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Sustainability of 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 Americancountries for the period 1960 - 2009: Argentina, Chile, Colombia, Ecuador, Panama, Peru, Paraguayand Uruguay. Using second generation cointegration panel data models, we test whether governmentrevenues and primary expenditures are sustainable in the long run. This methodology allowsfor cross-sectional dependence among countries and is appropriate under the existence of potentialstructural breaks. We found empirical evidence of sustainability of the primary deficit for theseLatin American countries but only in a weak sense.

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Bibliographic Info

Paper provided by BANCO DE LA REPÚBLICA in its series BORRADORES DE ECONOMIA with number 009106.

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Length: 16
Date of creation: 12 Dec 2011
Date of revision:
Handle: RePEc:col:000094:009106

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Related research

Keywords: Fiscal Sustainability; Panel Unit Root tests; Panel Cointegration tests; Structural Change.;

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  1. António Afonso, 2005. "Fiscal Sustainability: The Unpleasant European Case," FinanzArchiv: Public Finance Analysis, Mohr Siebeck, Tübingen, vol. 61(1), pages 19-, March.
  2. Ignacio Lozano & Enrique Cabrera, . "Una nota sobre la sostenibilidad fiscal y el nexo entre los ingresos y gastos del Gobierno Colombiano," Borradores de Economia 579, Banco de la Republica de Colombia.
  3. António Afonso & Christophe Rault, 2010. "What do we really know about fiscal sustainability in the EU? A panel data diagnostic," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 145(4), pages 731-755, January.
  4. Suzanne McCoskey & Chihwa Kao, 1998. "A residual-based test of the null of cointegration in panel data," Econometric Reviews, Taylor & Francis Journals, vol. 17(1), pages 57-84.
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