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Structural Breaks and Nonlinearity in US and UK Public Debt

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  • Fredj Jawadi

    ()
    (University of Evry Val d’Essone & Amiens School of Management)

  • Ricardo M. Sousa

    ()
    (Universidade do Minho - NIPE)

Abstract

This paper investigates the short-term dynamics for public debts in the US and the UK over more than four decades. We check for structural changes in the data and assess nonlinearity and switching-regime hypotheses using several linearity tests. Our findings point to multiple structural breaks due to economic downturns, oil shocks, and financial and political instability. We also identify different regimes for which the adjustment is asymmetric and nonlinear, in particular, since 2003 and around the Great Recession.

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File URL: http://www3.eeg.uminho.pt/economia/nipe/docs/2012/NIPE_WP_25_2012.pdf
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Bibliographic Info

Paper provided by NIPE - Universidade do Minho in its series NIPE Working Papers with number 25/2012.

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Date of creation: 2012
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Handle: RePEc:nip:nipewp:25/2012

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Postal: Núcleo de Investigação em Políticas Económicas, Escola de Economia e Gestão, Universidade do Minho, P-4710-057 Braga, Portugal
Phone: +351-253604510 ext 5532
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Web page: http://www3.eeg.uminho.pt/economia/nipe/versao_inglesa/index_uk.htm
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Keywords: Public debt; structural breaks; nonlinearity.;

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  1. Hansen, B.E., 1991. "Inference when a Nuisance Parameter is Not Identified Under the Null Hypothesis," RCER Working Papers 296, University of Rochester - Center for Economic Research (RCER).
  2. Luca Agnello & Vitor Castro & Ricardo M. Sousa, 2011. "How Does Fiscal Policy React to Wealth Composition and Asset Prices?," GEMF Working Papers 2011-18, GEMF - Faculdade de Economia, Universidade de Coimbra.
  3. Eric Zivot & Donald W.K. Andrews, 1990. "Further Evidence on the Great Crash, the Oil Price Shock, and the Unit Root Hypothesis," Cowles Foundation Discussion Papers 944, Cowles Foundation for Research in Economics, Yale University.
  4. Agnello, L. & Sousa, R., 2011. "Can Fiscal Policy Stimulus Boost Economic Recovery?," Working papers 325, Banque de France.
  5. Jushan Bai & Pierre Perron, 1998. "Estimating and Testing Linear Models with Multiple Structural Changes," Econometrica, Econometric Society, vol. 66(1), pages 47-78, January.
  6. Ricardo M. Sousa & António Afonso, 2008. "The Macroeconomic Effects of Fiscal Policy," NIPE Working Papers 22/2008, NIPE - Universidade do Minho.
  7. Ricardo M. Sousa, 2012. "Wealth-to-income ratio, government bond yields and financial stress in the Euro Area," Applied Economics Letters, Taylor & Francis Journals, vol. 19(11), pages 1085-1088, July.
  8. Jushan Bai & Pierre Perron, 2003. "Computation and analysis of multiple structural change models," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 18(1), pages 1-22.
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Cited by:
  1. Cooray, Arusha & Paradiso, Antonio & Truglia, Francesco Giovanni, 2013. "Do countries belonging to the same region suggest the same growth enhancing variables? Evidence from selected South Asian countries," Economic Modelling, Elsevier, vol. 33(C), pages 772-779.
  2. Gnegne, Yacouba & Jawadi, Fredj, 2013. "Boundedness and nonlinearities in public debt dynamics: A TAR assessment," Economic Modelling, Elsevier, vol. 34(C), pages 154-160.

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