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Sustainability of Latin American fiscal deficits: a panel data approach

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  • Jacobo Campo-Robledo
  • Luis Melo-Velandia

Abstract

This paper evaluates the fiscal sustainability hypothesis for eight Latin American countries for the period 1960–2009: Argentina, Chile, Colombia, Ecuador, Panama, Peru, Paraguay and Uruguay. Using second-generation cointegration panel data models, we test whether government revenues and primary expenditures are sustainable in the long run. This methodology allows for cross-sectional dependence among countries and is appropriate under the existence of potential structural breaks. We found empirical evidence of fiscal sustainability for these Latin American countries but only in a weak sense. Copyright Springer-Verlag Berlin Heidelberg 2015

Suggested Citation

  • Jacobo Campo-Robledo & Luis Melo-Velandia, 2015. "Sustainability of Latin American fiscal deficits: a panel data approach," Empirical Economics, Springer, vol. 49(3), pages 889-907, November.
    • Handle: RePEc:spr:empeco:v:49:y:2015:i:3:p:889-907
    DOI: 10.1007/s00181-014-0905-8
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    Cited by:

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    More about this item

    Keywords

    Fiscal sustainability; Panel unit root tests; Panel cointegration tests; Structural change; C22; C23; H62;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • H62 - Public Economics - - National Budget, Deficit, and Debt - - - Deficit; Surplus

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