Fiscal Policy Sustainability: Some Unpleasant European Evidence

ISEG Working Paper No. 12/2000/DE/CISEP

34 Pages Posted: 11 Jul 2002

See all articles by António Afonso

António Afonso

ISEG Lisbon School of Economics and Management,Universidade de Lisboa; UECE (Research Unit on Complexity and Economics); REM - Research in Economics and Mathematics

Date Written: August 2000

Abstract

The sustainability of fiscal deficits has been receiving increasing attention from economists. The issue is paramount for the newly formed Euro area and this is one of the motivations of the paper. In order to assess the sustainability of budget deficits in the Euro area, stationarity tests for the stock of public debt and co-integration tests between public expenditures and public revenues are performed for the Euro countries for the 1968-1997 period. The empirical results allow us to conclude that fiscal policy may not be sustainable for most countries with the possible exceptions of Germany, Austria and the Netherlands.

Keywords: Deficit finance, inter-temporal budget constraint, fiscal policy sustainability

JEL Classification: E60, H62, H63

Suggested Citation

Afonso, António, Fiscal Policy Sustainability: Some Unpleasant European Evidence (August 2000). ISEG Working Paper No. 12/2000/DE/CISEP, Available at SSRN: https://ssrn.com/abstract=317483 or http://dx.doi.org/10.2139/ssrn.317483

António Afonso (Contact Author)

ISEG Lisbon School of Economics and Management,Universidade de Lisboa ( email )

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HOME PAGE: http://https://www.iseg.ulisboa.pt/

UECE (Research Unit on Complexity and Economics) ( email )

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HOME PAGE: http://uece.rc.iseg.ulisboa.pt/

REM - Research in Economics and Mathematics ( email )

ISEG, Universidade de Lisboa
Rua Miguel Lupi, 20
Lisboa, 1249-078
Portugal

HOME PAGE: http://rem.rc.iseg.ulisboa.pt/

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