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How sustainable are fiscal deficits? Evidence from Mediterranean countries

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  • Aristovnik, Aleksander

Abstract

The paper’s main purpose is to assess the short-, medium- and long-term sustainability of fiscal policy in the great majority of the EU and non-EU member states in the Mediterranean Region. By using mainstream (primary fiscal gap) theory (proposed by Buiter (1983) and Blanchard (1990)), the difference between the required primary fiscal balance to GDP ratio and the actual primary fiscal balance to GDP ratio is calculated for selected Mediterranean countries. Based on simple mainstream theory measures of fiscal sustainability, the results indicate that fiscal sustainability seems to be a problem in many Mediterranean countries, particularly in Greece, Italy and France (in the EU Mediterranean region) as well as in Croatia, Egypt, Lebanon and Turkey (in the non-EU Mediterranean region). However, since the paper is dealing with an ex ante analysis on the grounds of ex post algebra of sustainability some caution should be exercised.

Suggested Citation

  • Aristovnik, Aleksander, 2008. "How sustainable are fiscal deficits? Evidence from Mediterranean countries," MPRA Paper 12317, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:12317
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    References listed on IDEAS

    as
    1. Olivier Jean Blanchard, 1990. "Suggestions for a New Set of Fiscal Indicators," OECD Economics Department Working Papers 79, OECD Publishing.
    2. A. Roux, 1993. "The Public Debt: A Medium‐term Perspective," South African Journal of Economics, Economic Society of South Africa, vol. 61(4), pages 10-29, December.
    3. Aristovnik, Aleksander & Berčič, Boštjan, 2007. "Fiscal Sustainability in Selected Transition Countries," MPRA Paper 122, University Library of Munich, Germany.
    4. Valérie Berenger & Matthieu Llorca, 2007. "Political determinants of the fiscal sustainability: evidence from six individual developed countries," Post-Print halshs-00268966, HAL.
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    Keywords

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    JEL classification:

    • H60 - Public Economics - - National Budget, Deficit, and Debt - - - General
    • H68 - Public Economics - - National Budget, Deficit, and Debt - - - Forecasts of Budgets, Deficits, and Debt

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