scholarly journals Fiscal Policy and Public Debt Dynamics in Italy, 1861-2009

2012 ◽  
Author(s):  
Alessandro Piergallini ◽  
Michele Postigliola
Keyword(s):  
Fiscal Policy ◽  
Public Debt ◽  
Debt Dynamics

Fiscal Policy, Public Debt and the World Crisis

2014 ◽  
Vol 15 (2) ◽  
pp. 225-242 ◽  
Author(s):  
Gauti B. Eggertsson
Keyword(s):  
Fiscal Policy ◽  
Public Debt ◽  
Dynamic Stochastic General Equilibrium ◽  
Equilibrium Analysis ◽  
World Crisis ◽  
Debt Dynamics ◽  
World Economic ◽  
Dynamic Stochastic ◽  
World Economic Crisis

AbstractThis study summarizes a theory of the origin of the current world economic crisis and the role of fiscal policy in mitigating its effect. The perspective is dynamic stochastic general equilibrium analysis. Overall, the model analysis suggests a strong case for fiscal policy if the monetary authority is unable/unwilling to close the output gap. This remains the case, even when explicitly taking into account public debt dynamics.

The macroeconomic effects of fiscal consolidation policies in Greece

2017 ◽  
Vol 9 (1) ◽  
pp. 34-49 ◽  
Author(s):  
Stephanos Papadamou ◽  
Trifon Tzivinikos
Keyword(s):  
Fiscal Policy ◽  
Public Debt ◽  
Wage Policy ◽  
Government Consumption ◽  
Content Type ◽  
Indirect Taxes ◽  
Debt Dynamics ◽  
Policy Shocks ◽  
The Government ◽  
A Minor

Purpose This paper aims to investigate the effects of contractionary fiscal policy shocks on major Greek macroeconomic variables within a structural vector autoregression framework while accounting for debt dynamics. Design/methodology/approach The sign restriction approach is applied to identify a linear combination of government spending and government revenue shock simultaneously while accounting for debt dynamics. Additionally, output and unemployment responses to fiscal shocks under different scenarios concerning the amalgamation of austerity measures are considered. Findings The results indicate that a contractionary consumption policy shock, namely, a 1 per cent decrease in government consumption and a 1 per cent increase in indirect taxes, is preferred, as it produces a minor decrease in output and substantially decreases public debt, while a contractionary wage policy shock is suitable only when the government aims to sharply reduce public debt, as the consequences for the economy are harsh. A contractionary investment policy shock is not recommended, as it triggers a rise in unemployment and a fall in output, while the effect on the public debt is minor. Practical implications Policymakers should focus their efforts on reducing unproductive government consumption on the expenditure side. Concerning revenues, the reinforcement of tax administration is recommended to ensure that indirect taxes will be collected. Originality/value This paper contributes to the existing literature by providing a disaggregated analysis of the effects of fiscal policy actions in Greece by implementing several fiscal policy scenarios and accounting for the level of public debt. All scenarios are in the vein of the economic adjustment programs guidelines.

Policy asymmetries and fiscal sustainability: evidence from Nigeria

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Opeoluwa Adeniyi Adeosun ◽  
Olumide Steven Ayodele ◽  
Olajide Clement Jongbo
Keyword(s):  
Fiscal Policy ◽  
Public Debt ◽  
Markov Switching ◽  
Fiscal Sustainability ◽  
Constant Parameter ◽  
Policy Rule ◽  
Content Type ◽  
Sustainability Analysis ◽  
Debt Dynamics ◽  
Fiscal Balance

PurposeThis study examines and compares different specifications of the fiscal policy rule in the fiscal sustainability analysis of Nigeria.Design/methodology/approachThis is methodologically achieved by estimating the baseline constant-parameter and Markov regime switching fiscal models. The asymmetric autoregressive distributed lag fiscal model is also employed to substantiate the differential responses of fiscal authorities to public debt.FindingsThe baseline constant-parameter fiscal model provides mixed results of sustainable and unsustainable fiscal policy. The inconclusiveness is adduced to instability in primary fiscal balance–public debt dynamics. This makes it necessary to capture regime switches in the fiscal policy rule. The Markov switching estimations show a protracted fiscal unsustainable regime that is inconsistent with the intertemporal budget constraint (IBC). The no-Ponzi game and debt stabilizing results of the Markov switching fiscal model further revealed that the transversality and debt stability conditions were not satisfied. Additional findings from the asymmetric autoregressive model estimation show that fiscal consolidation responses vary with contraction and expansion in output and spending, coupled with downturns and upturns in public debt dynamics in both the long and short run. These findings thus confirm the presence of asymmetries in the fiscal policy authorities' reactions to public debt. Further, additional evidences show the violation of the IBC which is exacerbated by the deleterious effect of the pro-cyclical fiscal policy response in boom on the improvement of the primary fiscal balance.Originality/valueThis study deviates from the extant literature by accommodating time variation, periodic switches and fiscal policy asymmetries in the fiscal sustainability analysis of Nigeria.

