A longer-run perspective on fiscal sustainability

Antonio Afonso and Joao Jalles

Empirica, 2014, vol. 41, issue 4, 847 pages

Abstract: We investigate 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 of the first-differenced level of government debt, and disentangling the components of the debt series using structural time series models, we conclude that since in most cases non-stationarity can be rejected, longer-run fiscal sustainability is not rejected (Japan and Spain can be exceptions). The same is true for a panel analysis when allowing for multiple structural breaks, and for cross-country dependence. In addition, endogenously identified breaks can be related to episodes of sovereign default. Copyright Springer Science+Business Media New York 2014

Keywords: Fiscal sustainability; Government debt; Unit roots; Multiple breaks; Structural time series models; C23; E62; H62 (search for similar items in EconPapers)
Date: 2014
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Citations: View citations in EconPapers (31)

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Working Paper: A Longer-run Perspective on Fiscal Sustainability (2011)
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DOI: 10.1007/s10663-013-9240-0

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