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Title:What do we really know about fiscal sustainability in the EU?: a panel data diagnostic PDF Logo
Authors:Afonso, António
Rault, Christophe
Issue Date:2008
Series/Report no.:CESifo working paper 2226
Abstract:We assess the sustainability of public finances in the EU15 using stationarity and cointegration analysis. Specifically, we use panel unit root tests of the first and second generation allowing in some cases for structural breaks. We also apply modern panel cointegration techniques developed by Pedroni (1999, 2004), generalized by Banerjee and Carrion-i-Silvestre (2006) and Westerlund and Edgerton (2007), to a structural long-run equation between general government expenditures and revenues. While sustainability may be lacking in individual cases, fiscal policy was overall sustainable both for the EU15 panel set, and within some sub-periods.
Subjects:intertemporal budget constraint
fiscal sustainability
EU
panel unit root
panel cointegration
JEL:C23
E62
H62
H63
Document Type:Working Paper
Appears in Collections:CESifo Working Papers, CESifo Group Munich

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