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Testing fiscal sustainability in Poland: a Bayesian analysis of cointegration

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  • SILVESTRINI, Andrea

    (Université catholique de Louvain (UCL). Center for Operations Research and Econometrics (CORE))

Abstract

Fiscal sustainability is a central topic for most of the transition economies of Eastern Europe. This paper focuses on a particular country: Poland. The main purpose is to investigate, empirically, whether the post-transition fiscal policy is consistent with the intertemporal budget constraint, used as a formal theorical framework. To test debt stabilization, the empirical analysis is made in two steps, in which different inferential approaches are adopted. In the first step we perform the preliminary unit roots analysis and the selection of the cointegration rank using parametric and bootstrap procedures. In the second step we apply Bayesian inference to the estimation of the cointegrating vector and of the adjustment parameters. In this way, we experiment the usefulness of Bayesian inference in precisely assessing the magnitude of the cointegrating vector. Moreover, we show to what extent the likehood of the data is important in revising the available prior information, relying on numerical integration techniques.

Suggested Citation

  • SILVESTRINI, Andrea, 2007. "Testing fiscal sustainability in Poland: a Bayesian analysis of cointegration," LIDAM Discussion Papers CORE 2007080, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  • Handle: RePEc:cor:louvco:2007080
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    Cited by:

    1. Andrea Silvestrini, 2010. "Testing fiscal sustainability in Poland: a Bayesian analysis of cointegration," Empirical Economics, Springer, vol. 39(1), pages 241-274, August.
    2. Tronzano, Marco, 2017. "Testing Fiscal Sustainability In The Transition Economies Of Eastern Europe: The Case Of Poland (1999-2015)," Economia Internazionale / International Economics, Camera di Commercio Industria Artigianato Agricoltura di Genova, vol. 70(1), pages 103-132.

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    More about this item

    Keywords

    Bayesian inference; fiscal sustainability; cointegration; bootstrap;
    All these keywords.

    JEL classification:

    • C11 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Bayesian Analysis: General
    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory

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