Debt Sustainability, Structural Breaks and Non-linear Fiscal Adjustment: A Testing Application to Greek Fiscal Policy
AbstractNon-linear public debt adjustment and structural breaks in fiscal policy may affect tests of public debt sustainability. Existing studies address these issues separately. No study has considered both. We address this gap by focusing on Greece, one of the most highly-indebted EMU countries. We find evidence of previously undetected non-linear fiscal adjustment; and two structural breaks in fiscal policy. Excluding these from the analysis, or allowing for non-linearities only, affects the nature of the empirical findings. Accounting for both, we find Greek public debt to be sustainable.This is in contrast to the findings of previous studies on Greece.
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Bibliographic InfoPaper provided by Economics and Finance Section, School of Social Sciences, Brunel University in its series Economics and Finance Discussion Papers with number 04-01.
Length: 35 pages
Date of creation: Feb 2004
Date of revision:
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Postal: Brunel University, Uxbridge, Middlesex UB8 3PH, UK
Other versions of this item:
- Michael G. Arghyrou, 2004. "Debt Sustainability, Structural Breaks and Non-linear Fiscal Adjustment: A Testing Application to Greek Fiscal Policy," Public Policy Discussion Papers 04-01, Economics and Finance Section, School of Social Sciences, Brunel University.
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