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Modelling the Fiscal Reaction Functions of the GIPS based on State-Varying Thresholds

Gabriella Legrenzi () and Costas Milas ()

Working Paper series from Rimini Centre for Economic Analysis

Abstract: We extend previous literature on fiscal policy sustainability by introducing non-linear fiscal reaction functions with endogenously estimated state-varying thresholds to capture the behaviour of fiscal policy authorities during "good" and "bad" times. These thresholds vary with the level of debt, the economic cycle and an index of financial pressure.

Keywords: Debt sustainability; fiscal reaction function; state-varying threshold (search for similar items in EconPapers)
JEL-codes: C2 H3 H5 (search for similar items in EconPapers)
Date: 2013-02
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http://www.rcea.org/RePEc/pdf/wp16_13.pdf (application/pdf)

Related works:
Journal Article: Modelling the fiscal reaction functions of the GIPS based on state-varying thresholds (2013) Downloads
Working Paper: Modelling the Fiscal Reaction Functions of the GIPS Based on State-Varying Thresholds (2013) Downloads
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