France: Selected Issues

July 24, 2019

Preview Citation

Format: Chicago

France: Selected Issues, (USA: International Monetary Fund, 2019) accessed September 18, 2024

Summary

This Selected Issues paper analyzes France’s fiscal stance using a structural stochastic model. The theoretical model features a forward-looking benevolent government that needs to decide the optimal fiscal stance given the level of public debt, the cyclical position of the economy, and expectations about future shocks. This paper shows that a fiscal consolidation can help build buffers that could help France confront the next downturn from a stronger fiscal position. The analysis highlights that, on average, fiscal policy in France exhibited a deficit bias over the past four decades, being unable to react to either rising debt levels, or cyclical conditions. A model-based analysis further confirms that fiscal policy was generally looser than warranted by cyclical and debt sustainability considerations, and this is only partly due to the fact policymakers need to take decisions based on real-time output gap measures that are subject to uncertainty.

Subject: Debt rescheduling, Fiscal consolidation, Fiscal policy, Fiscal stance, Output gap, Production, Public debt

Keywords: Countercyclical fiscal policy response, CR, Deficit, Fiscal consolidation, Fiscal policy stance, Fiscal stance, France, Global, ISCR, National fiscal policy, Output gap, Regulation, Service market regulation, Voting right

Publication Details

Pages:

42
Volume:

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DOI:

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Issue:

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Series:

Country Report No. 2019/246
Stock No:

1FRAEA2019003
ISBN:

9781513508467
ISSN:

1934-7685

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