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Fiscal governance after the financial crisis: A review

Andrew Hughes Hallett

Economic Analysis and Policy, 2019, vol. 64, issue C, 54-63

Abstract: Economists have traditionally used a simple rule that restricts primary deficits to less than a threshold given by the interest-growth rate differential and existing debt in order to judge fiscal sustainability. This rule derives from a single period application of the government budget constraint. It is not forward looking. In the equivalent dynamic rule, the primary surplus needs to match any expected, discounted increases in public spending, the net interest on existing debt, and preferences for extending debt relative to changing taxes.

Keywords: Sustainable public debt; Primary deficit rules; Fiscal space (search for similar items in EconPapers)
JEL-codes: E62 H53 H63 I38 (search for similar items in EconPapers)
Date: 2019
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DOI: 10.1016/j.eap.2019.07.006

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