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Indicators and Tests of Fiscal Sustainability: An Integrated ApproachGiancarlo MariniUniversity of Rome II - Faculty of Economics Alessandro PiergalliniTor Vergata University February 1, 2008 CEIS Working Paper No. 111 Abstract: 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, H60 working papers seriesDate posted: April 3, 2008Suggested CitationContact Information
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