The Global Dimension to Fiscal Sustainability

Posted: 25 Oct 2014

See all articles by Joseph Byrne

Joseph Byrne

Heriot-Watt University - Department of Accountancy, Economics and Finance

Norbert M. Fiess

World Bank

Ronald MacDonald

University of Glasgow - Adam Smith Business School

Date Written: January 2011

Abstract

This paper provides a new perspective of fiscal sustainability and financial globalization in emerging and industrial countries. We highlight the importance of global capital market shocks for fiscal sustainability, a relationship which has hitherto been ignored in the empirical literature. Using a factor model we demonstrate that the relationship between deficit and debt is conditional upon a global factor and we suggest that this global factor is related to world-wide liquidity. We also demonstrate that this acts as a constraint on emerging market economies' fiscal policy.

Keywords: Fiscal policy, Sustainability

JEL Classification: E62, F34, H62, H63

Suggested Citation

Byrne, Joseph and Fiess, Norbert M. and MacDonald, Ronald, The Global Dimension to Fiscal Sustainability (January 2011). Journal of Macroeconomics, Vol. 33, No. 1, 2011. Available at SSRN: https://ssrn.com/abstract=2514361

Joseph Byrne (Contact Author)

Heriot-Watt University - Department of Accountancy, Economics and Finance ( email )

Scotland
United Kingdom

Norbert M. Fiess

World Bank ( email )

1818 H Street, N.W.
Washington, DC 20433
United States

Ronald MacDonald

University of Glasgow - Adam Smith Business School ( email )

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