How Sustainable are Latin American Fiscal Deficits: A Panel Data Approach

Jacobo Campo Robledo and Luis Melo-Velandia

Borradores de Economia from Banco de la Republica de Colombia

Abstract: This paper evaluates the fiscal sustainability hypothesis for eight Latin American countries, Argentina, Chile, Colombia, Ecuador, Panama, Peru, Paraguay and Uruguay, during the period 1960 - 2009. Using second generation cointegration panel data models, we test whether Government revenues and primary expenditures are sustainable in the long-run. This methodology allows for cross-sectional dependence among countries and is also appropriated under the existence of potential structural breaks. We found empirical evidence of sustainability of the primary deficit for these Latin American countries but only in a weak sense.

Keywords: Fiscal Sustainability; Panel Unit Root tests; Panel Cointegration tests; Structural Change. (search for similar items in EconPapers)
JEL-codes: C22 C23 H62 (search for similar items in EconPapers)
Pages: 16
Date: 2011-11
New Economics Papers: this item is included in nep-lam and nep-pub
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Persistent link: https://EconPapers.repec.org/RePEc:bdr:borrec:679

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