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Panel cointegration tests of the sustainability hypothesis in rich OECD countries

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  • Joakim Westerlund
  • Silika Prohl

Abstract

This study reexamines the sustainability hypothesis by testing whether government revenues and expenditures for eight rich OECD countries between 1977Q1 and 2005Q4 are cointegrated. For this purpose, a nonstationary panel data approach is adopted, which is general enough to permit for cross-country dependence as well as structural breaks representing major shifts in fiscal policy. In contrast to many earlier studies, the results reported in this study suggest that the sustainability hypothesis cannot be rejected.

Suggested Citation

  • Joakim Westerlund & Silika Prohl, 2010. "Panel cointegration tests of the sustainability hypothesis in rich OECD countries," Applied Economics, Taylor & Francis Journals, vol. 42(11), pages 1355-1364.
    • Handle: RePEc:taf:applec:v:42:y:2010:i:11:p:1355-1364
    DOI: 10.1080/00036840701721323
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    References listed on IDEAS

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