Indicators and Tests of Fiscal Sustainability: An Integrated Approach
University of Rome II - Faculty of Economics
Tor Vergata University
February 1, 2008
CEIS Working Paper No. 111
This paper shows that indicators and tests of government solvency should not be used alternatively. We present a simple and intuitive procedure to integrate simultaneously the results from the two approaches to fiscal sustainability. An application to U.S. post-World War II data demonstrates the empirical relevance of the proposed strategy. Our results suggest that U.S. fiscal policy is on a sustainable path, since the warning predictions of tax gap indicators merely reflect cyclical factors.
Number of Pages in PDF File: 38
Keywords: Fiscal Sustainability, Fiscal Indicators, Tests of Government Solvency
JEL Classification: C12, C22, E60, H60working papers series
Date posted: April 3, 2008
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