Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/232458 
Authors: 
Year of Publication: 
2021
Series/Report no.: 
CESifo Working Paper No. 8861
Publisher: 
Center for Economic Studies and Ifo Institute (CESifo), Munich
Abstract: 
In this paper, I demonstrate that an indicator which is commonly used to assess the long-term fiscal sustainability of public finances in EU member states (“S2”) is also defined if government borrowing rates are assumed to be permanently lower than the growth rate of GDP. I illustrate this finding based on simulations prepared for the Fifth Sustainability Report published by the German Federal Ministry of Finance. In addition, I discuss the interpretation of the indicator in a low-interest environment and the assumption that relevant interest rates continue to be low if there are substantial challenges for fiscal sustainability, e.g., through demographic ageing.
Subjects: 
public budget
public debt
fiscal sustainability
interest rates
JEL: 
H60
J11
E43
Document Type: 
Working Paper
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