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Should we care for structural breaks when assessing fiscal sustainability?

  • Christophe Rault

    ()

    (Université d'Orléans, LEO, CNRS, UMR 6221, France IZA, Germany and William Davidson Institute at the University of Michigan, USA,)

  • António Afonso

    ()

    (ISEG/TULisbon - Technical University of Lisbon, Department of Economics UECE)

We apply recent panel cointegration methods to a structural equation between government expenditure and revenue. Allowing for multiple endogenous breaks and after computing appropriate bootstrap critical values, we conclude for fiscal sustainability in the overall EU15 panel.We apply recent panel cointegration methods to a structural equation between government expenditure and revenue. Allowing for multiple endogenous breaks and after computing appropriate bootstrap critical values, we conclude for fiscal sustainability in the overall EU15 panel.

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Article provided by AccessEcon in its journal Economics Bulletin.

Volume (Year): 3 (2007)
Issue (Month): 63 ()
Pages: 1-9

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Handle: RePEc:ebl:ecbull:eb-07c20154
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  8. Kaddour Hadri, 2000. "Testing for stationarity in heterogeneous panel data," Econometrics Journal, Royal Economic Society, vol. 3(2), pages 148-161.
  9. Westerlund, Joakim & Edgerton, David L., 2007. "A panel bootstrap cointegration test," Economics Letters, Elsevier, vol. 97(3), pages 185-190, December.
  10. 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.
  11. Pedroni, Peter, 2004. "Panel Cointegration: Asymptotic And Finite Sample Properties Of Pooled Time Series Tests With An Application To The Ppp Hypothesis," Econometric Theory, Cambridge University Press, vol. 20(03), pages 597-625, June.
  12. Anindya Banerjee & Josep Lluís Carrion-i-Silvestre, 2006. "Cointegration in Panel Data with Breaks and Cross-Section Dependence," Economics Working Papers ECO2006/5, European University Institute.
  13. Julia Campos & Neil R. Ericsson & David F. Hendry, 1993. "Cointegration tests in the presence of structural breaks," International Finance Discussion Papers 440, Board of Governors of the Federal Reserve System (U.S.).
  14. Quintos, Carmela E, 1995. "Sustainability of the Deficit Process with Structural Shifts," Journal of Business & Economic Statistics, American Statistical Association, vol. 13(4), pages 409-17, October.
  15. Silika Prohl & Friedrich G. Schneider, 2006. "Sustainability of Public Debt and Budget Deficit: Panel cointegration analysis for the European Union Member countries," Economics working papers 2006-10, Department of Economics, Johannes Kepler University Linz, Austria.
  16. Haug, Alfred A, 1991. "Cointegration and Government Borrowing Constraints: Evidence for the United States," Journal of Business & Economic Statistics, American Statistical Association, vol. 9(1), pages 97-101, January.
  17. Hakkio, Craig S & Rush, Mark, 1991. "Is the Budget Deficit "Too Large?"," Economic Inquiry, Western Economic Association International, vol. 29(3), pages 429-45, July.
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