Fiscal policy sustainability: some unpleasant European evidence

Antonio Afonso

No 2000/12, Working Papers Department of Economics from ISEG - Lisbon School of Economics and Management, Department of Economics, Universidade de Lisboa

Abstract: The sustainability of fiscal deficits has been receiving increasing attention from economists. The issue is paramount for the newly formed Euro area and this is one of the motivations of the paper. In order to assess the sustainability of budget deficits in the Euro area, stationarity tests for the stock of public debt and co-integration tests between public expenditures and public revenues are performed for the Euro countries for the 1968-1997 period. The empirical results allow us to conclude that fiscal policy may not be sustainable for most countries with the possible exceptions of Germany, Austria and the Netherlands.

Keywords: Deficit finance; inter-temporal budget constraint; fiscal policy sustainability; Euro area (search for similar items in EconPapers)
JEL-codes: E60 H62 H63 (search for similar items in EconPapers)
Date: 2000
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Citations: View citations in EconPapers (15)

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Persistent link: https://EconPapers.repec.org/RePEc:ise:isegwp:wp122000

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