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A "litmus test" of Deficit Sustainability: The Case of the Greek Budget Deficit

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  • Dimitris Hatzinikolaou

    (University of Ioannina, Department of Economics, 451 10 Ioannina, GREECE)

Abstract

The paper applies three sustainability tests to the Greek budget deficit, which is known to be unsustainable, and can therefore be used to check the reliability of the three tests. Using three deficit definitions, i.e., in levels, in per capita terms, and in percent of GDP, I find the following results: (1) the unit-root test rejects sustainability only for the last definition; (2) the Hakkio-Rush test does not reject sustainability for any definition; and (3) the Hatzinikolaou-Simos test, which is applicable only for the first two definitions, strongly rejects sustainability, and so it proves to be more reliable, as expected.

Suggested Citation

  • Dimitris Hatzinikolaou, 2016. "A "litmus test" of Deficit Sustainability: The Case of the Greek Budget Deficit," Review of Economics & Finance, Better Advances Press, Canada, vol. 6, pages 65-73, August.
    • Handle: RePEc:bap:journl:160305
    Note: The author is grateful to two anonymous referees of this Journal for their useful comments and suggestions, which improved this paper significantly. Of course, the usual disclaimer applies.
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    References listed on IDEAS

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    More about this item

    Keywords

    Budget deficit; Sustainability tests; Greece;
    All these keywords.

    JEL classification:

    • C15 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Statistical Simulation Methods: General
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • H62 - Public Economics - - National Budget, Deficit, and Debt - - - Deficit; Surplus
    • H63 - Public Economics - - National Budget, Deficit, and Debt - - - Debt; Debt Management; Sovereign Debt

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