OECD Economics Department Working Papers

Working papers from the Economics Department of the OECD that cover the full range of the Department’s work including the economic situation, policy analysis and projections; fiscal policy, public expenditure and taxation; and structural issues including ageing, growth and productivity, migration, environment, human capital, housing, trade and investment, labour markets, regulatory reform, competition, health, and other issues.

The views expressed in these papers are those of the author(s) and do not necessarily reflect those of the OECD or of the governments of its member countries.

English, French

Strategies for Countries with Favourable Fiscal Positions

The financial crisis and economic downturn are going to weigh on fiscal positions in OECD countries over the short to medium-term, both through the operation of automatic stabilisers and the enactment of discretionary fiscal stimulus packages. However, the strategic policy options facing OECD countries are mainly determined by the soundness of their underlying fiscal positions which vary substantially. This paper first describes how OECD economies are situated with respect to underlying fiscal balances and net government debt. A number of countries seem to enjoy favourable fiscal positions with underlying fiscal surpluses, low government debt or even positive net financial asset positions. When taking account, as far as possible, of implicit liabilities associated with ageing populations and resource-based revenues, fiscal positions still vary greatly across countries. The paper then examines the criteria involved in deciding whether government financial asset accumulation is in excess of needs and the use to which any excess government saving might be put, whether increasing public spending or reducing taxes. Finally, the determinants of the optimal size of the government balance sheet for any given desired net debt position are discussed.


Keywords: public investment, budget surplus, fiscal policy, underlying fiscal balance, fiscal sustainability, government financial assets, government debt, commodity-related revenues
JEL: H6: Public Economics / National Budget, Deficit, and Debt; H2: Public Economics / Taxation, Subsidies, and Revenue; J11: Labor and Demographic Economics / Demographic Economics / Demographic Trends, Macroeconomic Effects, and Forecasts; H5: Public Economics / National Government Expenditures and Related Policies; Q33: Agricultural and Natural Resource Economics; Environmental and Ecological Economics / Nonrenewable Resources and Conservation / Resource Booms; E62: Macroeconomics and Monetary Economics / Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook / Fiscal Policy
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