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Fiscal Policy and Financial Distress: A Balance Sheet Perspective

Author

Listed:
  • John FitzGerald

    (Department of Economics, Trinity College Dublin)

  • Philip Lane

    (Department of Economics, Trinity College Dublin)

Abstract

Governments actively manage the public balance sheet during episodes of financial distress. Under these circumstances, the stock of gross public debt is not a sufficient statistic for fiscal sustainability. In this paper, we examine the roles of financial asset acquisition, liquidity management, debt management and the central bank balance sheet in determining the fiscal health of a government. We argue that a strategy of under-promising and over-delivering is essential in restoring market access.

Suggested Citation

  • John FitzGerald & Philip Lane, 2016. "Fiscal Policy and Financial Distress: A Balance Sheet Perspective," Trinity Economics Papers tep0216, Trinity College Dublin, Department of Economics.
    • Handle: RePEc:tcd:tcduee:tep0216
    as

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    File URL: http://www.tcd.ie/Economics/TEP/2016/TEP0216.pdf
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    References listed on IDEAS

    as
    1. Patrick Honohan, 1999. "Fiscal Adjustment and Disinflation in Ireland: Setting the Macro Basis of Economic Recovery and Expansion," Palgrave Macmillan Books, in: Frank Barry (ed.), Understanding Ireland’s Economic Growth, chapter 4, pages 75-98, Palgrave Macmillan.
    2. Eduardo Borensztein & Paolo Mauro, 2004. "The case for GDP-indexed bonds [‘World income components: measuring and exploiting risk-sharing opportunities’]," Economic Policy, CEPR, CESifo, Sciences Po;CES;MSH, vol. 19(38), pages 166-216.
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    4. Philip Lane, 2010. "External Imbalances and Fiscal Policy," The Institute for International Integration Studies Discussion Paper Series iiisdp314, IIIS.
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    6. repec:esr:chaptr:jacb200010 is not listed on IDEAS
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    Keywords

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    JEL classification:

    • H63 - Public Economics - - National Budget, Deficit, and Debt - - - Debt; Debt Management; Sovereign Debt
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies

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