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Budgetary Sustainability in the Presence of Macroeconomic and Financial Market Instability: An Application to the Case of Belgium
Author(s) -
VAN AARLE BAS,
KONINGS JOZEF
Publication year - 2013
Publication title -
public budgeting and finance
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.694
H-Index - 30
eISSN - 1540-5850
pISSN - 0275-1100
DOI - 10.1111/j.1540-5850.2013.12005.x
Subject(s) - stylized fact , economics , fiscal sustainability , bond market , sustainability , speculation , government (linguistics) , bond , financial market , debt , interest rate , monetary economics , macroeconomics , fiscal policy , government bond , government debt , finance , ecology , linguistics , philosophy , biology
This paper develops a stylized budgeting framework to analyze the effects of macroeconomic shocks and government bond market conditions on public finances. We focus on the impacts of primary fiscal balance shocks, growth, and interest rate shocks on budgetary sustainability. We consider the effects of financial sector bailouts, uncertainty about aging costs and instability viz. speculation in government bond markets. The framework is applied to the case of Belgium, where recently these issues have played an important role. A scenario analysis of budgetary adjustment under alternative hypotheses is carried out to analyze Belgian fiscal sustainability over the next 20 years.