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Assessing future sustainability of french public finances

  • Jérôme Creel

    (Ofce sciences-po,Escp Europe)

  • Paul Hubert

    (Ofce sciences-po)

  • Francesco Saraceno,

    (Ofce sciences-po,Luiss school of european political economy Italy)

This paper contributes to the debate on the French public finances'consolidation by investigating the long-term sustainability of France’s fiscal position. We trace the historical trends of government’s tax receipts and expenditures. We find that while the level of public expenditure in France is larger than in the rest of the Euro Area (mostly because of public wages and social benefits), its trend is comparable to its neighbours. Net lending is also under control, thanks to the high levels of taxation, so that we see no real risk of future unsustainability. However, the French tax system is unfair, is not sufficiently progressive, and is too complex. The paper then proceeds to assess the future of France’s public finances on the basis of the current debate on the Euro Area fiscal rules. We report two analyses theoretical and empirical that project the inflation rate and output gap paths for the next twenty years. We finally assess fiscal rules on this ground. The ‘fiscal compact’ fares rather poorly compared to the alternative rules that we assess.

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Paper provided by Observatoire Francais des Conjonctures Economiques (OFCE) in its series Documents de Travail de l'OFCE with number 2013-11.

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Date of creation: Jul 2013
Date of revision:
Handle: RePEc:fce:doctra:1311
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  1. Giovanni Callegari & Giovanni Melina & Nicoletta Batini, 2012. "Successful Austerity in the United States, Europe and Japan," IMF Working Papers 12/190, International Monetary Fund.
  2. Ward Romp & Jakob de Haan, 2007. "Public Capital and Economic Growth: A Critical Survey," Perspektiven der Wirtschaftspolitik, Verein für Socialpolitik, vol. 8(s1), pages 6-52, 04.
  3. Jerome Creel & Paul Hubert & Francesco Saraceno, 2012. "An assessment of Stability and Growth Pact Reform Proposals in a Small-Scale Macro Framework," Documents de Travail de l'OFCE 2012-04, Observatoire Francais des Conjonctures Economiques (OFCE).
  4. Jérôme Creel & Eric Heyer & Mathieu Plane, 2011. "Petit précis de politique budgétaire par tous les temps : les multiplicateurs budgétaires au cours du cycle," Sciences Po publications info:hdl:2441/5l6uh8ogmqi, Sciences Po.
  5. Alan J. Auerbach & Yuriy Gorodnichenko, 2010. "Measuring the Output Responses to Fiscal Policy," NBER Working Papers 16311, National Bureau of Economic Research, Inc.
  6. Eisner, Robert & Pieper, Paul J, 1986. "A New View of the Federal Debt and Budget Deficits: Reply," American Economic Review, American Economic Association, vol. 76(5), pages 1156-57, December.
  7. Michael Kumhof & Dirk Muir & Carlos de Resende & Jan in ‘t Veld & René Lalonde & Davide Furceri & Annabelle Mourougane & John Roberts & Stephen Snudden & Mathias Trabandt & Günter Coenen & Susanna, 2010. "Effects of Fiscal Stimulus in Structural Models," IMF Working Papers 10/73, International Monetary Fund.
  8. Jérôme Creel & Gwénaëlle Poilon, 2006. "Is Public Capital Productive in Europe?," Sciences Po publications n°2006-10, Sciences Po.
  9. Olivier J. Blanchard & Daniel Leigh, 2013. "Growth Forecast Errors and Fiscal Multipliers," NBER Working Papers 18779, National Bureau of Economic Research, Inc.
  10. Creel, Jérôme & Hubert, Paul & Saraceno, Francesco, 2012. "The European Fiscal Compact: A Counterfactual Assessment," Journal of Economic Integration, Center for Economic Integration, Sejong University, vol. 27, pages 537-563.
  11. Paola Monperrus-Veroni & Francesco Saraceno, 2005. "Reform of the Stability and Growth Pact: Reducing or Increasing the Nuisance?," Documents de Travail de l'OFCE 2005-01, Observatoire Francais des Conjonctures Economiques (OFCE).
  12. Jerome Creel & Francesco Saraceno, 2008. "Automatic Stabilisation, Discretionary Policy and the Stability Pact," Documents de Travail de l'OFCE 2008-15, Observatoire Francais des Conjonctures Economiques (OFCE).
  13. Angelos A. Antzoulatos, 2012. "Policy Responses to the European Debt Crisis Treating the “Symptoms†or the “Disease�," Panoeconomicus, Savez ekonomista Vojvodine, Novi Sad, Serbia, vol. 59(5), pages 529-552, December.
  14. Jean-Paul Fitoussi & Francesco Saraceno, 2008. "Fiscal Discipline as a Social Norm: The European Stability Pact," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 10(6), pages 1143-1168, December.
  15. Éric Heyer & Mathieu Plane, 2012. "Les emplois d'avenir : quel impact sur l'emploi et les finances publiques ?," Revue de l'OFCE, Presses de Sciences-Po, vol. 0(8), pages 43-44.
  16. repec:spo:wpecon:info:hdl:2441/9909 is not listed on IDEAS
  17. Barro, Robert J, 1986. " U.S. Deficits since World War I," Scandinavian Journal of Economics, Wiley Blackwell, vol. 88(1), pages 195-22.
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