The Global Dimension to Fiscal Sustainability
This paper provides a new perspective of fiscal sustainability and financial globalization in emerging and industrial countries. We highlight the importance of global capital market shocks for fiscal sustainability, a relationship which has hitherto been ignored in the empirical literature. Using a...
| Main Authors: | , , |
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| Language: | EN |
| Published: |
2012
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| Subjects: | |
| Online Access: | http://hdl.handle.net/10986/5483 |
| Summary: | This paper provides a new perspective of fiscal sustainability and financial globalization in emerging and industrial countries. We highlight the importance of global capital market shocks for fiscal sustainability, a relationship which has hitherto been ignored in the empirical literature. Using a factor model we demonstrate that the relationship between deficit and debt is conditional upon a global factor and we suggest that this global factor is related to world-wide liquidity. We also demonstrate that this acts as a constraint on emerging market economies' fiscal policy. |
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