摘要：Two issues are addressed in this paper. First, we attempt to ascertain whether the current
fiscal policy in Spain satisfies the intertemporal borrowing constraint. For this purpose, we
apply the traditional empirical tests of sustainability proposed in the literature, that pay
special attention to integration orders of deficit and debt processes and the existence of
cointegration relationships between revenues and expenditures. Under this approach, a
sustainable fiscal policy would indicate that if fiscal variables follow the pattern of the past in
the future, no problems in marketing public debt are expected to arise. Our results show that
a structural break seems to have taken place gradually in the Spanish budget performance,
which allows to verify the intertemporal borrowing constraint in a “strong sense”.
Second, given the limitations of the previous sustainability analysis, the fact that the change
to strong sustainability is not fully confirmed for a large sample period and that, even if this
were the case, the Stability and Growth Pact for the EMU countries sets explicit ceilings to
public finance that might require additional consolidation efforts in Spain, we consider the
issue of which is the most efficient strategy to achieve permanent reductions in fiscal
deficits. Thus, we analyse empirically the possible interdependence between government
expenditure and revenues. We examine this issue by performing the standard Granger
causality tests. We find that there is a bias towards deficit in public sector's size and that
public expenditure causes revenues in the short and long term, whereas revenues only
cause expenditures in the long term. These results imply that fiscal consolidation could be
achieved with a reduction in the size of the public sector and that the most adequate
strategy of fiscal consolidation should consist on the reduction of structural public
expenditure
