Do Interest-growth Differentials Affect Fiscal Policy? Evidence for Advanced Economies

Philipp Heimberger

No 230, wiiw Working Papers from The Vienna Institute for International Economic Studies, wiiw

Abstract: This paper analyses the link between discretionary fiscal policy and interest-growth differentials (r-g). Panel regressions based on a dataset for 20 advanced countries over the years 1990-2019 reveal no evidence of a systematic linear relationship between fiscal policy and r-g. However, more unfavourable r-g differentials are linked more strongly to a tighter fiscal stance when public-debt-to-GDP ratios are higher – but only in the euro area, not in advanced stand-alone countries issuing government debt in their own currency.

Keywords: Public debt; fiscal deficits; interest-growth differentials; fiscal policy (search for similar items in EconPapers)
JEL-codes: E43 E62 F33 (search for similar items in EconPapers)
Pages: 24 pages including 5 Tables and 1 Figure
Date: 2023-10
New Economics Papers: this item is included in nep-eec, nep-fdg and nep-mac
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