Post by Sapphire Capital on Aug 1, 2008 3:02:23 GMT 4
3-Step Analysis of Public Finances Sustainability: The Case of the European Union
Antonio Afonso
Technical University of Lisbon - ISEG (School of Economics and Management); UECE (Research Unit on Complexity and Economics); European Central Bank (ECB)
Christophe Rault
Universite D'Orleans (France); Université d'Évry - Centre D'Etudes des Politiques Economiques et de L'Emploi (EPEE); Université Paris I Panthéon-Sorbonne - Equipe Universitaire de Recherche en Economie Quantitative (EUREQUA); Institute for the Study of Labor (IZA); CESifo (Center for Economic Studies and Ifo Institute for Economic Research)
June 23, 2008
ECB Working Paper No. 908
Abstract:
We use a 3-step analysis to assess the sustainability of public finances in the EU27. Firstly, we perform the SURADF specific panel unit root test to investigate the meanreverting behaviour of general government expenditure and revenue ratios. Secondly, we apply the bootstrap panel cointegration techniques that account for the time series and cross-sectional dependencies of the regression error. Thirdly, we check for a structural long-run equation between general government expenditures and revenues via SUR analysis. While results imply that public finances were not unsustainable for the EU panel, fiscal sustainability is an issue in most countries, with a below unit estimated coefficient of expenditure in the cointegration relation with revenue as the dependent variable.
papers.ssrn.com/sol3/Delivery.cfm/SSRN_ID1156246_code485639.pdf?abstractid=1138608&mirid=3
Antonio Afonso
Technical University of Lisbon - ISEG (School of Economics and Management); UECE (Research Unit on Complexity and Economics); European Central Bank (ECB)
Christophe Rault
Universite D'Orleans (France); Université d'Évry - Centre D'Etudes des Politiques Economiques et de L'Emploi (EPEE); Université Paris I Panthéon-Sorbonne - Equipe Universitaire de Recherche en Economie Quantitative (EUREQUA); Institute for the Study of Labor (IZA); CESifo (Center for Economic Studies and Ifo Institute for Economic Research)
June 23, 2008
ECB Working Paper No. 908
Abstract:
We use a 3-step analysis to assess the sustainability of public finances in the EU27. Firstly, we perform the SURADF specific panel unit root test to investigate the meanreverting behaviour of general government expenditure and revenue ratios. Secondly, we apply the bootstrap panel cointegration techniques that account for the time series and cross-sectional dependencies of the regression error. Thirdly, we check for a structural long-run equation between general government expenditures and revenues via SUR analysis. While results imply that public finances were not unsustainable for the EU panel, fiscal sustainability is an issue in most countries, with a below unit estimated coefficient of expenditure in the cointegration relation with revenue as the dependent variable.
papers.ssrn.com/sol3/Delivery.cfm/SSRN_ID1156246_code485639.pdf?abstractid=1138608&mirid=3