Public finance sustainability in Europe: a behavioral model

Gilles Dufrénot () and Carolina Ulloa Suarez ()
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Carolina Ulloa Suarez: AMSE - Aix-Marseille Sciences Economiques - EHESS - École des hautes études en sciences sociales - AMU - Aix Marseille Université - ECM - École Centrale de Marseille - CNRS - Centre National de la Recherche Scientifique

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Abstract: This paper investigates the sustainability of public finances in the European countries since 2002. We provide evidence of heterogenous behaviors among the EU countries and show that, even if they had been forced to focus their fiscal efforts on correcting the deviations of debt from their ceiling -through a correcting mechanism such as the recent TSCG rule-, this would not necessarily have changed the likelihood that debt and deficits become more sustainable. Sources of deviations from stable debt and deficits are related to the macroeconomic environment: the interest-growth differential, momentum dynamics in the sovereign bond markets, how markets react to rising debt.

Keywords: fiscal rules; euro area; quantile regression; stability (search for similar items in EconPapers)
Date: 2019-10
New Economics Papers: this item is included in nep-eec
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Working Paper: Public finance sustainability in Europe: a behavioral model (2019)
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