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Assessing Fiscal Sustainability: A Cross-Country Comparison

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  • Mr. Enzo Croce
  • Mr. V. Hugo Juan-Ramon

Abstract

To monitor fiscal sustainability, this paper proposes a recursive algorithm derived from the law of motion of the debt-to-GDP ratio, subject to a government reaction function that links convergence to the targeted debt ratio with primary fiscal surpluses. Based on quarterly estimates of this algorithm in the 1990s, 12 developed and developing countries are ranked according to their degree of sustainability. For a number of countries, the paper finds evidence of causality between the fiscal policy stance and growth-adjusted real interest rates.

Suggested Citation

  • Mr. Enzo Croce & Mr. V. Hugo Juan-Ramon, 2003. "Assessing Fiscal Sustainability: A Cross-Country Comparison," IMF Working Papers 2003/145, International Monetary Fund.
    • Handle: RePEc:imf:imfwpa:2003/145
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    References listed on IDEAS

    as
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    6. Perotti, Roberto, 1996. "Fiscal Consolidation in Europe: Composition Matters," American Economic Review, American Economic Association, vol. 86(2), pages 105-110, May.
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    8. Ms. Enrica Detragiache & Mr. Antonio Spilimbergo, 2001. "Crises and Liquidity: Evidence and Interpretation," IMF Working Papers 2001/002, International Monetary Fund.
    9. Alejandro Izquierdo & Ernesto Talvi & Guillermo A. Calvo, 2002. "Sudden Stops, the Real Exchange Rate and Fiscal Sustainability: Argentina's Lessons," Research Department Publications 4299, Inter-American Development Bank, Research Department.
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