UK Fiscal Policy Sustainability, 1955-2006

Jingwen Fan and Michael Arghyrou

No E2011/9, Cardiff Economics Working Papers from Cardiff University, Cardiff Business School, Economics Section

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.

Keywords: Fiscal policy; Sustainability; UK; Structural breaks; Non-linear adjustment (search for similar items in EconPapers)
JEL-codes: E62 H60 (search for similar items in EconPapers)
Pages: 26 pages
Date: 2011-03
New Economics Papers: this item is included in nep-cba, nep-his and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Related works:
Journal Article: UK FISCAL POLICY SUSTAINABILITY, 1955–2006 (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:cdf:wpaper:2011/9

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