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Uk Debt Sustainability: Some Nonlinear Evidence And Theoretical Implications

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Author Info
JOHN CONSIDINE
LIAM A. GALLAGHER

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Abstract

In this paper we assess whether the UK public finances were sustainable for the period 1919-2001. A robust test of sustainability is presented using a nonlinear representation of the debt-GDP ratio. Empirical evidence supports debt sustainability. Moreover, the exponential smooth transition autoregressive representation is evidence that sustainability is the result of active debt management rather than tax smoothing. The results strongly support the active debt management hypothesis for the UK. Copyright © 2008 The Authors.

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File URL: http://www.blackwell-synergy.com/doi/abs/10.1111/j.1467-9957.2008.01062.x
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Publisher Info
Article provided by University of Manchester in its journal Manchester School.

Volume (Year): 76 (2008)
Issue (Month): 3 (06)
Pages: 320-335
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Handle: RePEc:bla:manchs:v:76:y:2008:i:3:p:320-335

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  3. Barro, Robert J, 1979. "On the Determination of the Public Debt," Journal of Political Economy, University of Chicago Press, vol. 87(5), pages 940-71, October. [Downloadable!] (restricted)
  4. Wilcox, David W, 1989. "The Sustainability of Government Deficits: Implications of the Present-Value Borrowing Constraint," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 21(3), pages 291-306, August. [Downloadable!] (restricted)
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  5. James D. Hamilton & Marjorie A. Flavin, 1985. "On the Limitations of Government Borrowing: A Framework for Empirical Testing," NBER Working Papers 1632, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  6. Alan J. Auerbach & Jagadeesh Gokhale & Laurence J. Kotlikoff, 1995. "Restoring generational balance in U.S. fiscal policy: what will it take?," Economic Review, Federal Reserve Bank of Cleveland, issue Q I, pages 2-12. [Downloadable!]
  7. Eitrheim, Oyvind & Terasvirta, Timo, 1996. "Testing the adequacy of smooth transition autoregressive models," Journal of Econometrics, Elsevier, vol. 74(1), pages 59-75, September. [Downloadable!] (restricted)
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  8. Bharat Trehan & Carl E. Walsh, 1988. "Testing intertemporal budget constraints: theory and applications to U. S. federal budget and current account deficits," Working Papers in Applied Economic Theory 88-03, Federal Reserve Bank of San Francisco.
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  9. Barro, Robert J, 1986. " U.S. Deficits since World War I," Scandinavian Journal of Economics, Blackwell Publishing, vol. 88(1), pages 195-22.
  10. Cooley, Thomas F & Ohanian, Lee E, 1997. "Postwar British Economic Growth and the Legacy of Keynes," Journal of Political Economy, University of Chicago Press, vol. 105(3), pages 439-72, June.
  11. Ohanian, Lee E, 1997. "The Macroeconomic Effects of War Finance in the United States: World War II and the Korean War," American Economic Review, American Economic Association, vol. 87(1), pages 23-40, March. [Downloadable!] (restricted)
  12. White, Halbert, 1980. "A Heteroskedasticity-Consistent Covariance Matrix Estimator and a Direct Test for Heteroskedasticity," Econometrica, Econometric Society, vol. 48(4), pages 817-38, May. [Downloadable!] (restricted)
  13. Olivier Jean Blanchard, 1990. "Suggestions for a New Set of Fiscal Indicators," OECD Economics Department Working Papers 79, OECD, Economics Department. [Downloadable!]
  14. Sarno, Lucio, 2001. "The behavior of US public debt: a nonlinear perspective," Economics Letters, Elsevier, vol. 74(1), pages 119-125, December. [Downloadable!] (restricted)
  15. Auerbach, Alan J & Gokhale, Jagadeesh & Kotlikoff, Laurence J, 1992. " Generational Accounting: A New Approach to Understanding the Effects of Fiscal Policy on Saving," Scandinavian Journal of Economics, Blackwell Publishing, vol. 94(2), pages 303-18.
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  16. Auerbach, Alan J & Gokhale, Jagadeesh & Kotlikoff, Laurence J, 1994. "Generational Accounting: A Meaningful Way to Evaluate Fiscal Policy," Journal of Economic Perspectives, American Economic Association, vol. 8(1), pages 73-94, Winter. [Downloadable!] (restricted)
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