Assessing Fiscal Sustainability: A Cross-Country Comparison
July 1, 2003
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Summary
To monitor fiscal sustainability, this paper proposes a recursive algorithm derived from the law of motion of the debt-to-GDP ratio, subject to a government reaction function that links convergence to the targeted debt ratio with primary fiscal surpluses. Based on quarterly estimates of this algorithm in the 1990s, 12 developed and developing countries are ranked according to their degree of sustainability. For a number of countries, the paper finds evidence of causality between the fiscal policy stance and growth-adjusted real interest rates.
Subject: Expenditure, Fiscal policy, Fiscal stance, Fiscal sustainability, Public debt
Keywords: convergence, debt-ratio gap, Europe, fiscal policy strategy, fiscal rule, Fiscal stance, Fiscal sustainability, ifs algorithm, reaction function, target debt ratio, WP
Pages:
33
Volume:
2003
DOI:
Issue:
145
Series:
Working Paper No. 2003/145
Stock No:
WPIEA1452003
ISBN:
9781451856569
ISSN:
1018-5941
