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Fiscal policy sustainability: test of intertemporal borrowing constraints

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  • Huseyin Kalyoncu

Abstract

This paper examines sustainability of the fiscal stances of South Korea, Mexico, the Philippines, South Africa and Turkey. Using the usual intertemporal borrowing constraint, we have tested for a long-run relationship between revenue and expenditure plus interest payments. In our empirical analysis of the sustainability of fiscal stances, cointegration approaches have been used. Empirical results suggest that there exists a unique long-run or equilibrium relationship among variables for South Korea and Turkey. The cointegration results suggest that the Turkish and South Korean fiscal stances satisfy the weak sustainability condition. In the case of Mexico, the Philippines and South Africa cointegration results suggest that in these countries the fiscal stance is not sustainable (and violates their intertemporal budget constraints) in the long run.

Suggested Citation

  • Huseyin Kalyoncu, 2005. "Fiscal policy sustainability: test of intertemporal borrowing constraints," Applied Economics Letters, Taylor & Francis Journals, vol. 12(15), pages 957-962.
  • Handle: RePEc:taf:apeclt:v:12:y:2005:i:15:p:957-962 DOI: 10.1080/13504850500119104
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    References listed on IDEAS

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    Cited by:

    1. Meltem Ucal & Asli Alici, 2010. "Is Fiscal Policy Sustainable in Turkey?," Emerging Markets Finance and Trade, M.E. Sharpe, Inc., vol. 46(0), pages 83-93, May.
    2. Andrea Silvestrini, 2010. "Testing fiscal sustainability in Poland: a Bayesian analysis of cointegration," Empirical Economics, Springer, pages 241-274.
    3. Vasco Gabriel & Pataaree Sangduan, 2011. "Assessing fiscal sustainability subject to policy changes: a Markov switching cointegration approach," Empirical Economics, Springer, pages 371-385.
    4. Chen, Shyh-Wei, 2014. "Testing for fiscal sustainability: New evidence from the G-7 and some European countries," Economic Modelling, Elsevier, vol. 37(C), pages 1-15.
    5. Kalyoncu, Huseyin & Yucel, Fatih, 2005. "An analytical approach on defense expenditure and economic growth: the case of Turkey and Greece," MPRA Paper 4262, University Library of Munich, Germany, revised 2006.
    6. Vasco Gabriel & Pataaree Sangduan, 2011. "Assessing fiscal sustainability subject to policy changes: a Markov switching cointegration approach," Empirical Economics, Springer, pages 371-385.
    7. Chin-Hong Puah Author_Email: chpuah@feb.unimas.my & Evan Lau & Hui-Fern Teo, 2011. "Testing Budget Sustainability In Sarawak State," 2nd International Conference on Business and Economic Research (2nd ICBER 2011) Proceeding 2011-221, Conference Master Resources.
    8. repec:gam:jsusta:v:9:y:2017:i:10:p:1928-:d:116275 is not listed on IDEAS

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