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Fiscal Sustainability and Long-Term Projections: A Beginner’s Introduction

Pietro Tommasino*,
Banca d’Italia, Roma

This note provides a non-technical, concise and up-to-date introduction to the concept of fiscal sustainability and to its applications. The note stresses the importance of using indicators which are well-grounded in economic theory and highlights the pitfalls of some methodologies which are currently used. One of the main takeaways is that there is a high risk of oversimplification in presenting and interpreting the results of sustainability analyses; public finance experts should avoid arbitrary assumptions and transparently acknowledge the limits of the available sustainability indicators.

[JEL Classification: E62; H63; H68].

Keywords: fiscal sustainability; public debt; long-term projections; debt crises.

pietro.tommasino@bancaditalia.it, Directorate General Economics, Statistics & Research. The views expressed in the article are the author's own and do not necessarily reflect those of the Bank of Italy. I thank Stefania Zotteri and Francesco Caprioli for useful comments and Pietro Rizza for countless discussions on fiscal issues. Responsibility for all remaining errors is obviously just mine.