Intertemporal solvency and breaks in the US deficit process: a maximum-likelihood cointegration approach

Peter Liu and Evan Tanner ()

Applied Economics Letters, 1995, vol. 2, issue 7, 231-235

Abstract: Previous research has shown that the intertemporal solvency condition is equivalent to the cointegration of either (1) the interest-inclusive government spendings and tax revenue or (2) the interest-exclusive government spendings, tax revenue and government outstanding debt. This note examines the intertemporal solvency condition using a maximum likelihood cointegration test. Results show that the solvency condition for the US government is satisfied only if a break is included in the process.

Date: 1995
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DOI: 10.1080/135048595357339

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