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Recurrent explosive public debts and the long-run fiscal sustainability

Victor Bystrov and Michał Mackiewicz

Journal of Policy Modeling, 2020, vol. 42, issue 2, 437-450

Abstract: In this paper, the dynamics of debt-to-GDP ratio is analyzed for three countries with long fiscal records: Sweden, the UK and the US. A novel procedure of testing for recurrent explosive behavior is implemented in order to identify episodes of explosive debt dynamics. The detected periods of explosive debt growth can be attributed to changes in economic, political and institutional environment which required active policy responses subsequently followed by fiscal adjustments. The results of the study indicate that the long-run sustainability found for these countries in other studies can be interpreted as the outcome of fluctuating fiscal policies, some of which were unsustainable.

Keywords: Public debt; Fiscal sustainability; Explosiveness (search for similar items in EconPapers)
JEL-codes: C12 C22 E62 H63 (search for similar items in EconPapers)
Date: 2020
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DOI: 10.1016/j.jpolmod.2019.10.002

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Handle: RePEc:eee:jpolmo:v:42:y:2020:i:2:p:437-450