A Longer-run Perspective on Fiscal Sustainability

Antonio Afonso and Joao Tovar Jalles ()

No 2011/17, Working Papers from Department of Economics at the School of Economics and Management (ISEG), Technical University of Lisbon.

Abstract: This paper investigates the sustainability of fiscal policy in a set of 19 countries by taking a longer-run secular perspective over the period 1880-2009. Via a systematic analysis of the stationarity properties of the first-differenced level of government debt, and disentangling the components of the debt series using Structural Time Series Models, we are able to conclude that the solvency condition would be satisfied in mostly all cases since non-stationarity can be rejected, and, therefore, longer-run fiscal sustainability cannot be rejected (Japan and Spain can be exceptions). The same would be true for the panel sample analysis.

Keywords: fiscal sustainability; government debt; unit roots; breaks; structural time series models Classification-C23; E62; H62 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cba, nep-eec and nep-mac
Date: 2011-08
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Persistent link: http://EconPapers.repec.org/RePEc:ise:isegwp:wp172011

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