Prudent Debt Targets and Fiscal Frameworks

57 Pages Posted: 23 Aug 2015 Last revised: 24 Aug 2015

See all articles by Falilou Fall

Falilou Fall

Organization for Economic Co-Operation and Development (OECD)

Debra Bloch

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

Jean-Marc Fournier

Organization for Economic Co-Operation and Development (OECD)

Peter Hoeller

Organization for Economic Co-Operation and Development (OECD)

Date Written: July 1, 2015

Abstract

The sharp rise in debt experienced by most OECD countries raises questions about debt indicators and the prudent government debt level countries should target. It also raises questions about the fiscal frameworks needed to reach the prudent debt level and to accommodate cyclical fluctuations along the convergence path towards a prudent debt target. The objective of this paper is to define long-run prudent debt targets for OECD countries and country-specific fiscal rules. The paper presents a comprehensive analysis of government liabilities and assets and formulates recommendations for debt indicators. It also reviews the different linkages between government debt and the economic activity. The lessons from these analyses are combined with an assessment of the uncertainties surrounding the development of macroeconomic variables to define a prudent debt target. Different fiscal rules are compared with regard their impact on fiscal discipline and the risk of recession for country-specific fiscal rules recommendations.

Keywords: Fiscal rules, debt, fiscal policy

JEL Classification: E27, E61, E62, H62, H68

Suggested Citation

Fall, Falilou and Bloch, Debra and Fournier, Jean-Marc and Hoeller, Peter, Prudent Debt Targets and Fiscal Frameworks (July 1, 2015). OECD Economic Policy Paper No. 15. Available at SSRN: https://ssrn.com/abstract=2649081 or http://dx.doi.org/10.2139/ssrn.2649081

Falilou Fall (Contact Author)

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

2 rue Andre Pascal
Paris Cedex 16, 75775
France

Debra Bloch

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

2 rue Andre Pascal
Paris Cedex 16, 75116
France

Jean-Marc Fournier

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

2 rue Andre Pascal
Paris Cedex 16, 75775
France

Peter Hoeller

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

2 rue Andre Pascal
Paris Cedex 16, 75775
France

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