Preprint Article Version 1 This version is not peer-reviewed

Public Finance Sustainability in Romania - Challenges and Vulnerabilities

Version 1 : Received: 24 July 2018 / Approved: 24 July 2018 / Online: 24 July 2018 (15:54:14 CEST)

How to cite: Bostan, I.; Toderascu, C.; Gavriluta, A.F. Public Finance Sustainability in Romania - Challenges and Vulnerabilities. Preprints 2018, 2018070461 (doi: 10.20944/preprints201807.0461.v1). Bostan, I.; Toderascu, C.; Gavriluta, A.F. Public Finance Sustainability in Romania - Challenges and Vulnerabilities. Preprints 2018, 2018070461 (doi: 10.20944/preprints201807.0461.v1).

Abstract

Given the contradiction between the current demands for sustainability and the way the financial system works, this paper explores in a retrospective and a prospective view the Romanian Public Finance Sustainability, highlighting the major challenges and vulnerabilities. For the retrospective part, we concentrate mainly on empirical tests on Romanian government solvency between the period 1986- 2016, by applying unit root and co-integration tests. To gain a better, general understanding of the behavior of policy-makers, in the second part we use a scenario analysis of budgetary adjustment in the short and medium run under alternative hypotheses. The results provide a formal proof that policy makers decisions face critical and complex questions and the way in which they manage fiscal stimuli have a direct implication on the sustainability of the country and on the lax implementation of fiscal policy.

Subject Areas

fiscal sustainability; public finance; fiscal consolidation; fiscal responsibility

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