The elusive character of fiscal sustainability

António Afonso, João Tovar Jalles

Research output: Contribution to journalArticle

12 Citations (Scopus)

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 languageEnglish
Pages (from-to)2651-2664
Number of pages14
JournalApplied Economics
Volume48
Issue number28
DOIs
Publication statusPublished - 14 Jun 2016

Keywords

  • breaks
  • causality
  • Debt
  • DOLS
  • fiscal regimes
  • primary balance
  • stationarity

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