Bas van Aarle is a senior researcher, Faculty of Applied Economics, Hasselt University, Agoralaan C52, 3590 Hasselt Belgium and Vives KU Leuven. He can be reached at email@example.com.
Budgetary Sustainability in the Presence of Macroeconomic and Financial Market Instability: An Application to the Case of Belgium
Article first published online: 17 MAR 2013
© 2013 Public Financial Publications, Inc.
Public Budgeting & Finance
Volume 33, Issue 1, pages 114–134, Spring 2013
How to Cite
VAN AARLE, B. and KONINGS, J. (2013), Budgetary Sustainability in the Presence of Macroeconomic and Financial Market Instability: An Application to the Case of Belgium. Public Budgeting & Finance, 33: 114–134. doi: 10.1111/j.1540-5850.2013.12005.x
- Issue published online: 17 MAR 2013
- Article first published online: 17 MAR 2013
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.