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Fiscal Policy, Government Debt and Economic Performance

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  • Willi Leibfritz
  • Deborah Roseveare
  • Paul van den Noord

Abstract

This paper reviews fiscal policy, government indebtedness and its implications for economic performance in OECD countries. Government debt, expenditure and revenue relative to GDP have all risen significantly over the past 15 years and in several countries these trends are unsustainable. The macroeconomic implications of high fiscal deficits and debt levels are considered and the paper finds that while monetary policy played a clear role in generating recovery, the effects of fiscal policy are more mixed. Looking forward, Member countries’ plans for fiscal consolidation are ambitious, but if sustained economic growth is achieved, these plans are achievable. However, if growth is slower, then further fiscal consolidation efforts would be required to keep public debt under control. Finally, the paper considers ways of improving the control over expenditure and the budget process, so as to achieve better fiscal outcomes ... Cet article examine la politique budgétaire, l’endettement public et son incidence sur les résultats économiques dans les pays de l’OCDE. Au cours des quinze dernières années, la dette, les dépenses et les recettes des administrations publiques exprimées en proportion du PIB ont toutes augmenté de façon significative et ces tendances sont devenues insoutenables dans plusieurs pays. Les implications macroéconomiques de ces déficits budgétaires et de cette dette élevés sont étudiées et il en ressort qu’alors que la politique monétaire a joué un rôle évident dans la reprise économique, les effets de la politique budgétaire sont plus mitigés. Pour l’avenir, les programmes d’assainissement budgétaires des pays Membres sont ambitieux. Mais, dans l’hypothèse d’une reprise économique soutenue, ces programmes sont réalisables. Toutefois, si la reprise économique s’avère plus modeste, des efforts supplémentaires d’assainissement budgétaire s’imposeront pour contenir la dette publique. En ...

Suggested Citation

  • Willi Leibfritz & Deborah Roseveare & Paul van den Noord, 1994. "Fiscal Policy, Government Debt and Economic Performance," OECD Economics Department Working Papers 144, OECD Publishing.
  • Handle: RePEc:oec:ecoaaa:144-en
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    File URL: http://dx.doi.org/10.1787/038702083230
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    Cited by:

    1. Robert Amano & Don Coletti & Tiff Macklem, 1998. "Monetary rules when economic behaviour changes," Proceedings, Federal Reserve Bank of San Francisco, issue Mar.
    2. Kalle Kukk, 2007. "Fiscal Policy Effects on Economic Growth: Short Run vs Long Run," Working Papers 167, Tallinn School of Economics and Business Administration, Tallinn University of Technology.
    3. Kiander, Jaakko & Virén, Matti, 2000. "Do automatic stabilisers take care of asymmetric shocks in the euro area?," Discussion Papers 234, VATT Institute for Economic Research.
    4. Marco BUTI & Daniele FRANCO & Hedwig ONGENA, 1997. "Budgeetary Policies during Recessions : Retrospective Application of the Stability and Growth Pact” to the Post-War Period," Discussion Papers (REL - Recherches Economiques de Louvain) 1997041, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
    5. António Afonso, 2001. "Non-Keynesian Effects of Fiscal Policy in the EU-15," Working Papers Department of Economics 2001/07, ISEG - Lisbon School of Economics and Management, Department of Economics, Universidade de Lisboa.
    6. Guðmundsson, Björn Rúnar, 2015. "Financialisation and financial crisis in Iceland," IPE Working Papers 55/2015, Berlin School of Economics and Law, Institute for International Political Economy (IPE).
    7. Vratislav Izák, 2004. "Public Debt Service, Interest Rates and Fiscal Variables in Transition Countries," Prague Economic Papers, University of Economics, Prague, vol. 2004(1), pages 3-15.
    8. Jaakko Kiander & Pentti Vartia, 1996. "The great depression of the 1990s in Finland," Finnish Economic Papers, Finnish Economic Association, vol. 9(1), pages 72-88, Spring.
    9. Lars Calmfors & Giancarlo Corsetti & John Flemming & Seppo Honkapohja & John Kay & Willi Leibfritz & Gilles Saint-Paul & Hans-Werner Sinn & Xavier Vives, 2003. "Fiscal Policy and Macroeconomic Stabilisation in the Euro Area: Possible Reforms of the Stability and Growth Pact and National Decision-Making-Processes," EEAG Report on the European Economy, CESifo Group Munich, vol. 0, pages 46-75, May.

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