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High public debt in the euro area: still a fact

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  • Stoian, Andreea
  • Alves, Rui Henrique

Abstract

In this paper, we investigate the issues regarding the stabilization of public debt and its decrease down to 60 per cent of GDP for selected European Union countries using the primary balance derived from the public debt dynamic model as a leading indicator. We find that there is a high probability of stabilizing public debt at its 2014 level conditional on achieving an increased GDP growth rate . In addition, results indicate that it would take at least 10 years for many of the analyzed countries to decrease their public debt ratio to 60 per cent of GDP. We also draw conclusions on what really matters for fiscal sustainability and on implications for national and European fiscal policies.

Suggested Citation

  • Stoian, Andreea & Alves, Rui Henrique, 2014. "High public debt in the euro area: still a fact," MPRA Paper 63679, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:63679
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    More about this item

    Keywords

    Fiscal policy; primary balance; public debt; fiscal sustainability; European Union;
    All these keywords.

    JEL classification:

    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • E63 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Comparative or Joint Analysis of Fiscal and Monetary Policy; Stabilization; Treasury Policy
    • H62 - Public Economics - - National Budget, Deficit, and Debt - - - Deficit; Surplus

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