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Government Solvency or just Pseudo-Sustainability? a Long-Run Multicointegration Approach for Spain

Regina Escario (), María Gadea () and Marcela Sabate ()

Documentos de Trabajo from Facultad de Ciencias Económicas y Empresariales, Universidad de Zaragoza

Abstract: The concept of multicointegration allows to test the sustainability of public finances by assessing dynamic equilibrium relationships between flow and stock variables. This paper focus on the very long-run Spanish case, characterized by the more or less intensive use of monetization to offset the recurrent deficits. The results support that seigniorage allowed the governments to guarantee –even artificially– a pseudo-sustainability for their budgetary path. Besides, the possibility of there being a structural break during the period is also taken into account.

Keywords: deficit; seigniorage; sustainability; multicointegration (search for similar items in EconPapers)
JEL-codes: E5 H6 N1 (search for similar items in EconPapers)
Date: 2009-07
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Persistent link: https://EconPapers.repec.org/RePEc:zar:wpaper:dt2009-07

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