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.
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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:
Creators:
Correia, M. d. R., Neck, R., Panagiotidis, T. and Richter, C.
Publisher:
Springer Verlag
Faculties, Divisions and Institutes:
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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