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Structual Break: Tests of the Present-Value Government Borrowing Constraint and Stability of Debt-GDP Ratio in the UK: 1970-2000

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  • Ghatak A.

Abstract

In this paper we argue that allowance for structural breaks (Perron, 1989, Zivot and Andrews, 1992) in the relevant time–series can provide more accurate tests of the present–value borrowing constraint (Hamilton and Flavin, 1986) by accommodating any changes in the processes generating budget deficits and alterations in fiscal policies. Our results confirm that the UK government has satisfied the present value constraint during the period 1992–2000.

Suggested Citation

  • Ghatak A., 2001. "Structual Break: Tests of the Present-Value Government Borrowing Constraint and Stability of Debt-GDP Ratio in the UK: 1970-2000," European Research Studies Journal, European Research Studies Journal, vol. 0(3-4), pages 37-54, July - De.
  • Handle: RePEc:ers:journl:v:iv:y:2001:i:3-4:p:37-54
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    More about this item

    Keywords

    Hamilton and Flavin Stationarity; Structural Breaks; Cointegration Stability Perron Zivot and Andrews;

    JEL classification:

    • H61 - Public Economics - - National Budget, Deficit, and Debt - - - Budget; Budget Systems
    • H62 - Public Economics - - National Budget, Deficit, and Debt - - - Deficit; Surplus
    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation, Validation, and Selection
    • O52 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Europe

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