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The determinants of public deficit volatility

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  • Agnello, Luca
  • Sousa, Ricardo M.

Abstract

This paper empirically analyzes the political, institutional and economic sources of public deficit volatility. Using the system-GMM estimator for linear dynamic panel data models and a sample of 125 countries analyzed from 1980 to 2006, we show that higher public deficit volatility is typically associated with higher levels of political instability and less democracy. In addition, public deficit volatility tends to be magnified for small countries, in the outcome of hyper-inflation episodes and for countries with a high degree of openness. JEL Classification: E31, E63

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Bibliographic Info

Paper provided by European Central Bank in its series Working Paper Series with number 1042.

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Date of creation: Apr 2009
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Handle: RePEc:ecb:ecbwps:20091042

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Keywords: institutions; political instability; public deficit; Volatility;

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References

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Citations

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Cited by:
  1. Luca Agnello & Ricardo M. Sousa, 2011. "Fiscal Consolidation and Income Inequality," NIPE Working Papers 34/2011, NIPE - Universidade do Minho.
  2. Anwar, Mumtaz & Ahmad, Munazza, 2012. "Political determinants of budget deficit in Pakistan: An empirical investigation," HWWI Research Papers 135, Hamburg Institute of International Economics (HWWI).
  3. L, Agnello. & R, M. Sousa., 2012. "How does Fiscal Consolidation Impact on Income Inequality?," Working papers 382, Banque de France.
  4. Eugenia-Ramona Mara, 2012. "Determinants of fiscal budget volatility in old versus new EU member states," Working Papers Department of Economics 2012/31, ISEG - School of Economics and Management, Department of Economics, University of Lisbon.
  5. Emilia Câmpeanu & Andreea Stoian, 2010. "Fiscal Policy Reaction in the Short Term for Assessing Fiscal Sustainability in the Long Runin Central and Eastern European Countries," Czech Journal of Economics and Finance (Finance a uver), Charles University Prague, Faculty of Social Sciences, vol. 60(6), pages 501-518, December.

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