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Long-Term Objectives for Government Debt

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  • Alan J. Auerbach

Abstract

This paper considers what fiscal targets the government should use to achieve long-term fiscal objectives. Among its findings are: 1. At least three important and possibly conflicting long-term objectives are associated with concerns about debt and deficits: intergenerational equity, economic performance, and fiscal sustainability. 2. If governments have incentives not to adhere to fiscal policy targets, then restrictions on fiscal policy actions may be desirable, even though such restrictions reduce the scope for policy flexibility. 3. A collection of forward-looking measures, including explicit and implicit government assets and liabilities, can provide far more information than short-term deficit targets alone.

Suggested Citation

  • Alan J. Auerbach, 2009. "Long-Term Objectives for Government Debt," FinanzArchiv: Public Finance Analysis, Mohr Siebeck, Tübingen, vol. 65(4), pages 472-501, December.
  • Handle: RePEc:mhr:finarc:urn:sici:0015-2218(200912)65:4_472:lofgd_2.0.tx_2-t DOI: 10.1628/001522108X486606
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    Cited by:

    1. Alan J. Auerbach, 2014. "Budget Rules and Fiscal Policy: Ten Lessons from Theory and Evidence," German Economic Review, Verein für Socialpolitik, vol. 15(1), pages 84-99, February.
    2. Shafik Hebous, 2011. "The Effects Of Discretionary Fiscal Policy On Macroeconomic Aggregates: A Reappraisal," Journal of Economic Surveys, Wiley Blackwell, vol. 25(4), pages 674-707, September.
    3. Henning Bohn, 2011. "The Economic Consequences of Rising U.S. Government Debt: Privileges at Risk," FinanzArchiv: Public Finance Analysis, Mohr Siebeck, Tübingen, vol. 67(3), pages 282-302, September.
    4. Toshihiro Ihori, 2014. "Commitment, Deficit Ceiling, and Fiscal Privilege," FinanzArchiv: Public Finance Analysis, Mohr Siebeck, Tübingen, vol. 70(4), pages 511-526, December.
    5. Potrafke, Niklas & Reischmann, Markus, 2014. "Explosive Target balances of the German Bundesbank," Economic Modelling, Elsevier, vol. 42(C), pages 439-444.

    More about this item

    Keywords

    deficits; fiscal gap; implicit liabilities; tax smoothing; generational equity;

    JEL classification:

    • H60 - Public Economics - - National Budget, Deficit, and Debt - - - General

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