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“The relationship between debt level and fiscal sustainability in OECD countries”

Author

Listed:
  • Mariam Camarero

    (Jaume I University)

  • Josep Lluís Carrion-i-Silvestre

    (Faculty of Economics, University of Barcelona)

  • Cecilio Tamarit

    (University of Valencia)

Abstract

In this paper we unify the traditional approaches to testing for fiscal sustainability considering the stock-flow system that fiscal variables configure. Our approach encompasses previous ways of testing for sustainability. The results obtained for a group of 17 OECD countries point to weak fiscal sustainability, as well as to the existence of cointegration between deficit and debt, confirming the relevance of the stock-flow approach. Allowing for structural breaks and multicointegration turns out to be of critical importance to assess whether the fiscal authorities apply their policies looking for sustainability and whether, simultaneously, they try to stabilize real debt target levels..

Suggested Citation

  • Mariam Camarero & Josep Lluís Carrion-i-Silvestre & Cecilio Tamarit, 2013. "“The relationship between debt level and fiscal sustainability in OECD countries”," AQR Working Papers 201307, University of Barcelona, Regional Quantitative Analysis Group, revised Sep 2013.
    • Handle: RePEc:aqr:wpaper:201307
    as

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    File URL: http://www.ub.edu/irea/working_papers/2013/201315.pdf
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    References listed on IDEAS

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    Cited by:

    1. Olaoye, Olumide Olusegun & Olomola, P.A., 2022. "Empirical analysis of asymmetry phenomenon in the public debt structure of Sub-Saharan Africa's five biggest economies: A Markov-Switching model," The Journal of Economic Asymmetries, Elsevier, vol. 25(C).
    2. António Afonso & João Tovar Jalles, 2016. "The elusive character of fiscal sustainability," Applied Economics, Taylor & Francis Journals, vol. 48(28), pages 2651-2664, June.
    3. Afonso, António & Tovar Jalles, João, 2017. "Sovereign debt composition and time-varying public finance sustainability," The North American Journal of Economics and Finance, Elsevier, vol. 42(C), pages 144-155.
    4. Gabriela Dobrotă, 2016. "Budgetary Deficit and Its Effects on Public Debt," Ovidius University Annals, Economic Sciences Series, Ovidius University of Constantza, Faculty of Economic Sciences, vol. 0(2), pages 467-470, February.
    5. Magazzino, Cosimo & Brady, Gordon L. & Forte, Francesco, 2019. "A panel data analysis of the fiscal sustainability of G-7 countries," The Journal of Economic Asymmetries, Elsevier, vol. 20(C).

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    More about this item

    Keywords

    fiscal sustainability; cointegration; unit roots; structural breaks. JEL classification: H62; E62; C22.;
    All these keywords.

    JEL classification:

    • H62 - Public Economics - - National Budget, Deficit, and Debt - - - Deficit; Surplus
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes

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