Public Debt Sustainability: Some Results on the French Case

Boissinot, J.; L'Angevin, C.; Monfort, Brieuc

Public Debt Sustainability: Some Results on the French Case

J. Boissinot, C. L'Angevin and Brieuc Monfort
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J. Boissinot: Insee
C. L'Angevin: Insee

Documents de Travail de l'Insee - INSEE Working Papers from Institut National de la Statistique et des Etudes Economiques

Abstract: In France, government debt steadily rose from just below 20% of GDP in 1980 to more than 60% today. This raises concerns about the sustainability of public finances i.e. whether the government's intertemporal budget constraint can be satisfied without a major change in fiscal policy practices and orientations. Public finance developments in France between 1978 and 2002 are found to be weakly sustainable. Contrary to a situation of strong sustainability, where, in the long run, changes in government revenues and spending match, there has been a persistent gap between public spending and revenues developments. The dynamics of public debt is captured by breaking down the growth of government debt into different components within a cointegrated VAR model. This enables us to identify the trends that explain the strong persistence in the growth

Keywords: government debt; intertemporal budget constraint; sustainability; cointegrated VAR model (search for similar items in EconPapers)
JEL-codes: E61 E62 H62 H63 (search for similar items in EconPapers)
Date: 2004
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