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Testing for the government's intertemporal budget restriction in Brazil during 1823--1889

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  • Abdulnasser Hatemi-J
  • Fernando Zanella

Abstract

This article tests whether the government's intertemporal budget restriction was fulfilled during the Brazilian imperial period (1823--1889). To accomplish this, newly developed tests for cointegration with unknown structural breaks are applied. It is found that government spending and government revenue are cointegrated if the effect of two unknown structural breaks is taken into account. The estimated parameter vector reveals that the one-by-one relationship that is required for solvency does not prevail for the sub-periods before and after the first break, however it prevails for the sub-period after the second break. We interpret these findings as empirical support for the long-run government solvency in Brazil at the end of the imperial period.

Suggested Citation

  • Abdulnasser Hatemi-J & Fernando Zanella, 2013. "Testing for the government's intertemporal budget restriction in Brazil during 1823--1889," Applied Economics, Taylor & Francis Journals, vol. 45(12), pages 1533-1540, April.
    • Handle: RePEc:taf:applec:45:y:2013:i:12:p:1533-1540
    DOI: 10.1080/00036846.2011.629984
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    1. Hacker, Scott & Hatemi-J, Abdulnasser, 2010. "The Properties of Procedures Dealing with Uncertainty about Intercept and Deterministic Trend in Unit Root Testing," Working Paper Series in Economics and Institutions of Innovation 214, Royal Institute of Technology, CESIS - Centre of Excellence for Science and Innovation Studies.
    2. Abdulnasser Hatemi-J, 2009. "CItest2b: GAUSS module to implement tests for cointegration with two unknown structural breaks," Statistical Software Components G00006, Boston College Department of Economics.
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    Cited by:

    1. Triches, Divanildo & Sleimann Bertussi, Luis Antônio, 2017. "Multicointegração e sustentabilidade da política fiscal no Brasil com regime de quebras estruturais (1997-2015)," Revista Brasileira de Economia - RBE, EPGE Brazilian School of Economics and Finance - FGV EPGE (Brazil), vol. 71(3), September.

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