Debt sustainability in the European Monetary Union: Theory and empirical evidence for selected countries
This paper studies the sustainability of fiscal policy for selected Euro-area countries. We focus on those countries that either have a high debt to GDP ratio (Italy) or have recently violated the Maastricht treaty by permitting more than three percent of the deficit to GDP ratio (France, Germany, and Portugal). We apply an approach developed by Bohn who proposes to study whether the primary surplus to GDP ratio is a positive function of the debt to GDP ratio which does not need arbitrary discount rates that other approaches have to assume. By controlling for the impact of other variables in this process, we can show that for the above mentioned countries fiscal policy shows evidence for sustainability, although the three percent rule of the Maastricht treaty might temporarily be violated. We also compare our results from the Euro-area countries to results obtained for the US fiscal policy. Copyright 2007 , Oxford University Press.
Volume (Year): 59 (2007)
Issue (Month): 2 (April)
|Contact details of provider:|| Postal: Oxford University Press, Great Clarendon Street, Oxford OX2 6DP, UK|
Fax: 01865 267 985
Web page: http://oep.oupjournals.org/
|Order Information:||Web: http://www.oup.co.uk/journals|
When requesting a correction, please mention this item's handle: RePEc:oup:oxecpp:v:59:y:2007:i:2:p:194-218. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Oxford University Press)or (Christopher F. Baum)
If references are entirely missing, you can add them using this form.