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Intertemporal solvency and breaks in the US deficit process: a maximum-likelihood cointegration approach

  • Peter Liu
  • Evan Tanner
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    Previous research has shown that the intertemporal solvency condition is equivalent to the cointegration of either (1) the interest-inclusive government spendings and tax revenue or (2) the interest-exclusive government spendings, tax revenue and government outstanding debt. This note examines the intertemporal solvency condition using a maximum likelihood cointegration test. Results show that the solvency condition for the US government is satisfied only if a break is included in the process.

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    Article provided by Taylor & Francis Journals in its journal Applied Economics Letters.

    Volume (Year): 2 (1995)
    Issue (Month): 7 ()
    Pages: 231-235

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    Handle: RePEc:taf:apeclt:v:2:y:1995:i:7:p:231-235
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