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“The relationship between debt level and fiscal sustainability in OECD countries”

  • Mariam Camarero


    (Jaume I University)

  • Josep Lluís Carrion-i-Silvestre


    (Faculty of Economics, University of Barcelona)

  • Cecilio Tamarit


    (University of Valencia)

In this paper we unify the traditional approaches to testing for fiscal sustainability considering the stock-flow system that fiscal variables configure. Our approach encompasses previous ways of testing for sustainability. The results obtained for a group of 17 OECD countries point to weak fiscal sustainability, as well as to the existence of cointegration between deficit and debt, confirming the relevance of the stock-flow approach. Allowing for structural breaks and multicointegration turns out to be of critical importance to assess whether the fiscal authorities apply their policies looking for sustainability and whether, simultaneously, they try to stabilize real debt target levels..

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Paper provided by University of Barcelona, Research Institute of Applied Economics in its series IREA Working Papers with number 201315.

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Length: 55 pages
Date of creation: Sep 2013
Date of revision: Sep 2013
Handle: RePEc:ira:wpaper:201315
Contact details of provider: Postal: Tinent Coronel Valenzuela, Num 1-11 08034 Barcelona
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  17. António Afonso, 2005. "Fiscal Sustainability: The Unpleasant European Case," FinanzArchiv: Public Finance Analysis, Mohr Siebeck, Tübingen, vol. 61(1), pages 19-, March.
  18. Escario, Regina & Gadea, María Dolores & Sabaté, Marcela, 2012. "Multicointegration, seigniorage and fiscal sustainability. Spain 1857–2000," Journal of Policy Modeling, Elsevier, vol. 34(2), pages 270-283.
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  20. Vanessa Berenguer‐Rico & Josep Lluís Carrion‐i‐Silvestre, 2011. "Regime shifts in stock–flow I(2)–I(1) systems: the case of US fiscal sustainability," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 26(2), pages 298-321, March.
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