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Authors
Advisor(s)
Abstract(s)
We use an original multi-step analysis to assess the sustainability of public finances. Firstly, we investigate the
mean-reverting behaviour of government expenditures and revenues. Secondly, we apply bootstrap panel
cointegration techniques to check for a long-run relationship between expenditures and revenues. Thirdly, we
check the coefficient of expenditure in the cointegration relation. Fourthly, we estimate panel error correction
models to identify short-run and long-run fiscal developments. While the results imply that public finances
were not unsustainable for the EU panel, they highlight that fiscal sustainability is an issue for most countries,
as evidenced by a below unit estimated coefficient of expenditure in the cointegration relation.
Description
Keywords
Fiscal Sustainability EU Panel Cointegration
Pedagogical Context
Citation
Afonso, António and Christophe Rault. (2015). "Multi-step analysis of public finances sustainability". Economic Modelling, Vol.48: pp.199-209.
Publisher
Elsevier