IDEAS home Printed from https://ideas.repec.org/p/duk/dukeec/01-04.html
   My bibliography  Save this paper

Multicointegration, Sustainability of Fiscal Practices and the Role of Fiscal Institutions

Author

Listed:
  • Leachman, Lori L.

Abstract

Using the multicointegration methodology first presented in Granger and Lee (1989, 1990) and further developed by Engsted, Gonzalo and Haldrup (1997) and Haldrup (1998) we develop criteria for testing sustainability of the fiscal budgeting process. We then apply this criteria to the fiscal systems of fifteen industrialized countries. Finland, Norway, the U.K. and Switzerland display government budgeting behavior consistent with sustainable fiscal practices. Evidence indicates that the budgeting practices of Belgium, Canada, Denmark, France, Greece, Italy, the Netherlands, Portugal, Spain, Sweden and the U.S. are inconsistent with practices that are sustainable. The findings suggest that over the sample period the governments of these last eleven countries may have been trying to exploit low rates of interest relative to growth or execute a Ponzi scheme. However, should growth decline, sustainability of the fiscal processes may become problematic necessitating structural adjustments. The evidence further suggests that reforming budgetary institutions in such a manner as to make them stronger, more hierarchical and transparent will mitigate the pressures to pursue fiscal profligacy.

Suggested Citation

  • Leachman, Lori L., 2001. "Multicointegration, Sustainability of Fiscal Practices and the Role of Fiscal Institutions," Working Papers 01-04, Duke University, Department of Economics.
  • Handle: RePEc:duk:dukeec:01-04
    as

    Download full text from publisher

    File URL: http://www.econ.duke.edu/Papers/Abstracts01/abstract.01.04.html
    File Function: main text
    Download Restriction: no

    More about this item

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:duk:dukeec:01-04. 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: (Department of Economics Webmaster). General contact details of provider: http://econ.duke.edu/ .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.