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This paper investigates the relevance of the No-Ponzi game condition forpublic debt (i.e. the public debt growth rate has to be lower than the realinterest rate, a necessary assumption for Ricardian equivalence) and of thetransversality condition for the GDP growth rate (i.e. the GDP growth rate hasto be lower than the real interest rate). First, on the unbalanced panel of 21countries from 1961 to 2010 available in OECD database, those two conditionswere simultaneously validated only for 29% of the cases under examination.Second, those two conditions were more frequent in the 1980s and the 1990s whenmonetary policies were more restrictive. Third, in tune with the Keynesianview, when the real interest rate is higher than the GDP growth, it correspondsto 75% of the cases of the increases of the debt/GDP ratio but to only 43% ofthe cases of the decreases of the debt/GDP ratio (fiscal consolidations).

Government Solvency, Austerity and Fiscal Consolidation in the OECD: A Keynesian Appraisal of Transversality and No Ponzi Game Conditions