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Assessing Fiscal Sustainability; A Cross Country Comparison

  • Enzo Croce
  • V. Hugo Juan-Ramon
Registered author(s):

    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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    Paper provided by International Monetary Fund in its series IMF Working Papers with number 03/145.

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    Length: 33
    Date of creation: 01 Jul 2003
    Date of revision:
    Handle: RePEc:imf:imfwpa:03/145
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    1. Catherine Pattillo & Hélène Poirson & Luca Antonio Ricci, 2011. "External Debt and Growth," Review of Economics and Institutions, Università di Perugia, vol. 2(3).
    2. Perotti, Roberto, 1996. "Fiscal Consolidation in Europe: Composition Matters," American Economic Review, American Economic Association, vol. 86(2), pages 105-10, May.
    3. Michael Mussa, 2002. "Argentina and the Fund: From Triumph to Tragedy," Peterson Institute Press: All Books, Peterson Institute for International Economics, number pa67, December.
    4. 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.
    5. Enrica Detragiache & Antonio Spilimbergo, 2001. "Crises and Liquidity; Evidence and Interpretation," IMF Working Papers 01/2, International Monetary Fund.
    6. 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.
    7. Alberto Alesina & Roberto Perotti, 1995. "Fiscal Expansions and Fiscal Adjustments in OECD Countries," NBER Working Papers 5214, National Bureau of Economic Research, Inc.
    8. Olivier Jean Blanchard, 1990. "Suggestions for a New Set of Fiscal Indicators," OECD Economics Department Working Papers 79, OECD Publishing.
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