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Assessing future sustainability of french public finances

Author

Listed:
  • Jérôme Creel

    () (OFCE - OFCE - Sciences Po)

  • Paul Hubert

    () (OFCE - OFCE - Sciences Po)

  • Francesco Saraceno

    () (OFCE - OFCE - Sciences Po)

Abstract

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.

Suggested Citation

  • Jérôme Creel & Paul Hubert & Francesco Saraceno, 2013. "Assessing future sustainability of french public finances," Working Papers hal-01070452, HAL.
  • Handle: RePEc:hal:wpaper:hal-01070452
    Note: View the original document on HAL open archive server: https://hal-sciencespo.archives-ouvertes.fr/hal-01070452
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    References listed on IDEAS

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    1. repec:nbr:nberch:13342 is not listed on IDEAS
    2. Creel, Jérôme & Hubert, Paul & Saraceno, Francesco, 2013. "An assessment of the Stability and Growth Pact reform in a small-scale macro-framework," Journal of Economic Dynamics and Control, Elsevier, vol. 37(8), pages 1567-1580.
    3. Jerome Creel & Gwenaelle Poilon, 2008. "Is public capital productive in Europe?," International Review of Applied Economics, Taylor & Francis Journals, vol. 22(6), pages 673-691.
    4. Günter Coenen & Christopher J. Erceg & Charles Freedman & Davide Furceri & Michael Kumhof & René Lalonde & Douglas Laxton & Jesper Lindé & Annabelle Mourougane & Dirk Muir & Susanna Mursula & Carlos d, 2012. "Effects of Fiscal Stimulus in Structural Models," American Economic Journal: Macroeconomics, American Economic Association, vol. 4(1), pages 22-68, January.
    5. Barro, Robert J, 1986. " U.S. Deficits since World War I," Scandinavian Journal of Economics, Wiley Blackwell, vol. 88(1), pages 195-122.
    6. Francesco Saraceno & Paola Veroni, 2005. "Reform of the Stability and Growth Pact: Reducing or Increasing the Nuisance," Sciences Po publications 2005-1, Sciences Po.
    7. 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.
    8. Olivier J. Blanchard & Daniel Leigh, 2013. "Growth Forecast Errors and Fiscal Multipliers," American Economic Review, American Economic Association, vol. 103(3), pages 117-120, May.
    9. 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, April.
    10. Alan J. Auerbach & Yuriy Gorodnichenko, 2012. "Measuring the Output Responses to Fiscal Policy," American Economic Journal: Economic Policy, American Economic Association, vol. 4(2), pages 1-27, May.
    11. Jérôme Creel & Francesco Saraceno, 2008. "Automatic Stabilisation, Discretionary Policy and the Stability Pact," Working Papers hal-00973049, HAL.
    12. 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.
    13. 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.
    14. repec:spo:wpecon:info:hdl:2441/9909 is not listed on IDEAS
    15. Jérôme Creel & Éric Heyer & Mathieu Plane, 2011. "Petit précis de politique budgétaire par tous les temps. Les multiplicateurs budgétaires au cours du cycle," Revue de l'OFCE, Presses de Sciences-Po, vol. 0(1), pages 61-88.
    16. Giovanni Callegari & Giovanni Melina & Nicoletta Batini, 2012. "Successful Austerity in the United States, Europe and Japan," IMF Working Papers 12/190, International Monetary Fund.
    17. J. Bradford DeLong & Lawrence H. Summers, 2012. "Fiscal Policy in a Depressed Economy," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 43(1 (Spring), pages 233-297.
    18. 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.
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    Cited by:

    1. Taner Turan & Mesut Karakas & Halit Yanikkaya, 2014. "Tax Smoothing Hypothesis: A Turkish Case," Panoeconomicus, Savez ekonomista Vojvodine, Novi Sad, Serbia, vol. 61(4), pages 487-501, September.

    More about this item

    Keywords

    deficits; dettes; dettes management; fiscales rule; fiscale compact; golden rule;

    JEL classification:

    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
    • E63 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Comparative or Joint Analysis of Fiscal and Monetary Policy; Stabilization; Treasury Policy
    • H61 - Public Economics - - National Budget, Deficit, and Debt - - - Budget; Budget Systems

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