EconPapers    
Economics at your fingertips  
 

Optimal Debt Under a Deficit Constraint

Massimo Rostagno, Javier Pérez and Paul Hiebert

Chapter 13 in The Stability and Growth Pact, 2001, pp 313-343 from Palgrave Macmillan

Abstract: Abstract It has been consistently argued by many that European Union member states, in the context of significant demographic change in coming years, should pursue a more rigorous course of accelerated debt abatement in order to reduce the burden on future taxpayers. In this vein, these observers point to the need for a new fiscal paradigm more solidly based on the principles of sustainability and intergener- ational responsibility. One tool to help in generating this outcome is the adoption of a rule-rather than discretion-based fiscal policy, given the success of this approach in the conduct of monetary policy. In order to produce a more credible and predictable path for future fiscal policy, there would be a need to curtail systematic discretionary policy and resuscitate the role of automatic stabilisers in government policy. In the past, the effectiveness of shock absorbers has been often severely reduced as the result of discretionary action, leading to a need for high interest spending and accompanied by recurrent spells of deficit and debt crises.

Keywords: Fiscal Policy; Debt Ratio; Debt Level; Automatic Stabilisation; Primary Surplus (search for similar items in EconPapers)
Date: 2001
References: Add references at CitEc
Citations: View citations in EconPapers (1)

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

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:pal:palchp:978-0-230-62926-4_13

Ordering information: This item can be ordered from
http://www.palgrave.com/9780230629264

DOI: 10.1057/9780230629264_13

Access Statistics for this chapter

More chapters in Palgrave Macmillan Books from Palgrave Macmillan
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().

 
Page updated 2025-04-01
Handle: RePEc:pal:palchp:978-0-230-62926-4_13