Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/84149 
Year of Publication: 
2013
Series/Report no.: 
CESifo Working Paper No. 4385
Publisher: 
Center for Economic Studies and ifo Institute (CESifo), Munich
Abstract: 
We extend previous literature on fiscal policy sustainability by introducing non-linear fiscal reaction functions with endogenously estimated state-varying thresholds to capture the behaviour of fiscal policy authorities during “good” and “bad” times. These thresholds vary with the level of debt, the economic cycle and an index of financial pressure.
Subjects: 
debt sustainability
fiscal reaction function
state-varying threshold
JEL: 
C20
H30
H50
Document Type: 
Working Paper
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