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A Nonlinear Approach to Public Finance Sustainability in Latin America

Author

Listed:
  • Georgios Chortareas

    (University of Connecticut)

  • George Kapetanios

    (Queen Mary, University of London)

  • Merih Uctum

    (City University of New York)

Abstract

The debt crisis in Latin America is associated with the large fiscal imbalances of the 1980s; therefore public finance sustainability occupies the center of stabilization efforts in these economies. The literature examining this question in emerging economies is surprisingly scant and this paper aims at filling this gap. We analyze sustainability for a sample of Latin American countries, employing unit root tests that incorporate nonlinear alternative hypotheses. These tests capture the thresholds or corridor regimes that international agreements or markets impose on emerging economies' public finances. We show that support for sustainability substantially improves when such nonlinearities are taken into account.

Suggested Citation

  • Georgios Chortareas & George Kapetanios & Merih Uctum, 2003. "A Nonlinear Approach to Public Finance Sustainability in Latin America," Working Papers 486, Queen Mary University of London, School of Economics and Finance.
    • Handle: RePEc:qmw:qmwecw:486
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    References listed on IDEAS

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    More about this item

    JEL classification:

    • H6 - Public Economics - - National Budget, Deficit, and Debt
    • H87 - Public Economics - - Miscellaneous Issues - - - International Fiscal Issues; International Public Goods

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