Fiscal Sustainability: A 21st Century Guide for the Perplexed
50 Pages Posted: 11 May 2013
Date Written: April 2013
This paper critically reviews recent work regarding the sustainability of public debt. It argues that Debt Sustainability Analyses (DSAs) should be more than mere mechanical simulation exercises. Instead, a DSA should be linked to some objective regarding the distribution of fiscal burdens and distortions over time (in the tradition of Barro’s 1979 tax smoothing objective). The paper discusses objective functions that yield simple and transparent fiscal policy rules.
Keywords: Fiscal sustainability, Public debt, Fiscal policy, Debt sustainability analysis, Business cycles, Intertemporal solvency, tax smoothing, debt stabilization, fiscal rule, stochastic simulation., fiscal adjustment, budget constraint, fiscal burden, primary deficit, fiscal authority, government spending, tax collection, fiscal reaction, taxation, fiscal reaction function, tax revenues, tax burden, fiscal imbalances, tax system, public expenditures, public spending, expenditure ratio, sustainable fiscal policy, primary surplus ratio, fiscal rules, foreign debt, fiscal plan, tax administration, fiscal policy rules, tax base, fiscal policy debt, tax rates, fiscal balances, public sector solvency,
JEL Classification: E61, E62, H62, H63, H68
Suggested Citation: Suggested Citation