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Political determinants of the fiscal sustainability: evidence from six individual developed countries

Author

Listed:
  • Valérie Berenger
  • Matthieu Llorca

    (LEG - Laboratoire d'Economie et de Gestion - UB - Université de Bourgogne - CNRS - Centre National de la Recherche Scientifique)

Abstract

This paper aims at assessing the fiscal sustainability and its political determinants in six countries, namely France, Germany, Greece, Italy, the United Kingdom, the United States. First, using the recent sustainability approach of Bohn (1998) based on fiscal reaction function, econometric findings using OLS reveal a positive response of the primary surplus to changes in debt in several countries. In other words, fiscal policy is sustainable in France, Italy, the United Kingdom, the United States, but not in Germany and Greece. Second, by introducing political dummy variables, we test the electoral budget cycle, the partisan cycle and the government coalition theories. We find the presence of electoral and partisan cycle in France, Greece, Italy but not in the rest of our countries.

Suggested Citation

  • Valérie Berenger & Matthieu Llorca, 2007. "Political determinants of the fiscal sustainability: evidence from six individual developed countries," Post-Print halshs-00268966, HAL.
    • Handle: RePEc:hal:journl:halshs-00268966
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    Citations

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    Cited by:

    1. Srđan Redžepagić & Matthieu Llorca, 2007. "Does Politics Matter in the Conduct of Fiscal Policy? Political Determinants of the Fiscal Sustainability: Evidence from Seven Individual Central and Eastern European Countries (CEEC)," Panoeconomicus, Savez ekonomista Vojvodine, Novi Sad, Serbia, vol. 54(4), pages 489-500, December.
    2. Aristovnik, Aleksander, 2008. "How sustainable are fiscal deficits? Evidence from Mediterranean countries," MPRA Paper 12317, University Library of Munich, Germany.
    3. Hyejin Ko, 2020. "Measuring fiscal sustainability in the welfare state: fiscal space as fiscal sustainability," International Economics and Economic Policy, Springer, vol. 17(2), pages 531-554, May.

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