Abstract
Given the contradiction between the current demands for sustainability and the way that the financial system works, this paper explored in a retrospective and a prospective view, Romanian Public Finance Sustainability, highlighting the major challenges and vulnerabilities. Relating to the retrospective part, we concentrated mainly on empirical tests on Romanian government solvency between the period 1990–2020, by applying un it root and co-integration tests. To gain a better, general understanding of the behavior of policy-makers, in the second part we used a scenario analysis of budgetary adjustment in the short and medium run under alternative hypotheses. The results provided formal proof that policy makers decisions face critical and complex questions, and the way in which they manage fiscal stimuli has a direct implication on the sustainability of the country and on the lax implementation of fiscal policy.
Highlights
The study of public finance sustainability has been the focus of a large body of finance literature in recent decades
Given that modernity intervenes with major changes on this branch and the central element of analysis falls to the notion of accountability; at the global level, we find a preference and a necessity to study the relationship between public finance sustainability and Fiscal Responsibility Laws (FRLs)
Referring to the example of some international organizations, regarding the International Monetary Fund (IMF), we identify the use of such tools as the ALM (Asset and Liability Management) model or the QUEST model developed by the European Commission, which is based on the analysis of many variables, where the simulation is relevant only if primary data entered in the model are correct (Chan-Lau and Santos 2010; Woo and Kumar 2015; Radulescu 2003; Săveanu 2015; Wilson 2010; Badinger and Reuter 2015; Joireman et al 2005; Neyapti and Bulut-Cevik 2014; Afonso 2005; Fatás and Mihov 2009; Neaime 2015; Blanchard et al 1990; Polito and Wickens 2005; Tanner and Samake 2008; Pinheiro and Geraldes 2007)
Summary
The study of public finance sustainability has been the focus of a large body of finance literature in recent decades. Considering the current macroeconomic context, which is characterized by decisions based on tough political stakes, with oscillation in tackling anti-cyclical or procyclical policies; and the fact that it is hypothesized that the economic and political environments of Romania are characterized by instability, we can conduct an analysis of fundamental elements involving challenges and vulnerabilities in Romanian fiscal policy. This can reveal the need for accountability of decision-makers, and implicitly, better correlation of their decisions with the finality of the actions taken
Sign-in/Register to view highlights & summary Sign-in/Register to access full text options 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
