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Mean Reversion Of The Fiscal Conduct In 24 Developing Countries

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  • AHMAD ZUBAIDI BAHARUMSHAH
  • EVAN LAU

Abstract

In this paper, we examine the mean reverting behaviour of fiscal deficit by analysing the fiscal position of 24 developing countries. Using annual data over the period 1970-2003 and the series-specific panel unit root test developed by Breuer et al. (Oxford Bulletin of Economics and Statistics, Vol. 64 (2002), pp. 527-546), we found the budget process for most developing countries fails to satisfy the strong-form sustainability condition. Further investigation shows the budget process for a majority of the countries is on a sustainable path (weak form) when a one-time, structural break is allowed in the model. Therefore, our empirical results suggest that the budget process in most of the sample countries is in accordance with the intertemporal budget constraint. Copyright © 2010 The Authors. Journal compilation © 2010 Blackwell Publishing Ltd and The University of Manchester.

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  • Ahmad Zubaidi Baharumshah & Evan Lau, 2010. "Mean Reversion Of The Fiscal Conduct In 24 Developing Countries," Manchester School, University of Manchester, vol. 78(4), pages 302-325, July.
  • Handle: RePEc:bla:manchs:v:78:y:2010:i:4:p:302-325
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    Cited by:

    1. Chin-Hong Puah Author_Email: chpuah@feb.unimas.my & Evan Lau & Hui-Fern Teo, 2011. "Testing Budget Sustainability In Sarawak State," 2nd International Conference on Business and Economic Research (2nd ICBER 2011) Proceeding 2011-221, Conference Master Resources.
    2. Ching-Chuan Tsong & Cheng-Feng Lee & Li-Ju Tsai & Te-Chung Hu, 2016. "The Fourier approximation and testing for the null of cointegration," Empirical Economics, Springer, vol. 51(3), pages 1085-1113, November.

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