Long-Term Tendencies in Budget Deficits and Debt

52 Pages Posted: 15 Feb 2006

See all articles by Paul R. Masson

Paul R. Masson

International Monetary Fund (IMF) - Research Department; The Brookings Institution

Michael L. Mussa

International Monetary Fund (IMF) - Research Department; National Bureau of Economic Research (NBER)

Date Written: December 1995

Abstract

The last two decades have diverged from earlier experience, with many countries having peacetime deficits. Widespread deficits are shown to be linked to expansion of social programs, unmatched by tax revenue increases. Contributing to this were the output slowdowns in the 1970s, and inflation declines and increases in real interest rates in the 1980s. Anticipated effects on pension and health-care spending of population aging make future prospects worrisome, and urgent measures are needed to limit increases in spending. Developing countries have typically not put in place such generous social programs. In designing pension systems, they need to ensure fiscal sustainability by limiting the scope of public pensions and encouraging funding.

JEL Classification: H11, H55, H60, J11

Suggested Citation

Masson, Paul R. and Mussa, Michael L., Long-Term Tendencies in Budget Deficits and Debt (December 1995). IMF Working Paper No. 95/128, Available at SSRN: https://ssrn.com/abstract=883274

Paul R. Masson (Contact Author)

International Monetary Fund (IMF) - Research Department ( email )

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United States

The Brookings Institution ( email )

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Michael L. Mussa

International Monetary Fund (IMF) - Research Department

700 19th Street NW
Washington, DC 20431
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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