Public Debt Stock Sustainability in Selected OECD Countries
Among the different criteria used for testing sustainability of public debt, the econometric approach determines whether a government is able to sustain its budget deficits without defaulting on its debt. In this contribution, by linking three different motives proposed respectively by Trehan and Walsh (1991), Hakkio and Rush (1991) and Bohn (1995), we develop a compact step-wise test algorithm and apply that to the European economies, including the PIIGS countries and Turkey. Secondly, we introduce phase-space reconstruction methodology in order to locate the path for debt dynamics, which enables us to observe fiscal policy implications in short and medium-term. We conclude that most economies are characterized by sustainable debt policies with the exception of Greece, Ireland, Portugal, Spain, and possibly United Kingdom. For the latter country, while the outcome of test algorithm indicates the sustainability of debt policy, phase-space examination shows that the reaction of the government to diverging debt stock GDP ratio cannot be sufficient to stabilize the path for debt dynamics.
Volume (Year): 13 (2013)
Issue (Month): 1 ()
|Contact details of provider:|| Postal: Head Office, Istiklal Cad. 10 Ulus, 06100 Ankara|
Phone: (90 312) 507 5000
Fax: (90 312) 507 5640
Web page: http://www.tcmb.gov.tr/
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Johansen, Soren, 1991. "Estimation and Hypothesis Testing of Cointegration Vectors in Gaussian Vector Autoregressive Models," Econometrica, Econometric Society, vol. 59(6), pages 1551-80, November.
- Hakkio, Craig S & Rush, Mark, 1991. "Is the Budget Deficit "Too Large?"," Economic Inquiry, Western Economic Association International, vol. 29(3), pages 429-45, July.
- Olivier Jean Blanchard, 1990. "Suggestions for a New Set of Fiscal Indicators," OECD Economics Department Working Papers 79, OECD Publishing.
- Antonio Afonso, 2004.
"Fiscal Sustainability: the Unpleasant European Case,"
Money Macro and Finance (MMF) Research Group Conference 2004
57, Money Macro and Finance Research Group.
- António Afonso, 2005. "Fiscal Sustainability: The Unpleasant European Case," FinanzArchiv: Public Finance Analysis, Mohr Siebeck, Tübingen, vol. 61(1), pages 19-, March.
- Wilcox, David W, 1989.
"The Sustainability of Government Deficits: Implications of the Present-Value Borrowing Constraint,"
Journal of Money, Credit and Banking,
Blackwell Publishing, vol. 21(3), pages 291-306, August.
- David W. Wilcox, 1987. "The substainability of government deficits: implications of the present- value borrowing constraint," Working Paper Series / Economic Activity Section 77, Board of Governors of the Federal Reserve System (U.S.).
- Enzo Croce & V. Hugo Juan-Ramon, 2003. "Assessing Fiscal Sustainability; A Cross-Country Comparison," IMF Working Papers 03/145, International Monetary Fund.
- Bohn, Henning, 1995.
"The Sustainability of Budget Deficits in a Stochastic Economy,"
Journal of Money, Credit and Banking,
Blackwell Publishing, vol. 27(1), pages 257-71, February.
- Bohn, H., 1990. "The Sutainability Of Budget Deficits In A Stochastic Economy," Weiss Center Working Papers 6-90, Wharton School - Weiss Center for International Financial Research.
- Wu, Jyh-lin, 1998. "Are budget deficits "too large"?: The evidence from Taiwan," Journal of Asian Economics, Elsevier, vol. 9(3), pages 519-528.
- Axel Dreher & Bernhard Herz & Volker Karb, 2005.
"Is There a Causal Link between Currency and Debt Crisis?,"
TWI Research Paper Series
3, Thurgauer Wirtschaftsinstitut, Universitï¿½t Konstanz.
- Axel Dreher & Bernhard Herz & Volker Karb, 2006. "Is there a causal link between currency and debt crises?," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 11(4), pages 305-325.
- Axel Dreher & Bernhard Herz & Volker Karb, 2004. "Is There a Causal Link between Currency and Debt Crises?," International Finance 0404005, EconWPA, revised 16 Feb 2005.
- Gael M. Martin, 2000.
"US deficit sustainability: a new approach based on multiple endogenous breaks,"
Journal of Applied Econometrics,
John Wiley & Sons, Ltd., vol. 15(1), pages 83-105.
- Martin, G.M., 1998. "U.S. Deficit Sustainability: A New Approach Based on Multiple Endogenous Breaks," Monash Econometrics and Business Statistics Working Papers 1/98, Monash University, Department of Econometrics and Business Statistics.
- Giancarlo Corsetti & Nouriel Roubini, 1991.
"Fiscal Deficits, Public Debt and Government Solvency: Evidence from OECD Countries,"
NBER Working Papers
3658, National Bureau of Economic Research, Inc.
- Corsetti, Giancarlo & Roubini, Nouriel, 1991. "Fiscal deficits, public debt, and government solvency: Evidence from OECD countries," Journal of the Japanese and International Economies, Elsevier, vol. 5(4), pages 354-380, December.
- Tanner, Evan & Liu, Peter, 1994. "Is the Budget Deficit "Too Large"?: Some Further Evidence," Economic Inquiry, Western Economic Association International, vol. 32(3), pages 511-18, July.
- Arghyrou, Michael G & Tsoukalas, John D., 2010.
"The Greek Debt Crisis: Likely Causes, Mechanics and Outcomes,"
Cardiff Economics Working Papers
E2010/3, Cardiff University, Cardiff Business School, Economics Section.
- Michael G. Arghyrou & John D. Tsoukalas, 2011. "The Greek Debt Crisis: Likely Causes, Mechanics and Outcomes," The World Economy, Wiley Blackwell, vol. 34(2), pages 173-191, 02.
- Michael G. Arghyrou & John D. Tsoukalas, 2010. "The Greek Debt Crisis: Likely Causes, Mechanics and Outcomes," CESifo Working Paper Series 3266, CESifo Group Munich.
- 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.
- Fincke Bettina & Greiner Alfred, 2011. "Debt Sustainability in Selected Euro Area Countries: Empirical Evidence Estimating Time-Varying Parameters," Studies in Nonlinear Dynamics & Econometrics, De Gruyter, vol. 15(3), pages 1-23, May.
- Engle, Robert & Granger, Clive, 2015.
"Co-integration and error correction: Representation, estimation, and testing,"
Publishing House "SINERGIA PRESS", vol. 39(3), pages 106-135.
- Engle, Robert F & Granger, Clive W J, 1987. "Co-integration and Error Correction: Representation, Estimation, and Testing," Econometrica, Econometric Society, vol. 55(2), pages 251-76, March.
- Eaton, Jonathan, 1989. "Foreign public capital flows," Handbook of Development Economics, in: Hollis Chenery & T.N. Srinivasan (ed.), Handbook of Development Economics, edition 1, volume 2, chapter 25, pages 1305-1386 Elsevier.
When requesting a correction, please mention this item's handle: RePEc:tcb:cebare:v:13:y:2013:i:1:p:31-49. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ()or () or ()
If references are entirely missing, you can add them using this form.