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Title:UK fiscal policy sustainability, 1955 - 2006 PDF Logo
Authors:Fan, Jingwen
Arghyrou, Michael G.
Issue Date:2011
Series/Report no.:Cardiff Economics Working Papers E2011/9
Abstract:We test for fiscal policy sustainability in the UK for the period 1955-2006. We find evidence of sustainability with three structural breaks, respectively occurring in the early 1970s, early 1980s and late 1990s. UK fiscal policy has been sustainable throughout the sample period except from 1973-1981 when a non-Ricardian regime applied. For the remaining periods correction of fiscal disequilibrium occurs through adjustments in public revenue rather than expenditure. Finally, we find evidence of non-linear fiscal adjustment, with UK authorities not reacting to relatively small deficits; but correcting exceedingly large deficits and any temporary surpluses relatively fast.
Subjects:Fiscal policy
Structural breaks
Non-linear adjustment
Document Type:Working Paper
Appears in Collections:Cardiff Economics Working Papers, Cardiff Business School, Cardiff University

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