Are budget deficits bad for an economy? This question has perplexed economists for centuries. Historically, three schools of thought have emerged on this matter. One school takes the position that deficits have adverse influence on inflation, interest rates and private investment. As yearly...

In this paper, I demonstrate that an indicator which is commonly used to assess the long-term fiscal sustainability of public finances in EU member states (“S2”) is also defined if government borrowing rates are assumed to be permanently lower than the growth rate of GDP. I illustrate this...