Enrique Mendoza, Atish R. Ghosh, Jonathan D. Ostry, 08 March 2011

The fiscal challenges facing advanced economies today are unprecedented. In this column, the authors re-examine the issue of debt sustainability in a large group of advanced economies, pinning down the concepts of “debt limit” and “fiscal space”. They find that – based on the historical track record of adjustment – a number of countries have either very little or no additional fiscal space.

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