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The determinants of public deficit volatility

Luca Agnello () and Ricardo M. Sousa ()

No 1042, Working Paper Series from European Central Bank

Abstract: This paper empirically analyzes the political, institutional and economic sources of public deficit volatility. Using the system-GMM estimator for linear dynamic panel data models and a sample of 125 countries analyzed from 1980 to 2006, we show that higher public deficit volatility is typically associated with higher levels of political instability and less democracy. In addition, public deficit volatility tends to be magnified for small countries, in the outcome of hyper-inflation episodes and for countries with a high degree of openness. JEL Classification: E31, E63

Keywords: institutions; political instability; public deficit; Volatility (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-pbe and nep-pol
Date: 2009-04
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Working Paper: The Determinants of Public Deficit Volatility (2009) Downloads
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