How sustainable are fiscal deficits? Evidence from Mediterranean countries

Aleksander Aristovnik

MPRA Paper from University Library of Munich, Germany

Abstract: The paper’s main purpose is to assess the short-, medium- and long-term sustainability of fiscal policy in the great majority of the EU and non-EU member states in the Mediterranean Region. By using mainstream (primary fiscal gap) theory (proposed by Buiter (1983) and Blanchard (1990)), the difference between the required primary fiscal balance to GDP ratio and the actual primary fiscal balance to GDP ratio is calculated for selected Mediterranean countries. Based on simple mainstream theory measures of fiscal sustainability, the results indicate that fiscal sustainability seems to be a problem in many Mediterranean countries, particularly in Greece, Italy and France (in the EU Mediterranean region) as well as in Croatia, Egypt, Lebanon and Turkey (in the non-EU Mediterranean region). However, since the paper is dealing with an ex ante analysis on the grounds of ex post algebra of sustainability some caution should be exercised.

Keywords: the Mediterranean region; public finance; fiscal sustainability; forecasting (search for similar items in EconPapers)
JEL-codes: H60 H68 (search for similar items in EconPapers)
Date: 2008-12-20
New Economics Papers: this item is included in nep-ara and nep-cwa
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Published in Romanian Journal of Economic Forecasting 4.9(2008): pp. 161-173

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