Giancarlo Marini; Alessandro Piergallini :
057_DP75 Indicators and Tests of Fiscal Sustainability: An Integrated Approach
JEL Classification:
C12; C22; E50; H60
Abstract:
This paper shows that indicators and tests of government solvency should not be used alternatively. We present a simple and intuitive procedure to integrate simultaneously the
results from the two approaches to fiscal sustainability. An application to U.S. post-World War II data demonstrates the empirical relevance of the proposed strategy. Our results
suggest that U.S. fiscal policy is on a sustainable path, since the negative values of indicators merely reflect cyclical factors.
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