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An empirical investigation of the sustainability of the public deficit in Portugal

Correia, M. d. R., Neck, R., Panagiotidis, T. and Richter, C. (2008) An empirical investigation of the sustainability of the public deficit in Portugal. International Economics and Economic Policy. 5(1-2), pp. 209-223. 1612-4812.

Item Type: Article
Abstract: In this paper, we investigate Portuguese government expenditures and revenues as an example for a long time series. Our hypothesis states that there may be periods when the deficit is sustainable and those when it is not. Usually, after a period of unsustainable deficits, a new regime takes over. These regime shifts call for an approach that takes into account a non-constant structure of the underlying data generating process. Consequently, we use different tests which we set up in a timevarying framework. We apply and compare the results of the Trace test, Breitung’s non-parametric test and the Bohn test. We identify several break points and find that the Trace test performs worst in this case while Breitung’s test and the Bohn test give similar results. Comparing the results with history, we find that the last two tests best reflect what happened historically.
Uncontrolled Keywords: Budget deficit, cointegration, long time series, structural breaks
Subjects: H Social Sciences > HC Economic History and Conditions > HC94 By region or country > HC392 Portugal
H Social Sciences > HJ Public Finance > HJ241 By region or country
Creators: Correia, Maria do Rosario, Neck, Reinhard, Panagiotidis, Theodore and Richter, Christian
Publisher: Springer Verlag
Faculties, Divisions and Institutes: Faculties > Faculty of Business & Law > Accounting & Finance
University Faculties, Divisions and Research Centres - OLD > Faculty of Business & Law > Accounting and Finance
Date: July 2008
Date Type: Publication
Page Range: pp. 209-223
Journal or Publication Title: International Economics and Economic Policy
Volume: 5
Number: 1-2
Language: English
ISSN: 1612-4812
Status: Published / Disseminated
Refereed: Yes

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