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Public finances solvency in the Euro Area : true or false?
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Autores
Orientador(es)
Resumo(s)
We assess public finances solvency for Euro Area countries using quarterly data between
1999Q1 and 2020Q4. Through a country-by-country analysis, the answer to the title question
is true. For most countries, (i) the primary budget balance reacts positively to the lagged public
debt ratio and past primary government balances contribute to the reduction of the public debt
ratio, indicating a Ricardian fiscal regime. Furthermore, in a panel framework: (ii) the response
of revenues to government expenditures is higher from 2010 onwards, and, for higher average
public debt ratios, the response is lower, while (iii) the response of the primary government
balance to the lagged public debt ratio is lower from 2010 onwards and is higher for higher
average public debt ratios; (iv) past primary budget balances allow the public debt ratio to be
reduced, especially before 2010 and in countries whose average public debt ratio is between 60
and 90% of GDP. Using a rolling window method, we find that (v) fiscal sustainability
coefficients are higher the higher the lagged public debt ratios, fiscal rule indexes and sovereign
ratings. Conversely, after 2010 and in periods of legislative elections, those coefficients are
lower.
Descrição
Palavras-chave
fiscal sustainability primary budget balance public debt panel data rolling windows Euro Area quarterly fiscal data
Contexto Educativo
Citação
Afonso, António e José Carlos Coelho (2022). "Public finances solvency in the Euro Area : true or false?". REM Working paper series, nº 0243/2022
Editora
ISEG - REM - Research in Economics and Mathematics