Strategies for Countries with Favourable Fiscal Positions

Posted: 1 Jun 2010

See all articles by Robert Price

Robert Price

Organization for Economic Co-Operation and Development (OECD) - Economics Department (ECO)

Isabelle Joumard

Organization for Economic Co-Operation and Development (OECD) - Economics Department (ECO)

Christophe Andre

Organization for Economic Co-Operation and Development (OECD) - Economics Department (ECO)

Makoto Minegishi

affiliation not provided to SSRN

Date Written: December 17, 2008

Abstract

The financial crisis and economic downturn are going to weigh on fiscal positions in OECD countries over the short to medium-term, both through the operation of automatic stabilisers and the enactment of discretionary fiscal stimulus packages. However, the strategic policy options facing OECD countries are mainly determined by the soundness of their underlying fiscal positions which vary substantially. This paper first describes how OECD economies are situated with respect to underlying fiscal balances and net government debt. A number of countries seem to enjoy favourable fiscal positions with underlying fiscal surpluses, low government debt or even positive net financial asset positions. When taking account, as far as possible, of implicit liabilities associated with ageing populations and resource-based revenues, fiscal positions still vary greatly across countries. The paper then examines the criteria involved in deciding whether government financial asset accumulation is in excess of needs and the use to which any excess government saving might be put, whether increasing public spending or reducing taxes. Finally, the determinants of the optimal size of the government balance sheet for any given desired net debt position are discussed.

Keywords: Fiscal sustainability, fiscal policy, budget surplus, underlying fiscal balance, government

JEL Classification: E62, H2, H5, H6, J11, Q33

Suggested Citation

Price, Robert and Joumard, Isabelle and Andre, Christophe and Minegishi, Makoto, Strategies for Countries with Favourable Fiscal Positions (December 17, 2008). Available at SSRN: https://ssrn.com/abstract=1618203

Robert Price

Organization for Economic Co-Operation and Development (OECD) - Economics Department (ECO) ( email )

2 rue Andre Pascal
Paris Cedex 16, MO 63108
France

Isabelle Joumard

Organization for Economic Co-Operation and Development (OECD) - Economics Department (ECO) ( email )

2 rue Andre Pascal
Paris Cedex 16, MO 63108
France

Christophe Andre (Contact Author)

Organization for Economic Co-Operation and Development (OECD) - Economics Department (ECO) ( email )

2 rue Andre Pascal
Paris Cedex 16, MO 63108
France

Makoto Minegishi

affiliation not provided to SSRN ( email )

Here is the Coronavirus
related research on SSRN

Paper statistics

Abstract Views
402
PlumX Metrics