Long-Term Fiscal Sustainability in Advanced Economies

Alan Auerbach

Asia and the Pacific Policy Studies from Crawford School of Public Policy, The Australian National University

Abstract: With the Great Recession leaving nearly all advanced economies with substantially higher debt–gross domestic product ratios, this paper re-evaluates the long-term fiscal sustainability of these economies based on current estimates of their current-policy fiscal trajectories. Through measuring fiscal imbalance, we find that for many countries, short-term fiscal measures such as the debt–gross domestic product ratio and current budget deficits as a share of gross domestic product bear little relationship to the sustainability of policy. The longer-term challenges these countries face are related much more to the future fiscal challenge of growing primary deficits, associated with the cost of providing pensions and health care in the face of growing old-age dependency ratios. While focusing on managing the short-term debt burden may help avoid crises like the one being played out in Greece, attention and policy actions must eventually turn to the longer-term fiscal problem.

Keywords: fiscal policy; intergenerational; economic policy (search for similar items in EconPapers)
Pages: 13 pages
Date: 2016-07-01
New Economics Papers: this item is included in nep-mac
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Citations: View citations in EconPapers (2)

Published in Asia & the Pacific Policy Studies, May 2016, pages 142-154

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Related works:
Journal Article: Long-Term Fiscal Sustainability in Advanced Economies (2016)
Working Paper: Long-term fiscal sustainability in advanced economies (2015)
Working Paper: Long-term fiscal sustainability in advanced economies (2015)
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Persistent link: https://EconPapers.repec.org/RePEc:een:appswp:201614

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