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What do we really know about fiscal sustainability in the EU? A panel data diagnostic

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Author Info
António Afonso (BCE - Banque Centrale Européenne - BCE)
Christophe Rault () (LEO - Laboratoire d'économie d'Orleans - CNRS : UMR6221 - Université d'Orléans)

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Abstract

We assess the sustainability of public finances in the EU15 using stationarity and cointegration analysis. Specifically, we use panel unit root tests of the first and second generation allowing in some cases for structural breaks. We also apply modern panel cointegration techniques developed by Pedroni (1999, 2004), generalized by Banerjee and Carrion-i-Silvestre (2006) and Westerlund and Edgerton (2007), to a structural long-run equation between general government expenditures and revenues. While sustainability may be lacking in individual cases, fiscal policy was overall sustainable both for the EU15 panel set, and within some sub-periods.

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Paper provided by HAL in its series Working Papers with number hal-00322091_v1.

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Date of creation: 01 May 2007
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Keywords: intertemporal budget constraint; fiscal sustainability; EU; panel unit root; panel cointegration.;

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Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. António Afonso & Christophe Rault, 2008. "3-Step Analysis of Public Finances Sustainability: the Case of the European Union," Working Papers 2008/35, Department of Economics at the School of Economics and Management (ISEG), Technical University of Lisbon.. [Downloadable!]
    Other versions:
  2. Lars P. Feld & Christoph A. Schaltegger, 2009. "Political Stability and Fiscal Policy - Time Series Evidence for the Swiss Federal Level since 1849," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
  3. António Afonso, 2009. "Neck, R. and Sturm, J.-E. (eds.): Sustainability of public debt," Journal of Economics, Springer, vol. 97(1), pages 95-96, May. [Downloadable!] (restricted)
  4. António Afonso & Luca Agnello & Davide Furceri & Ricardo M. Sousa, 2009. "Assessing Long-Term Fiscal Developments: a New Approach," Working Papers 2009/19, Department of Economics at the School of Economics and Management (ISEG), Technical University of Lisbon.. [Downloadable!]
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  5. António Afonso & Christophe Rault, 2009. "Spend-and-tax: A Panel Data Investigation for the EU," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
  6. Ricardo M. Sousa & António Afonso, 2009. "Assessing Long-Term Fiscal Developments: Evidence from Portugal," NIPE Working Papers 1/2009, NIPE - Universidade do Minho. [Downloadable!]
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  7. António Afonso & Christophe Rault, 2009. "Budgetary and External Imbalances Relationship: A Panel Data Diagnostic," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
    Other versions:
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