 144.

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Date of creation: 1994
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Handle: RePEc:oec:ecoaaa:144-en

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Cited by:
  1. Robert Amano & Don Coletti & Tiff Macklem, 1998. "Monetary rules when economic behaviour changes," Proceedings, Federal Reserve Bank of San Francisco, Federal Reserve Bank of San Francisco, issue Mar.
  2. Lars Calmfors & Giancarlo Corsetti & John Flemming & Seppo Honkapohja & John Kay & Willi Leibfritz & Gilles Saint-Paul & Hans-Werner Sinn & Xavier Vives, 2003. "Fiscal Policy and Macroeconomic Stabilisation in the Euro Area: Possible Reforms of the Stability and Growth Pact and National Decision-Making-Processes," EEAG Report on the European Economy, CESifo Group Munich, CESifo Group Munich, vol. 0, pages 46-75, 05.
  3. António Afonso, 2001. "Non-Keynesian Effects of Fiscal Policy in the EU-15," Working Papers Department of Economics, ISEG - School of Economics and Management, Department of Economics, University of Lisbon 2001/07, ISEG - School of Economics and Management, Department of Economics, University of Lisbon.
  4. Jaakko Kiander & Matti Virén, 2000. "Do automatic stabilisers take care of asymmetric shocks in the euro area?," Discussion Papers, Government Institute for Economic Research Finland (VATT) 234, Government Institute for Economic Research Finland (VATT).
  5. Vratislav Izák, 2004. "Public Debt Service, Interest Rates and Fiscal Variables in Transition Countries," Prague Economic Papers, University of Economics, Prague, University of Economics, Prague, vol. 2004(1), pages 3-15.
  6. M. Buti & D. Franco & H. Ongena, 1997. "Budgetary Policies during Recessions - Retrospective Application of the "Stability and Growth Pact" to the Post-War Period," European Economy - Economic Papers, Directorate General Economic and Monetary Affairs (DG ECFIN), European Commission 121, Directorate General Economic and Monetary Affairs (DG ECFIN), European Commission.
  7. Kalle Kukk, 2007. "Fiscal Policy Effects on Economic Growth: Short Run vs Long Run," Working Papers, Tallinn School of Economics and Business Administration, Tallinn University of Technology 167, Tallinn School of Economics and Business Administration, Tallinn University of Technology.
  8. Kiander, Jaakko & Vartia, Pentti, 1994. "The Great Deperession of the 199s in Finland," Discussion Papers, The Research Institute of the Finnish Economy 526, The Research Institute of the Finnish Economy.

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