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Fiscal shocks and budget balance persistence in the EU countries from Central and Eastern Europe

  • Juan Carlos Cuestas

    ()

    (Department of Economics, The University of Sheffield)

  • Karsten Steahr

This paper analyses the time series properties of the fiscal balance in the 10 EU countries from Central and Eastern Europe. The persistence of shocks in the variable has been analysed by means of unit root tests that account for the possibility of non-linearities and structural changes. The results of the linear and non-linear unit root tests find only mild evidence in favour of the stationarity hypothesis, with asymmetric effects present in a few cases. After controlling for structural changes in the data generation process, the results point to stochastic stationarity of the series. Thus, in spite relatively steady headline figures, the public balance processes exhibit substantial instability in the EU countries from Central and Eastern Europe.

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File URL: http://www.shef.ac.uk/economics/research/serps/articles/2011_014.html
File Function: First version, 2011
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Paper provided by The University of Sheffield, Department of Economics in its series Working Papers with number 2011014.

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Length: 21 pages
Date of creation: May 2011
Date of revision: May 2011
Handle: RePEc:shf:wpaper:2011014
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