Fiscal reform and fiscal sustainability: Evidence from Australia and Sweden

This paper examines how the adoption of a fiscal rule affects the sustainability of fiscal policy in two OECD countries; Australia and Sweden. In Australia, we show that government revenues are not necessarily growing at a faster rate than government expenditures, at least from the viewpoint of a statistical long-run relationship. In contrast, in Sweden, we show that the reform is more beneficial for the attainment of a budget surplus.