## Assessing Fiscal Sustainability: A Cross-Country Comparison

_IMF Working Papers, July 1, 2003_

## Source details

**Canonical URL:** [Assessing Fiscal Sustainability: A Cross-Country Comparison](https://www.imf.org/en/publications/wp/issues/2016/12/30/assessing-fiscal-sustainability-a-cross-country-comparison-16610)

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## Bibliographic details
- Authors: Enzo Croce, V. Hugo Juan-Ramon
- Published: July 1, 2003
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781451856569.001

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### Methodology
- Proposes a recursive algorithm derived from the law of motion of the debt-to-GDP ratio.
- Algorithm is subject to a government reaction function that links convergence to the targeted debt ratio with primary fiscal surpluses.
- Estimates are based on quarterly data in the 1990s.
- Empirical application covers 12 developed and developing countries.

### Key Findings
- Countries are ranked according to their degree of sustainability using the recursive algorithm and quarterly estimates from the 1990s.
- For a number of countries, the paper finds evidence of causality between the fiscal policy stance and growth-adjusted real interest rates.
- Emphasis on the role of the reaction function and the debt-ratio gap in driving convergence dynamics.

### Policy Implications and Analytical Uses
- The reaction-function framework links primary fiscal surpluses to a targeted debt ratio, providing a formal tool to monitor fiscal sustainability.
- The ranking of countries by sustainability can inform comparative assessments of fiscal strategies and fiscal rules.
- Evidence of causality between fiscal stance and growth-adjusted real interest rates highlights interactions policymakers should consider when designing fiscal policy.

### Subjects and Keywords
- Subjects: 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

*Source: "Assessing Fiscal Sustainability: A Cross-Country Comparison", Enzo Croce and V. Hugo Juan-Ramon, July 1, 2003 (IMF Working Paper).*

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_Source: https://www.imf.org/en/publications/wp/issues/2016/12/30/assessing-fiscal-sustainability-a-cross-country-comparison-16610_