Political determinants of the fiscal sustainability: evidence from six individual developed countries.

Valérie Berenger , Matthieu Llorca (1)

1 LEG - Laboratoire d'Economie et de Gestion

This paper aims at assessing the fiscal sustainability and its political determinants in six countries, namely France, Germany, Greece, Italy, the United Kingdom, the United States. First, using the recent sustainability approach of Bohn (1998) based on fiscal reaction function, econometric findings using OLS reveal a positive response of the primary surplus to changes in debt in several countries. In other words, fiscal policy is sustainable in France, Italy, the United Kingdom, the United States, but not in Germany and Greece. Second, by introducing political dummy variables, we test the electoral budget cycle, the partisan cycle and the government coalition theories. We find the presence of electoral and partisan cycle in France, Greece, Italy but not in the rest of our countries.

Mots clés: Fiscal reaction function; Public debt sustainability; Political budget cycles; time series.; time series

Domaines: Economies et finances

Valérie Berenger, Matthieu Llorca. Political determinants of the fiscal sustainability: evidence from six individual developed countries.. 56 ème Congrès de l'AFSE, Université Paris 1 - Panthéon Sorbonne, 20 et 21 septembre 2007, Sep 2007, Paris, France. pp.28. ⟨halshs-00268966⟩