Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/153254
Authors: 
Afonso, António
Rault, Christophe
Year of Publication: 
2007
Series/Report no.: 
ECB Working Paper 820
Abstract: 
We assess the sustainability of public finances in the EU15 over the period 1970-2006 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 estimations point to fiscal sustainability being an issue in some countries, fiscal policy was sustainable both for the EU15 panel set, and within subperiods (1970-1991 and 1992-2006).
Subjects: 
EU
Fiscal sustainability
intertemporal budget constraint
panel cointegration
panel unit root
JEL: 
C23
E62
H62
H63
Document Type: 
Working Paper

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