Debt Sustainability in Selected Euro Area Countries: Empirical Evidence Estimating Time-Varying Parameters
Testing for sustainability of public debt by analyzing how the primary surplus reacts to variations in debt, as suggested by Bohn (1998), has received great attention in economics literature. In this contribution, we apply that test to some countries of the euro area, including the PIIGS countries, where we allow for a time-varying reaction coefficient. We conclude that most economies are characterized by sustainable debt policies with the exception of Greece and possibly Italy. While Greece has clearly pursued an unsustainable debt policy, no clear-cut result can be obtained for Italy. For the latter country, the outcome crucially depends on the time period under consideration.
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Volume (Year): 15 (2011)
Issue (Month): 3 (May)
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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.:
- Ruppert,David & Wand,M. P. & Carroll,R. J., 2003. "Semiparametric Regression," Cambridge Books, Cambridge University Press, number 9780521785167, December.
- Joakim Westerlund & Silika Prohl, 2010. "Panel cointegration tests of the sustainability hypothesis in rich OECD countries," Applied Economics, Taylor & Francis Journals, vol. 42(11), pages 1355-1364.
- Ruppert,David & Wand,M. P. & Carroll,R. J., 2003. "Semiparametric Regression," Cambridge Books, Cambridge University Press, number 9780521780506, December.
- Greiner, Alfred & Kauermann, Göran, 2008. "Debt policy in euro area countries: Evidence for Germany and Italy using penalized spline smoothing," Economic Modelling, Elsevier, vol. 25(6), pages 1144-1154, November.
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