Fiscal Transfers and Fiscal Sustainability

Niklas Potrafke and Markus Reischmann ()

No 4716, CESifo Working Paper Series from CESifo

Abstract: We examine whether US and German state governments pursue sustainable fiscal policies taking into account fiscal transfers. Using panel data techniques we investigate whether the debt-to-GDP ratio had a positive influence on the primary surplus (Bohn-model). We show that including/excluding fiscal transfers changes the results. If fiscal transfers are not included in the primary surplus, the test results do not indicate that the US and German state governments pursued sustainable fiscal policies. Our results also suggest that fiscal transfers were positively related with debt. These findings indicate that intergovernmental transfers have implicitly subsidized debts.

Keywords: fiscal sustainability; public debt; institutions; fiscal transfers; panel data (search for similar items in EconPapers)
JEL-codes: C23 H72 H74 H77 (search for similar items in EconPapers)
Date: 2014
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (14)

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Related works:
Journal Article: Fiscal Transfers and Fiscal Sustainability (2015)
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Persistent link: https://EconPapers.repec.org/RePEc:ces:ceswps:_4716

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