Can EU high indebted countries manage to fulfill fiscal sustainability? Some evidence from the solvency constraint
The public finance constraints introduced by the Maastricht Treaty have been subject to numerous debates among economists. Balassone and Franco (2000) pointed out, for instance, that the fulfillment of these constraints allows for fiscal discipline and flexibility and excludes any bias from an unsustainable fiscal policy in the long run. But data shows that many of the advanced economies have exceeded the limits for budgetary deficits and public debt since 1993. Therefore, the question on whether fiscal policy is sustainable naturally arises. The aim of this paper is to investigate the achievement of the solvency constraint for the European Union high indebted countries using a simple public debt dynamic model. The required primary surplus is estimated under different scenarios, namely: (i) a baseline that aims at stabilizing public debt; (ii) a 60% of GDP scenario; and (iii) a minimum public debt scenario that differs among the countries under analysis. From results, we try to draw conclusions on what really matters for fiscal sustainability.
|Date of creation:||Aug 2012|
|Date of revision:|
|Contact details of provider:|| Postal: |
Web page: http://www.fep.up.pt/
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Pedro Cosme Costa Vieira, 2012. "A low cost supercritical Nuclear + Coal 3.0 Gwe power plant," FEP Working Papers 461, Universidade do Porto, Faculdade de Economia do Porto.
- Duarte Guimarães & Ana Paula Ribeiro & Sandra Tavares Silva, 2012. "Macroeconomic Fundamentals of Poverty and Deprivation: an empirical study for developed countries," FEP Working Papers 460, Universidade do Porto, Faculdade de Economia do Porto.
- Duarte N. Leite & Sandra T. Silva & Óscar Afonso, 2012.
"Institutions, Economics and the Development Quest,"
FEP Working Papers
457, Universidade do Porto, Faculdade de Economia do Porto.
- Vera Catarina Rocha, 2012. "The entrepreneur in economic theory: from an invisible man toward a new research field," FEP Working Papers 459, Universidade do Porto, Faculdade de Economia do Porto.
- João Correia-da-Silva & Joana Pinho, 2012. "The profit-sharing rule that maximizes sustainability of cartel agreements," FEP Working Papers 463, Universidade do Porto, Faculdade de Economia do Porto.
- Sara Santos Cruz & Aurora A.C. Teixeira, 2012. "Methodological approaches for measuring the creative employment: a critical appraisal with an application to Portugal," FEP Working Papers 455, Universidade do Porto, Faculdade de Economia do Porto.
- Sara Santos Cruz & Aurora A.C. Teixeira, 2012. "Industry-based methodological approaches to the measurement of Creative Industries: a theoretical and empirical account," FEP Working Papers 453, Universidade do Porto, Faculdade de Economia do Porto.
- Raquel Meneses & Carlos Brito, 2012. "A Dynamic Approach To The Development Of International New Ventures," FEP Working Papers 454, Universidade do Porto, Faculdade de Economia do Porto.
When requesting a correction, please mention this item's handle: RePEc:por:fepwps:464. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ()
If references are entirely missing, you can add them using this form.