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Keynesian and neoclassical fiscal susteinability indicators, with applications to EMU member countries

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  • Alberto Bagnai

Abstract

The purposes of this paper are twofold: first, it aims at critically evaluating the solvency criterion, pioneered by Hamilton and Flavin (1986), which is nowadays almost hegemonic in the analysis of public debt sustainability, and at illustrating alternative measures of sustainability grounded on the dynamic stability approach originated by Domar (1944); secondly, it looks at sustainability in EMU member countries, with particular attention given to the relations between sustainability and the design of fiscal rules. The results show that the 3% rule imposed by the Maastricht treaty can be justified as a sustainability requirement for an “average†EMU member country. At the same time, the dispersion around this average is quite substantial: this questions the viability of uniform deficit caps across EMU member countries.

Suggested Citation

  • Alberto Bagnai, 2004. "Keynesian and neoclassical fiscal susteinability indicators, with applications to EMU member countries," Working Papers 75, University of Rome La Sapienza, Department of Public Economics.
  • Handle: RePEc:sap:wpaper:wp75
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    Blog mentions

    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. Maastricht e l'aritmetica del debito pubblico
      by Alberto Bagnai in Goofynomics on 2013-01-08 05:19:00
    2. IL DEBITO PUBBLICO GRAVA SULLE GENERAZIONI FUTURE? MOLTO, MOLTO MENO DELL'EURO, MR. MOSCOVICI
      by Quarantotto in Orizzonte48 on 2017-07-11 19:08:00

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    Cited by:

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    More about this item

    Keywords

    public debt sustainability; dynamic analysis; solvency constraint; EMU; fiscal rules; Maastricht treaty.;
    All these keywords.

    JEL classification:

    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
    • H63 - Public Economics - - National Budget, Deficit, and Debt - - - Debt; Debt Management; Sovereign Debt

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