Long-Term Fiscal Sustainability in Major Economies

53 Pages Posted: 12 Dec 2011  

Alan J. Auerbach

University of California, Berkeley - Department of Economics; National Bureau of Economic Research (NBER); CESifo (Center for Economic Studies and Ifo Institute for Economic Research)

Date Written: December 1, 2011

Abstract

As the world economy slowly recovers from the very deep and widespread recession of recent years, many countries confront very serious fiscal imbalances. How much time they have to deal with these imbalances is a central question, the salience of which can only have been increased by the ongoing fiscal crisis and bailout in Greece and the immediate fiscal adjustments being discussed or already undertaken in several other countries.

There is little doubt that much of the current attention to fiscal imbalances is attributable to the rapid increases in debt to GDP ratios arising from the recession, either directly through the automatic tax and spending responses to slow growth, or indirectly through the counter-cyclical discretionary fiscal measures undertaken. Table 1 shows the evolution of net general government debt to GDP ratios for several leading economies in recent years, starting in 2007, just as the worldwide recession began.

Keywords: deficit, fiscal gap, fiscal rule, fiscal policy, fiscal sustainability

JEL Classification: E37, E61, E62, E63, H62, H63, H68

Suggested Citation

Auerbach, Alan J., Long-Term Fiscal Sustainability in Major Economies (December 1, 2011). BIS Working Paper No. 361. Available at SSRN: https://ssrn.com/abstract=1971166 or http://dx.doi.org/10.2139/ssrn.1971166

Alan Jeffrey Auerbach (Contact Author)

University of California, Berkeley - Department of Economics ( email )

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Berkeley, CA 94720-3880
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National Bureau of Economic Research (NBER) ( email )

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CESifo (Center for Economic Studies and Ifo Institute for Economic Research)

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Munich, DE-81679
Germany

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