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Debt Sustainability and Fiscal Policy Rules in the European Union

Ada Marinescu

Hyperion Economic Journal, 2017, vol. 5, issue 4, 41-47

Abstract: The sustainability of fiscal policy represents a subject which was studied extensively and the general conclusion of these studies is that fiscal policy is sustainable provided the intertemporal budget constraint is satisfied. The future expected discounted primary surpluses should exceed the value of public debt in order for public debt to be sustainable. The ability of governments to repay the debt will depend on the capacity to achieve future primary surpluses and on the stock of past debts. Fiscal policies are thus dependent on the intertemporal budget constraint, in case this condition is not fulfilled, then governments will have to change fiscal policies.

Keywords: fiscal policy; intertemporal budget constraint; primary surplus; public debt; fiscal rules (search for similar items in EconPapers)
JEL-codes: H60 H63 E62 (search for similar items in EconPapers)
Date: 2017
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Handle: RePEc:hyp:journl:v:5:y:2017:i:4:p:41-47