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How Sustainable are Latin American Fiscal Deficits: A Panel Data Approach

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  • Jacobo Campo Robledo
  • Luis Fernando Melo Velandia

Abstract

This paper evaluates the fiscal sustainability hypothesis for eight Latin American countries, Argentina, Chile, Colombia, Ecuador, Panama, Peru, Paraguay and Uruguay, during the period 1960 - 2009. Using second generation cointegration panel data models, we test whether Government revenues and primary expenditures are sustainable in the long-run. This methodology allows for cross-sectional dependence among countries and is also appropriated under the existence of potential structural breaks. We found empirical evidence of sustainability of the primary deficit for these Latin American countries but only in a weak sense.

Suggested Citation

  • Jacobo Campo Robledo & Luis Fernando Melo Velandia, 2011. "How Sustainable are Latin American Fiscal Deficits: A Panel Data Approach," Borradores de Economia 679, Banco de la Republica de Colombia.
    • Handle: RePEc:bdr:borrec:679
    DOI: 10.32468/be.679
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    References listed on IDEAS

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    More about this item

    Keywords

    Fiscal Sustainability; Panel Unit Root tests; Panel Cointegration tests; Structural Change.;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • H62 - Public Economics - - National Budget, Deficit, and Debt - - - Deficit; Surplus

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