Fiscal Sustainability in the European Countries: A Panel ARDL Approach and a Dynamic Panel Threshold Model

Abstract

We analyze the fiscal sustainability hypothesis for a panel of 20 European Union countries from 2000 to 2019. In particular, we employ new econometric methodologies that, to the best of our knowledge, are applied for the first time to the study of sovereign fiscal policy sustainability in these economies. Specifically, we estimate the panel ARDL technique, distinguishing between short- and long-run coefficients because the order of integration of our variables is not the same. Moreover, a panel threshold model with endogeneity is considered to investigate whether, departing from a particular threshold, there is different behavior between the government primary balance and public debt, both taken as a ratio of potential GDP. Finally, the panel Granger causality test is implemented to determine the direction of causality or the existence of bidirectional causality.

On the Sustainable Economic Growth in Sub-Saharan Africa: Do Remittances, Human Capital Flight, and Brain Drain Matter?

“…Therefore, for the selected SSA economies' real gross domestic product to improve, remittances must account for at least a 26.6 percent share of the yearly impact inflow to overcome the persistent human capital flight challenges in the region. This is comparable to the findings of a previous study [69]. As a result, a return to convergence will take four years on average, although authorities (i.e., government institutions and departments of the selected SSA countries, government agencies, and private organizations) may implement active policies and programs that can offer opportunities for decent work, wages, and favorable labor market participation for all who wish to seek employment, as well as providing traceable channels for remittance inflows into their countries to ensure the remittance system is easy to access as well as policies that will prevent human capital flight and brain drain.…”

Assessing Fiscal Sustainability in the Landscape of Economics Research

“…By utilizing semiparametric formulations and exploring the explicit role of singularity in conditional covariance matrices, these studies reveal empirical insights into fiscal sustainability, examining fiscal adjustments, public debt dynamics, and the impact of joining economic unions like the EMU (European Monetary Union) on fiscal sustainability. Furthermore, (iii) panel analysis (Abeysinghe et al 2022;Bui 2019;Feld et al 2020;Polat and Polat 2021;Ramos-Herrera and Prats 2020). These studies, employing various panel analysis techniques, contribute to understanding fiscal sustainability across different economies, identifying both sustainable and unsustainable fiscal trends, and providing insights into governments' reactions to increasing debt levels.…”

“…Furthermore, (iii) panel analysis (Abeysinghe et al 2022;Bui 2019;Feld et al 2020;Polat and Polat 2021;Ramos-Herrera and Prats 2020). These studies, employing various panel analysis techniques, contribute to understanding fiscal sustainability across different economies, identifying both sustainable and unsustainable fiscal trends, and providing insights into governments' reactions to increasing debt levels.…”

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