Debt and Deficit Ceilings, and Sustainability of Fiscal Policies: An Intertemporal Analysis

Merih Uctum and Michael Wickens

No 1612, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: This paper examines the consequences for the sustainability of fiscal policy of imposing restrictive ceilings on deficits and debt. Our theoretical framework is a generalization of the government intertemporal budget constraint which allows for time-varying interest rates, endogenous primary deficits, a finite planning horizon and future policy shifts. We show how published forecasts can be used and we derive a measure of fiscal pressure suitable for the medium term. We find that fiscal policy is not sustainable for most industrialized countries over an infinite horizon, but is sustainable in the medium term in the absence of ceilings. Imposing ceilings, however, generates unsustainability.

Keywords: Fiscal Criteria; Fiscal Policy; Forecasts; Stochastic Discount Rate; Sustainability (search for similar items in EconPapers)
JEL-codes: E6 H6 H87 (search for similar items in EconPapers)
Date: 1997-03
References: Add references at CitEc
Citations: View citations in EconPapers (19)

Downloads: (external link)
http://www.cepr.org/active/publications/discussion_papers/dp.php?dpno=1612 (application/pdf)
CEPR Discussion Papers are free to download for our researchers, subscribers and members. If you fall into one of these categories but have trouble downloading our papers, please contact us at subscribers@cepr.org

Related works:
Journal Article: Debt and Deficit Ceilings, and Sustainability of Fiscal Policies: an Intertemporal Analysis (2000)
Working Paper: Debt and deficit ceilings, and sustainability of fiscal policies: an intertemporal analysis (1996)
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:cpr:ceprdp:1612

Ordering information: This working paper can be ordered from
http://www.cepr.org/ ... ers/dp.php?dpno=1612

Access Statistics for this paper

More papers in CEPR Discussion Papers from C.E.P.R. Discussion Papers Centre for Economic Policy Research, 33 Great Sutton Street, London EC1V 0DX.
Bibliographic data for series maintained by ().