Fiscal Sustainability: A 21st Century Guide for the Perplexed

April 22, 2013

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

This paper critically reviews recent work regarding the sustainability of public debt. It argues that Debt Sustainability Analyses (DSAs) should be more than mere mechanical simulation exercises. Instead, a DSA should be linked to some objective regarding the distribution of fiscal burdens and distortions over time (in the tradition of Barro’s 1979 tax smoothing objective). The paper discusses objective functions that yield simple and transparent fiscal policy rules.

Subject: Commodities, Fiscal consolidation, Fiscal policy, Fiscal sustainability, Oil, Public debt

Keywords: debt ratio, debt stabilization, Fiscal consolidation, fiscal rule, Fiscal sustainability, GDP ratio, Global, Intertemporal solvency, market value, nominal interest rate, Oil, present value, primary surplus, public goods, share price, stochastic simulation, structural surplus, surplus goal, surplus process, surplus ratio, surplus ratio-to-output, surplus target, tax smoothing, war chest, WP

Pages:
49
Volume:
2013
DOI:
https://doi.org/10.5089/9781484381991.001
Issue:
089
Series:
Working Paper No. 2013/089
Stock No:
WPIEA2013089
ISBN:
9781484381991
ISSN:
1018-5941

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