Assessing Fiscal Sustainability; A Cross-Country Comparison
To monitor fiscal sustainability, this paper proposes a recursive algorithm derived from the law of motion of the debt-to-GDP ratio, subject to a government reaction function that links convergence to the targeted debt ratio with primary fiscal surpluses. Based on quarterly estimates of this algorithm in the 1990s, 12 developed and developing countries are ranked according to their degree of sustainability. For a number of countries, the paper finds evidence of causality between the fiscal policy stance and growth-adjusted real interest rates.
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- Alberto Alesina & Roberto Perotti, 1995. "Fiscal Expansions and Fiscal Adjustments in OECD Countries," NBER Working Papers 5214, National Bureau of Economic Research, Inc.
- Olivier Jean Blanchard, 1990. "Suggestions for a New Set of Fiscal Indicators," OECD Economics Department Working Papers 79, OECD Publishing.
- Luigi Spaventa, 1987. "The Growth of Public Debt: Sustainability, Fiscal Rules, and Monetary Rules," IMF Staff Papers, Palgrave Macmillan, vol. 34(2), pages 374-399, June.
- Helene Poirson Ward & Luca A Ricci & Catherine A Pattillo, 2002.
"External Debt and Growth,"
IMF Working Papers
- Perotti, Roberto, 1996. "Fiscal Consolidation in Europe: Composition Matters," American Economic Review, American Economic Association, vol. 86(2), pages 105-110, May.
- Alejandro Izquierdo, 2002. "Sudden Stops, the Real Exchange Rate and Fiscal Sustainability in Argentina," The World Economy, Wiley Blackwell, vol. 25(7), pages 903-923, 07.
- Enrica Detragiache & Antonio Spilimbergo, 2001. "Crises and Liquidity; Evidence and Interpretation," IMF Working Papers 01/2, .
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