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A longer-run perspective on fiscal sustainability

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  • António Afonso
  • João Jalles

Abstract

We investigate the sustainability of fiscal policy in a set of 19 countries by taking a longer-run secular perspective over the period 1880–2009. Via a systematic analysis of the stationarity of the first-differenced level of government debt, and disentangling the components of the debt series using structural time series models, we conclude that since in most cases non-stationarity can be rejected, longer-run fiscal sustainability is not rejected (Japan and Spain can be exceptions). The same is true for a panel analysis when allowing for multiple structural breaks, and for cross-country dependence. In addition, endogenously identified breaks can be related to episodes of sovereign default. Copyright Springer Science+Business Media New York 2014

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  • António Afonso & João Jalles, 2014. "A longer-run perspective on fiscal sustainability," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 41(4), pages 821-847, November.
    • Handle: RePEc:kap:empiri:v:41:y:2014:i:4:p:821-847
    DOI: 10.1007/s10663-013-9240-0
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