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Fiscal Sustainability in Flow Model: Panel Cointegration Approach for the EU-28

Author

Listed:
  • Radmila Dragutinović Mitrović

    () (University of Belgrade)

  • Olgica GlavaÅ¡ki

    () (University of Novi Sad)

  • Emilija Beker Pucar

    () (University of Novi Sad)

Abstract

This paper assesses fiscal sustainability in 28 European Union economies in the period 1995- 2018, using panel cointegration analysis for fiscal sustainability testing. The research is based on econometric framework of nonstationary, heterogeneous, and cross-sectional dependent panels, using robust Westerlund (2007) panel cointegration test, Mean Group, and Pooled Mean Group method of estimations. The results of cointegration analysis for EU-28 point to weak fiscal sustainability, with significant fiscal adjustment in average. However, heterogeneous coefficients show in which economies fiscal sustainability is achieved (whether it is strong or weak fiscal sustainability) and heterogeneous fiscal reactions. Robustness check confirmed existence of fiscal sustainability with heterogeneous fiscal adjustments in European Union economies, and indicated strong fiscal sustainability in the shorter period of time, namely after 1997 when Stability and Growth Pact is introduced.

Suggested Citation

  • Radmila Dragutinović Mitrović & Olgica GlavaÅ¡ki & Emilija Beker Pucar, 2019. "Fiscal Sustainability in Flow Model: Panel Cointegration Approach for the EU-28," Ovidius University Annals, Economic Sciences Series, Ovidius University of Constantza, Faculty of Economic Sciences, vol. 0(1), pages 15-24, August.
  • Handle: RePEc:ovi:oviste:v:xix:y:2019:i:1:p:15-24
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    Fiscal sustainability; Flow models; Panel cointegration; EU-28;

    JEL classification:

    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • H50 - Public Economics - - National Government Expenditures and Related Policies - - - General
    • H62 - Public Economics - - National Budget, Deficit, and Debt - - - Deficit; Surplus

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