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Fiscal Sustainability: Interest Rates, Growth and Debt-based Policy Rules

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  • George Economides
  • Apostolis Philippopoulos

Abstract

Calculations based on the intertemporal government budget constraint can be only indicative regarding an economy’s fiscal sustainability Sovereign interest rates, growth rates, as well as primary fiscal balances are all endogenous variables that are jointly determined. This rationalizes the use of structural macroeconomic models for the study of fiscal sustainability In the current situation and in most countries, macroeconomic stability can be guaranteed only if some fiscal policy instruments react systematically to public debt imbalances. This is consistent with the rhetoric in the new economic governance framework communicated by the European Commission Which fiscal policy instrument is being used to bring public debt down is essentially a fiscal policy multiplier problem

Suggested Citation

  • George Economides & Apostolis Philippopoulos, 2023. "Fiscal Sustainability: Interest Rates, Growth and Debt-based Policy Rules," EconPol Forum, CESifo, vol. 24(04), pages 11-15, July.
    • Handle: RePEc:ces:epofor:v:24:y:2023:i:04:p:11-15
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    File URL: https://www.cesifo.org/DocDL/econpol-forum-2023-4-economides-philippopoulos-fiscal-sustainability.pdf
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    Cited by:

    1. Economides, George & Koliousi, Giota & Miaouli, Natasha & Philippopoulos, Apostolis, 2024. "From debt arithmetic to fiscal sustainability and fiscal rules: taking stock and policy lessons," LSE Research Online Documents on Economics 122241, London School of Economics and Political Science, LSE Library.
    2. Dimakopoulou, Vasiliki & Economides, George & Philippopoulos, Apostolis & Vassilatos, Vanghelis, 2024. "Can central banks do the unpleasant job that governments should do?," European Economic Review, Elsevier, vol. 165(C).

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