Testing Sustainability of German Fiscal Policy. Evidence for the Period 1960 – 2003
AbstractIn this paper we test whether German public debt has been sustainable by resorting to a test proposed by Bohn (1998). We apply non-parametric and semi-parametric regressions with time depending coefficients. This test shows that the mean of the coefficient relevant for sustainability has been significantly positive over the time period considered. However, there is a negative trend in that coefficient which seems to have ceased to decline only in the middle to late 1990s. Further, we find evidence that the response of the primary deficit is a U-shaped function of the debt ratio which first declines and then rises after a certain threshold of the debt ratio is exceeded.
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Bibliographic InfoPaper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 1386.
Date of creation: 2005
Date of revision:
public debt; intertemporal budget constraint; varying coefficient model; non-parametric estimation;
This paper has been announced in the following NEP Reports:
- NEP-ALL-2005-02-06 (All new papers)
- NEP-HIS-2005-02-06 (Business, Economic & Financial History)
- NEP-MAC-2005-02-06 (Macroeconomics)
- NEP-PBE-2005-02-06 (Public Economics)
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