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Sustainability of Portuguese Fiscal Policy in Historical Perspective

Carlos Marinheiro

No 32, Working Papers de Economia (Economics Working Papers) from Departamento de Economia, Gestão e Engenharia Industrial, Universidade de Aveiro

Abstract: This paper analyses the sustainability of Portuguese public finances, making use of a long dataset with more than a full century of observations. The use of such a long dataset is appropriate because both unit root and cointegration tests require a long period of data. The sustainability testing procedure is based on unit root and cointegration tests. We find considerable evidence in favour of sustainability for the 1903-2003 period. The overall conclusion of sustainability for the 1903-2003 period is not maintained for the more recent 1975-2003 period, which is characterised by the largest GDP deficit ratios of our sample. This latter period appears to signal a shift to an unsustainable path in Portuguese fiscal policy. Hence, our results suggest that fiscal consolidation efforts must, in fact, be continued in Portugal.

Keywords: Fiscal sustainability; sustainability of public debt; intertemporal budget constraint; government deficits and debt; Portugal (search for similar items in EconPapers)
JEL-codes: E60 H60 (search for similar items in EconPapers)
Pages: 30 pages
Date: 2005-12
New Economics Papers: this item is included in nep-his, nep-mac and nep-pbe
References: View references in EconPapers View complete reference list from CitEc
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