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Fiscal shocks and budget balance persistence in the EU countries from Central and Eastern Europe

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  • Juan Carlos Cuestas

    ()

  • Karsten Staehr

    ()

Abstract

This paper analyses the time series properties of the fiscal balance in the 10 EU countries from Central and Eastern Europe. The persistence of shocks in the variable is analysed by means of unit root tests that account for the possibility of non-linearities and structural changes. The results of linear and non-linear unit root tests find only mild evidence in favour of the stationarity hypothesis, with asymmetric effects present in a few cases. After controlling for structural changes in the data generation process, the results point to stochastic stationarity of the series. Thus, in spite of relatively steady headline figures, the public balance processes exhibit substantial instability in the EU countries from Central and Eastern Europe

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Paper provided by Bank of Estonia in its series Bank of Estonia Working Papers with number wp2011-08.

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Date of creation: 13 Jul 2011
Date of revision: 13 Jul 2011
Handle: RePEc:eea:boewps:wp2011-08

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Keywords: unit roots; structural breaks; budget balance; EU;

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Cited by:
  1. Shahbaz, Muhammad & Mutascu, Mihai & Tiwari, Aviral Kumar, 2012. "Revisiting the Relationship between Electricity Consumption, Capital and Economic Growth: Cointegration and Causality Analysis in Romania," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 0(3), pages 97-120, September.

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