The relationship between debt level and fiscal sustainability in OECD countries

Mariam Camarero, Josep Carrion-i-Silvestre and Cecilio Tamarit

No 201307, AQR Working Papers from University of Barcelona, Regional Quantitative Analysis Group

Abstract: In this paper we unify the traditional approaches to testing for fiscal sustainability considering the stock-flow system that fiscal variables configure. Our approach encompasses previous ways of testing for sustainability. The results obtained for a group of 17 OECD countries point to weak fiscal sustainability, as well as to the existence of cointegration between deficit and debt, confirming the relevance of the stock-flow approach. Allowing for structural breaks and multicointegration turns out to be of critical importance to assess whether the fiscal authorities apply their policies looking for sustainability and whether, simultaneously, they try to stabilize real debt target levels..

Keywords: fiscal sustainability; cointegration; unit roots; structural breaks. JEL classification: H62; E62; C22. (search for similar items in EconPapers)
Pages: 55 pages
Date: 2013-09, Revised 2013-09
New Economics Papers: this item is included in nep-opm, nep-pbe and nep-pub
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http://www.ub.edu/irea/working_papers/2013/201315.pdf (application/pdf)

Related works:
Working Paper: The relationship between debt level and fiscal sustainability in OECD countries (2014)
Working Paper: The relationship between debt level and fiscal sustainability in OECD countries (2013)
Working Paper: The relationship between debt level and fiscal sustainability in OECD countries (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:aqr:wpaper:201307

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