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Is the Government's intertemporal budget constraint fulfilled in Sweden? An application of the Kalman filter

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  • Abdulnasser Hatemi-J

Abstract

This paper deals with the issue of whether the Government complies with its budget constraint for the case of Sweden during the period 1963-2000 using quarterly data. It is found that government spending and government revenue are nonstationary (integrated) but cointegrated. A random coefficient model against a fixed coefficient model is also tested for. The results show that the random coefficient model, which is nonlinear, is preferred to the linear fixed parameter model. This model, which takes into account the Lucas critique, is estimated by the Kalman filter and it provides further empirical evidence that the government follows its intertemporal budget restriction.

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  • Abdulnasser Hatemi-J, 2002. "Is the Government's intertemporal budget constraint fulfilled in Sweden? An application of the Kalman filter," Applied Economics Letters, Taylor & Francis Journals, vol. 9(7), pages 433-439.
    • Handle: RePEc:taf:apeclt:v:9:y:2002:i:7:p:433-439
    DOI: 10.1080/13504850110086792
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    1. Harvey,Andrew C., 1991. "Forecasting, Structural Time Series Models and the Kalman Filter," Cambridge Books, Cambridge University Press, number 9780521405737.
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    Cited by:

    1. Taha Bahadir Sarac & OkYAY Ucan, 2013. "The Interest Rate Channel in Turkey: An Investigation with Kalman Filter Approach," International Journal of Economics and Financial Issues, Econjournals, vol. 3(4), pages 874-884.
    2. Ibrahim Arisoy, 2013. "Testing for the Fisher Hypothesis under Regime Shifts in Turkey: New Evidence from Time-Varying Parameters," International Journal of Economics and Financial Issues, Econjournals, vol. 3(2), pages 496-502.
    3. Abdulnasser Hatemi-J & Eduardo Roca, 2006. "Calculating the optimal hedge ratio: constant, time varying and the Kalman Filter approach," Applied Economics Letters, Taylor & Francis Journals, vol. 13(5), pages 293-299.
    4. Miyazaki, Tomomi, 2014. "Fiscal reform and fiscal sustainability: Evidence from Australia and Sweden," International Review of Economics & Finance, Elsevier, vol. 33(C), pages 141-151.
    5. Abdulnasser Hatemi-J & R. Scott Hacker, 2007. "Capital mobility in Sweden: a time-varying parameter approach," Applied Economics Letters, Taylor & Francis Journals, vol. 14(15), pages 1115-1118.
    6. Anne Neumann & Boriss Siliverstovs & Christian von Hirschhausen, 2006. "Convergence of European spot market prices for natural gas? A real-time analysis of market integration using the Kalman Filter," Applied Economics Letters, Taylor & Francis Journals, vol. 13(11), pages 727-732.

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