Government debt in EMU countries

Gordon L. Brady and Cosimo Magazzino ()

The Journal of Economic Asymmetries, 2018, vol. 18, issue C, -

Abstract: We investigate the sustainability of fiscal policy in a set of 19 European Monetary Union (EMU) countries over the period 1970–2016. Panel unit root tests in the presence of cross-section dependence show that the Government debt series is stationary, indicating that the solvency condition would be satisfied for the EMU-19 countries. This implies the effectiveness of the austerity measures implemented by member countries. Moreover, Markov-switching models estimates show that for 12 selected countries two different regimes exist, with statistically different coefficients across states. For all these countries, the mean of government debt in the more recent years (state 2) is incredibly higher than the mean of the 1970s (state 1).

Keywords: Fiscal sustainability; Government debt; Eurozone; Panel stationarity; Cross-section dependence; Markov switching (search for similar items in EconPapers)
JEL-codes: C23 C33 E62 H63 (search for similar items in EconPapers)
Date: 2018
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Citations: View citations in EconPapers (13)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:joecas:v:18:y:2018:i:c:14

DOI: 10.1016/j.jeca.2018.e00096

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