Arbeitspapier
Fiscal regimes and the (non)stationarity of debt
This paper analyzes the sustainability of fiscal debt contingent on fiscal policy operating in two fiscal regimes. The first regime is characterized by active policy (not reacting to debt) and the other by passive fiscal policy (reacting to debt). The average duration for which either regime can be pursued in order to arrive at a long-run stable solution is dependent on the steady-state debt-to-GDP ratio and thus determines the cutoff point beyond which debt is non-stationary. We find that the longer an active policy regime is in force or, equivalently, the more likely fiscal policy is to remain in this regime, the lower the steady state debt-to-GDP ratio must be. This has repercussions for the overall business cycle, implying a higher volatility of inflation and output the longer fiscal policy is active for any given equilibrium debt-to-GDP level. Using the Markov-switching DSGE-model as the data generating process it is possible to apply the test by Bohn (1998) and find that it is prone to type 2 errors.
- ISBN
-
978-3-95729-447-0
- Sprache
-
Englisch
- Erschienen in
-
Series: Bundesbank Discussion Paper ; No. 11/2018
- Klassifikation
-
Wirtschaft
Existence and Stability Conditions of Equilibrium
Policy Objectives; Policy Designs and Consistency; Policy Coordination
Fiscal Policy
- Thema
-
DSGE
Markov-Switching
Fiscal Policy
Debt Sustainability
- Ereignis
-
Geistige Schöpfung
- (wer)
-
Hollmayr, Josef
- Ereignis
-
Veröffentlichung
- (wer)
-
Deutsche Bundesbank
- (wo)
-
Frankfurt a. M.
- (wann)
-
2018
- Handle
- Letzte Aktualisierung
-
10.03.2025, 11:43 MEZ
Datenpartner
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. Bei Fragen zum Objekt wenden Sie sich bitte an den Datenpartner.
Objekttyp
- Arbeitspapier
Beteiligte
- Hollmayr, Josef
- Deutsche Bundesbank
Entstanden
- 2018
Ähnliche Objekte (12)
International investment position and external debt
Active monetary policy, passive fiscal policy and the value of public debt: some further monetarist arithmetic
The debt brake: business cycle and welfare consequences of Germany's new fiscal policy rule
Fiscal austerity, unemployment and family firms
The fiscal footprint of macroprudential policy
Fiscal sustainability duringthe COVID-19 pandemic
Deep habits and the macroeconomic effects of government debt
What do deficits tell us about debt? Empirical evidence on creative accounting with fiscal rules in the EU
Rollover risk in commercial paper markets and firms' debt maturity choice
Monitoring fiscal adjustments in the European Union and EMU
Intertemporal effects of fiscal policy in an RBC model
The financial accelerator and market-based debt instruments: A role for maturities?
International investment position and external debt
Active monetary policy, passive fiscal policy and the value of public debt: some further monetarist arithmetic
The debt brake: business cycle and welfare consequences of Germany's new fiscal policy rule
Fiscal austerity, unemployment and family firms
The fiscal footprint of macroprudential policy
Fiscal sustainability duringthe COVID-19 pandemic
Deep habits and the macroeconomic effects of government debt
What do deficits tell us about debt? Empirical evidence on creative accounting with fiscal rules in the EU
Rollover risk in commercial paper markets and firms' debt maturity choice
Monitoring fiscal adjustments in the European Union and EMU
Intertemporal effects of fiscal policy in an RBC model
The financial accelerator and market-based debt instruments: A role for maturities?
International investment position and external debt
Active monetary policy, passive fiscal policy and the value of public debt: some further monetarist arithmetic
The debt brake: business cycle and welfare consequences of Germany's new fiscal policy rule
Fiscal austerity, unemployment and family firms
The fiscal footprint of macroprudential policy
Fiscal sustainability duringthe COVID-19 pandemic
Deep habits and the macroeconomic effects of government debt
What do deficits tell us about debt? Empirical evidence on creative accounting with fiscal rules in the EU
Rollover risk in commercial paper markets and firms' debt maturity choice
Monitoring fiscal adjustments in the European Union and EMU
Intertemporal effects of fiscal policy in an RBC model