From debt arithmetic to fiscal sustainability and fiscal rules: taking stock and policy lessons

Economides, George, Koliousi, Giota, Miaouli, Natasha and Philippopoulos, Apostolis (2024) From debt arithmetic to fiscal sustainability and fiscal rules: taking stock and policy lessons. GreeSE Papers: Hellenic Observatory Discussion Papers on Greece and Southeast Europe (194). Hellenic Observatory, London School of Economics and Political Science, London, UK.

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Abstract

We start by clarifying the role of the interest rate-growth rate differential in debt arithmetic with numerical examples for the Greek economy. In turn, buidling upon this popular approach to fiscal sustainability, which is based on the intertemporal government budget constraint only, we make a number of methodological points that question the quantitative usefulness of standard calculations. Among other things, we argue that a structural approach is needed and this reveals the necessity of fiscal rules according to which fiscal instruments systematically react to public debt imbalances. This naturally enables us to evaluate the EU's fiscal rules and to suggest simple and implementable alternatives. Throughout, we confront our arguments with data from the Euro Area.

Item Type:	Monograph (Discussion Paper)
Official URL:	https://www.lse.ac.uk/hellenic-observatory/publica...
Additional Information:	© 2024 The Author(s)
Divisions:	Hellenic Observatory
Subjects:	H Social Sciences > HB Economic Theory H Social Sciences > HJ Public Finance
JEL classification:	E - Macroeconomics and Monetary Economics > E6 - Macroeconomic Policy Formation, Macroeconomic Aspects of Public Finance, Macroeconomic Policy, and General Outlook > E62 - Fiscal Policy; Public Expenditures, Investment, and Finance; Taxation H - Public Economics > H6 - National Budget, Deficit, and Debt > H63 - Debt; Debt Management
Date Deposited:	07 Mar 2024 15:51
Last Modified:	07 Mar 2024 16:00
URI:	http://eprints.lse.ac.uk/id/eprint/122241

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