Public Debt Sustainability: Some Results on the French Case
In France, government debt steadily rose from just below 20% of GDP in 1980 to more than 60% today. This raises concerns about the sustainability of public finances i.e. whether the government's intertemporal budget constraint can be satisfied without a major change in fiscal policy practices and orientations. Public finance developments in France between 1978 and 2002 are found to be weakly sustainable. Contrary to a situation of strong sustainability, where, in the long run, changes in government revenues and spending match, there has been a persistent gap between public spending and revenues developments. The dynamics of public debt is captured by breaking down the growth of government debt into different components within a cointegrated VAR model. This enables us to identify the trends that explain the strong persistence in the growth
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- Francisco de Castro & José M. González-Páramo & Pablo Hernández de Cos, 2001. "Evaluating the dynamics of fiscal policy in Spain: patterns of interdependence and consistency of public expenditure and revenues," Working Papers 0103, Banco de España;Working Papers Homepage.
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