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Fiscal policy sustainability: some unpleasant European evidence

  • António Afonso

The sustainability of fiscal deficits has been receiving increasing attention from economists. The issue is paramount for the newly formed Euro area and this is one of the motivations of the paper. In order to assess the sustainability of budget deficits in the Euro area, stationarity tests for the stock of public debt and co-integration tests between public expenditures and public revenues are performed for the Euro countries for the 1968-1997 period. The empirical results allow us to conclude that fiscal policy may not be sustainable for most countries with the possible exceptions of Germany, Austria and the Netherlands.

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Paper provided by ISEG - School of Economics and Management, Department of Economics, University of Lisbon in its series Working Papers Department of Economics with number 2000/12.

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Date of creation: 2000
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Handle: RePEc:ise:isegwp:wp122000
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Department of Economics, ISEG - School of Economics and Management, University of Lisbon, Rua do Quelhas 6, 1200-781 LISBON, PORTUGAL

Web page: https://aquila1.iseg.ulisboa.pt/aquila/departamentos/EC

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