Debt sustainability in the European Monetary Union: Theory and empirical evidence for selected countries

Alfred Greiner, Uwe Köller and Willi Semmler

Oxford Economic Papers, 2007, vol. 59, issue 2, 194-218

Abstract: This paper studies the sustainability of fiscal policy for selected Euro-area countries. We focus on those countries that either have a high debt to GDP ratio (Italy) or have recently violated the Maastricht treaty by permitting more than three percent of the deficit to GDP ratio (France, Germany, and Portugal). We apply an approach developed by Bohn who proposes to study whether the primary surplus to GDP ratio is a positive function of the debt to GDP ratio which does not need arbitrary discount rates that other approaches have to assume. By controlling for the impact of other variables in this process, we can show that for the above mentioned countries fiscal policy shows evidence for sustainability, although the three percent rule of the Maastricht treaty might temporarily be violated. We also compare our results from the Euro-area countries to results obtained for the US fiscal policy. Copyright 2007 , Oxford University Press.

Date: 2007
References: Add references at CitEc
Citations: View citations in EconPapers (79)

Downloads: (external link)
http://hdl.handle.net/10.1093/oep/gpl035 (application/pdf)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:oup:oxecpp:v:59:y:2007:i:2:p:194-218

Ordering information: This journal article can be ordered from
https://academic.oup.com/journals

Access Statistics for this article

Oxford Economic Papers is currently edited by James Forder and Francis J. Teal

More articles in Oxford Economic Papers from Oxford University Press Oxford University Press, Great Clarendon Street, Oxford OX2 6DP, UK.
Bibliographic data for series maintained by Oxford University Press ().