scholarly journals Examination of Interest-Growth Differentials and the Risk of Sovereign Insolvency

Risks ◽  
2021 ◽  
Vol 9 (4) ◽  
pp. 75
Author(s):  
Jussi Lindgren
Keyword(s):  
Fiscal Policy ◽  
Public Debt ◽  
Interest Rate Risk ◽  
Debt Management ◽  
Model Parameters ◽  
Fiscal Multipliers ◽  
Debt Dynamics ◽  
Optimal Fiscal Policy ◽  
The Interest Rate ◽  
Growth Differential

The objective of this research was to demonstrate the (nonlinear) risks of sovereign insolvency and explore the applicability of stochastic modeling in public debt management, given a structural economic model of stochastic government debt dynamics. A stochastic optimal control model was developed to model public debt dynamics based on the debt accounting identity, where the interest-growth differential obeys a continuous random process. This stochasticity represents both the interest rate risk of public debt and the variability of the growth rate of the nominal Gross Domestic Product combined. The optimal fiscal policy was analyzed in terms of the model parameters. The model was simulated, and results were visualized. The insolvency risk was demonstrated by examining the variance of the optimal process. The model was amended with hidden credit risk premia and fiscal multipliers, which forces the debt dynamics to be nonlinear in the debt ratio. The results, on the other hand, confirm that the volatility of the interest-growth differential is crucial in terms of sovereign solvency and in addition, it demonstrates the large risks stemming from the multiplier effect, which underlines the need for prudent debt management and fiscal policy.

scholarly journals A Keynesian Approach to Fiscal Policy for Full Employment and Continuous Time Debt Dynamics

2020 ◽  
Vol 65 (1) ◽  
pp. 20-38
Author(s):  
Yasuhito Tanaka
Keyword(s):  
Fiscal Policy ◽  
Public Debt ◽  
Continuous Time ◽  
Full Employment ◽  
Future Generations ◽  
Real Gdp ◽  
Marginal Propensity To Consume ◽  
Debt Dynamics ◽  
Marginal Propensity ◽  
One Year

AbstractIt is widely argued that public debt is a burden on the future generations. We analyze another aspect of public debt as an economic stimulus program, that is, the measure to realize full employment from an under-employment state. Using a continuous time version of a dynamic analysis of debt-to-GDP ratio we show that a fiscal policy to realize full employment from a state of under-employment can reduce the debt-to-GDP ratio. More precisely we show that the larger the extra growth rate (increasing rate) of real GDP by a fiscal policy is, the smaller the debt-to-GDP ratio at the time when full employment is realized is. Also we show that even if the marginal propensity to consume is very small (including zero), an aggressive fiscal policy can realize full employment without increasing the debt-to-GDP ratio. Further, we consider a condition to realize full employment from a state of under-employment within one year without increasing debt-to-GDP ratio.

scholarly journals Public debt dynamics: the interaction with national income and fiscal policy

2021 ◽  
Vol 10 (1) ◽  
Author(s):  
Vasileios Spyrakis ◽  
Stelios Kotsios
Keyword(s):  
Fiscal Policy ◽  
Public Debt ◽  
Sovereign Debt ◽  
Debt Crisis ◽  
National Income ◽  
Equation System ◽  
Policy Implications ◽  
Debt Dynamics ◽  
The 2008 Financial Crisis ◽  
New Perspective

AbstractThe 2008 financial crisis triggered the debt crisis in Europe. High debt-to-GDP ratios made it impossible for some countries to apply countercyclical policy in order to overcome the recession. As a result, highly indebted countries were forced to apply austerity measures to avoid sovereign default, which deepened even further the decline of their GDP. We examine the case of a highly indebted country, which is not cut off from the financial markets yet, using a bilinear difference equation system. We contemplate the dynamic equations of national income and sovereign debt together, as GDP fluctuations directly affect the debt evolution and we introduce the notion of the second relation, namely the deceleration of private investments due to sovereign debt. We build a new method for the implementation of fiscal policy, a feedback control of the economic system, and we stress its consequent policy implications. We contribute to the existing debt dynamics literature providing a new perspective for the interaction of public debt and GDP. The fiscal policy method we propose vanishes the dilemma between the front-loaded and back-loaded austerity, combines the fiscal recovery from a recession and the fiscal consolidation, as it immediately improves the debt-to-GDP ratio by increasing the national income and restraining the rise of public debt. Finally, we stress why the second relation is important for the implementation of fiscal policy, as its presence leads to a slower and more painful recovery.

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