Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/153898
Authors: 
Afonso, António
Jalles, João Tovar
Year of Publication: 
2012
Series/Report no.: 
ECB Working Paper 1465
Abstract: 
We assess the sustainability of public finances in OECD countries, over the period 1970-2010, using unit root and cointegration analysis, both country and panel based, controlling for endogenous breaks. Results notably show: lack of cointegration – absence of sustainability – between government revenues and expenditures for most countries (except for Austria, Canada, France, Germany, Japan, Netherlands, Sweden, and UK); improvements of the primary balance after past worsening in debt ratios for Australia, Belgium, Germany, Ireland, Netherlands and the UK; Granger causality from government debt to the primary balance for 12 countries (suggesting the existence of Ricardian regimes). Overall, fiscal policy has been less sustainable for several countries, and panel data results corroborate the time-series findings.
Subjects: 
breaks
causality
debt
fiscal regimes
FMOLS
Panel Cointegration
primary balance
stationarity
JEL: 
C32
E62
H62
H63
Document Type: 
Working Paper

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