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International Evidenceon Fiscal Solvency: Is Fiscal Policy "Responsible"?
Author: Mr. Enrique G. Mendoza and Mr. Jonathan David Ostry
Series:
IMF Working Papers
Volume/Issue:
Volume 2007: Issue 056
Language:
English
Publication Date:
01 Mar 2007
DOI:
https://doi.org/10.5089/9781451866209.001
ISBN:
9781451866209
ISSN:
1018-5941
Pages:
30
Keywords:
WP; emerging market; government purchase; growth rate; fiscal solvency; fiscal policy; debt sustainability; solvency condition; budget constraint; debt country; government purchases data; Fiscal stance; Solvency; Africa
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IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
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This paper looks at fiscal solvency and public debt sustainability in both emerging market and advanced countries. Evidence of fiscal solvency, in the form of a robust positive conditional relationship between public debt and the primary fiscal balance, is established in both groups of countries. Evidence of fiscal solvency is much weaker, however, at high debt levels. These findings suggest that many industrial and emerging market economies, including several where fiscal solvency has been the subject of recent debates, appear to conduct fiscal policy responsibly. Yet our results cannot reject the hypothesis of fiscal insolvency in groups of countries with high debt ratios.
Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund