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UK Debt Sustainability: Some Nonlinear Evidence and Theoretical Implications

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  • John Considine

    (University College Cork)

  • Liam A. Gallagher

    (Dublin City University)

Abstract

In this paper we assess whether the UK public finances were sustainable for the period 1919-2001. A robust test of sustainability is presented using a nonlinear representation of the debt-GDP ratio. Empirical evidence supports debt sustainability. Moreover, the exponential smooth transition autoregressive representation is evidence that sustainability is the result of active debt management rather than tax smoothing. The results strongly support the active debt management hypothesis for the UK. Copyright © 2008 The Authors.
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Suggested Citation

  • John Considine & Liam A. Gallagher, 2004. "UK Debt Sustainability: Some Nonlinear Evidence and Theoretical Implications," Money Macro and Finance (MMF) Research Group Conference 2004 59, Money Macro and Finance Research Group.
  • Handle: RePEc:mmf:mmfc04:59
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    Cited by:

    1. Abderrahim Chibi & Sidi Mohamed Chekouri & Mohamed Benbouziane, 2015. "Assessing Fiscal Sustainability in Algeria: a Nonlinear Approach," Working Papers 962, Economic Research Forum, revised Oct 2015.
    2. Piergallini, Alessandro & Postigliola, Michele, 2013. "Non-linear budgetary policies: Evidence from 150 years of Italian public finance," Economics Letters, Elsevier, vol. 121(3), pages 495-498.
    3. Tsong, Ching-Chuan & Wu, Chien-Wei & Chiu, Hsien-Hung & Lee, Cheng-Feng, 2013. "Covariate unit root tests under structural change and asymmetric STAR dynamics," Economic Modelling, Elsevier, vol. 33(C), pages 101-112.
    4. Piergallini, Alessandro, 2012. "Non-Linear Fiscal Regimes and Interest Rate Policy," MPRA Paper 42671, University Library of Munich, Germany.

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