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Fiscal governance after the financial crisis: A review

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  • Hughes Hallett, Andrew

Abstract

Economists have traditionally used a simple rule that restricts primary deficits to less than a threshold given by the interest-growth rate differential and existing debt in order to judge fiscal sustainability. This rule derives from a single period application of the government budget constraint. It is not forward looking. In the equivalent dynamic rule, the primary surplus needs to match any expected, discounted increases in public spending, the net interest on existing debt, and preferences for extending debt relative to changing taxes.

Suggested Citation

  • Hughes Hallett, Andrew, 2019. "Fiscal governance after the financial crisis: A review," Economic Analysis and Policy, Elsevier, vol. 64(C), pages 54-63.
    • Handle: RePEc:eee:ecanpo:v:64:y:2019:i:c:p:54-63
    DOI: 10.1016/j.eap.2019.07.006
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    References listed on IDEAS

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    More about this item

    Keywords

    Sustainable public debt; Primary deficit rules; Fiscal space;
    All these keywords.

    JEL classification:

    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • H53 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Welfare Programs
    • H63 - Public Economics - - National Budget, Deficit, and Debt - - - Debt; Debt Management; Sovereign Debt
    • I38 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Government Programs; Provision and Effects of Welfare Programs

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