What We Really Know about Fiscal Sustainability in the EU? A Panel Data Diagnostic

Antonio Afonso and Christophe Rault

No 2007/20, Working Papers Department of Economics from ISEG - Lisbon School of Economics and Management, Department of Economics, Universidade de Lisboa

Abstract: We assess the sustainability of public finances in the EU15 over the period 1970-2006 using stationarity and cointegration analysis. Specifically, we use panel unit root tests of the first and second generation allowing in some cases for structural breaks. We also apply modern panel cointegration techniques developed by Pedroni (1999, 2004), generalized by Banerjee and Carrion-i-Silvestre (2006) and Westerlund and Edgerton (2007), to a structural long-run equation between general government expenditures and revenues. While estimations point to fiscal sustainability being an issue in some countries, fiscal policy was sustainable both for the EU15 panel set, and within subperiods (1970-1991 and 1992-2006).

Keywords: intertemporal budget constraint; fiscal sustainability; EU; panel unit root; panel cointegration. (search for similar items in EconPapers)
JEL-codes: C23 E62 H62 H63 (search for similar items in EconPapers)
Date: 2007
New Economics Papers: this item is included in nep-eec, nep-mac and nep-pbe
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (30)

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https://depeco.iseg.ulisboa.pt/wp/wp202007.pdf (application/pdf)

Related works:
Journal Article: What do we really know about fiscal sustainability in the EU? A panel data diagnostic (2010)
Working Paper: What do we really Know about Fiscal Sustainability in the EU? A Panel Data Diagnostic (2008)
Working Paper: What do we Really Know About Fiscal Sustainability in the EU? A Panel Data Diagnostic (2008)
Working Paper: What do we Really Know about Fiscal Sustainability in the EU? A Panel Data Diagnostic (2008)
Working Paper: What do we Really Know about Fiscal Sustainability in the EU? A Panel Data Diagnostic (2008)
Working Paper: What do we Really Know about Fiscal Sustainability in the EU? A Panel Data Diagnostic (2008)
Working Paper: What do we Really Know about Fiscal Sustainability in the EU? A Panel Data Diagnostic (2008)
Working Paper: What do we Really Know about Fiscal Sustainability in the EU ? A Panel Data Diagnostic (2008)
Working Paper: What do we really know about fiscal sustainability in the EU? A panel data diagnostic (2007)
Working Paper: What do we really know about fiscal sustainability in the EU? A panel data diagnostic (2007)
Working Paper: What do we really know about fiscal sustainability in the EU? A panel data diagnostic (2007)
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