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The sustainability of fiscal policy: A group-mean panel estimator approach

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  • Chow, Sheung Chi

Abstract

There has been a rising interest recently on studying sustainability of fiscal policy using panel data. Generally, these kinds of studies will in their last come up with a conclusion that a panel of countries have or haven’t a sustainable fiscal policy. To come up with such kind of conclusion, most of those studies implicitly assume that there is a common cointegrated relationship in government revenue and expenditure between countries in their panel data. However there is not much argument could support that necessarily those countries shares a same long run relationship. This paper employs recently developed techniques, group-mean panel estimator (include group-mean panel FMOLS and DOLS), for investigating the sustainability of fiscal policy in a panel of countries , but without assuming that there must be a common cointegrated relationship in government revenue and expenditure between countries in their panel data. To our knowledge, this is the first paper adopt a group-mean panel estimator to investigate whether countries have a sustainable fiscal policy.

Suggested Citation

  • Chow, Sheung Chi, 2013. "The sustainability of fiscal policy: A group-mean panel estimator approach," MPRA Paper 57808, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:57808
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    References listed on IDEAS

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    More about this item

    Keywords

    Fiscal sustainability; Group-mean panel FMOLS; Group-mean panel DOLS.;
    All these keywords.

    JEL classification:

    • C5 - Mathematical and Quantitative Methods - - Econometric Modeling
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory

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