Abstract
PurposeThis paper aims to analyze the dynamics of the Spanish public debt–gross domestic product ratio during the period 1850–2020.Design/methodology/approachThis study uses a recent procedure to test for recurrent explosive behavior (Phillipset al., 2011; Phillipset al., 2015a, 2015b) to identify episodes of explosive public debt dynamics and also the episodes of fiscal adjustments over this long period.FindingsThe identified episodes of explosive behavior of public debt coincided with fiscal stress events, whereas fiscal adjustments and changes in economic policies stabilized public finances after periods of explosive dynamics of public debt.Originality/valueThe longer than usual span of the data should allow the authors to obtain some more robust results than in most of previous analyses of long-run sustainability.
Highlights
Since the start of the COVID-19 crisis, Spanish government has focused on doing whatever it takes to limit its consequences in economy and employment
The immediate consequence of budget deficits was a huge increase in public debt
In this paper, the dynamics of the Spanish public debt-to-gross domestic product (GDP) ratio is analyzed during the period 1850–2020
Summary
Since the start of the COVID-19 crisis, Spanish government has focused on doing whatever it takes to limit its consequences in economy and employment. The response of Spanish fiscal policy for an unprecedented crisis has included public health measures, unemployment benefits, wages subsidies, liquidity support for small- and medium-sized firms to prevent a wave of defaults and mass layoffs, and cash transfers to support the poor and informal workers and self-employed who lost jobs, among others. The full terms of this licence maybe seen at http://creativecommons.org/licences/by/4.0/legalcode
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