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Government Solvency or just Pseudo-Sustainability? a Long-Run Multicointegration Approach for Spain

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Author Info

  • Regina Escario

    ()
    (Applied Economics Department. University of Zaragoza)

  • María Dolores Gadea

    (Applied Economics Department. University of Zaragoza)

  • Marcela Sabaté

    (Applied Economics Department. University of Zaragoza)

Abstract

The concept of multicointegration allows to test the sustainability of public finances by assessing dynamic equilibrium relationships between flow and stock variables. This paper focus on the very long-run Spanish case, characterized by the more or less intensive use of monetization to offset the recurrent deficits. The results support that seigniorage allowed the governments to guarantee –even artificially– a pseudo-sustainability for their budgetary path. Besides, the possibility of there being a structural break during the period is also taken into account.

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Bibliographic Info

Paper provided by Facultad de Ciencias Económicas y Empresariales, Universidad de Zaragoza in its series Documentos de Trabajo with number dt2009-07.

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Date of creation: Jul 2009
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Handle: RePEc:zar:wpaper:dt2009-07

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Keywords: deficit; seigniorage; sustainability; multicointegration;

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