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Sustainability of national debt in Europe: why it matters in the EMU and how it is assessed

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  • Heinemann, Friedrich

Abstract

There are at least two reasons why sustainability of public debt is an issue of increasing importance. First, public choice considerations show the danger of an excessive use of deficit finance in a democracy. Second, the conditions of a European Monetary Union (EMU) imply further incentives for deficit finance. Various approaches to assess sustainability of public debt are presented and partially applied to the EC countries. According to these results, sustainability is as issue of empirical relevance in Europe today and has to be taken seriously on the further way to EMU.

Suggested Citation

  • Heinemann, Friedrich, 1992. "Sustainability of national debt in Europe: why it matters in the EMU and how it is assessed," ZEW Discussion Papers 92-02, ZEW - Leibniz Centre for European Economic Research.
    • Handle: RePEc:zbw:zewdip:9202
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    References listed on IDEAS

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    1. Barro, Robert J, 1979. "On the Determination of the Public Debt," Journal of Political Economy, University of Chicago Press, vol. 87(5), pages 940-971, October.
    2. McCallum, Bennett T, 1984. "Are Bond-Financed Deficits Inflationary? A Ricardian Analysis," Journal of Political Economy, University of Chicago Press, vol. 92(1), pages 123-135, February.
    3. Trehan, Bharat & Walsh, Carl E., 1988. "Common trends, the government's budget constraint, and revenue smoothing," Journal of Economic Dynamics and Control, Elsevier, vol. 12(2-3), pages 425-444.
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