Abstract
We assess the sustainability of public finances in OECD countries using unit root and cointegration analysis, controlling for endogenous breaks. Results deem fiscal sustainability as rather elusive since we find lack of cointegration – absence of sustainability – between government revenues and expenditures (except for Austria, Canada, France, Germany, Japan, Netherlands, Sweden and UK); improvements of the primary balance after worsening debt ratios only for Australia, Belgium, Germany, Ireland, Netherlands and the UK; and Granger causality from government debt to primary balances for 12 countries (suggesting Ricardian regimes).
Original language | English |
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Pages (from-to) | 2651-2664 |
Number of pages | 14 |
Journal | Applied Economics |
Volume | 48 |
Issue number | 28 |
DOIs | |
Publication status | Published - 14 Jun 2016 |
Keywords
- breaks
- causality
- Debt
- DOLS
- fiscal regimes
- primary balance
- stationarity