US deficit sustainability: a new approach based on multiple endogenous breaks

Martin, Gael M.

doi:10.1002/(sici)1099-1255(200001/02)15:1<83::aid-jae543>3.0.co;2-j

Cited by 123 publications

(107 citation statements)

References 33 publications

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“…Hakkio and Rush (1991), Martin (2000), Cunado et al (2004), andPaleologou (2013) have shown that cointegration between government revenues and expenditures is considered as evidence in support of the intertemporal budget constraint. The theoretical rationale underlying the use of the cointegration methodology starts with the government's one-period budget constraint given in Eq.…”

Section: Theoretical Frameworkmentioning

confidence: 99%

Government spending and revenues in Sweden 1722–2011: evidence from hidden cointegration

Irandoust

2017

Empirica

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This study examines the long-run causal relationship between government revenues and spending of the Swedish economy over the period 1722-2011. The results based on hidden cointegration technique and a modified version of the Granger non-causality test, show that there exists a long-run and asymmetric relationship between government spending and government revenues. Our estimation results can be summarized into three main empirical findings. First, the government follows a hard budget constraint and soft budget constraint strategies in the case of negative and positive shocks, respectively. Second, negative shocks to the fiscal budget are removed fairly quickly compared to positive shocks. Third, bi-directional causality between revenues and expenditures offers support in favor of the fiscal synchronization hypothesis. The policy implication is that budget deficit's reduction could be achieved through government spending cut, accompanied by contemporaneous tax controls.

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Section: Theoretical Frameworkmentioning

confidence: 99%

Government spending and revenues in Sweden 1722–2011: evidence from hidden cointegration

Irandoust

2017

Empirica

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“…We demonstrate that the results based on the procedures accounting for structural breaks are more favorable on the long-run relation between exports and imports. Several authors of recent studies (Wu et al, 1996;Apergis et al, 2000;Martin, 2000) have also raised this point that derives from the low power of standard cointegration tests in the presence of structural breaks. Note: The t, Z(t) and η statistics refer to the ADF, PP, and KPSS tests, respectively.…”

Section: Conclusion and Policy Lessonsmentioning

confidence: 99%

On the sustainability of current account deficits: evidence from four ASEAN countries

Baharumshah

Lau

Fountas

2003

Journal of Asian Economics

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This paper examines the sustainability of the current account imbalance for four ASEAN countries (Indonesia, Malaysia, the Philippines and Thailand) over the 1961-1999 period.To this end, we utilize the intertemporal budget constraint (IBC) model to explain the behavior of the current account in these countries. The analysis is based on various unit root and cointegration procedures including those allowing for a structural break to deal with the major shortcomings of previous studies. The empirical results indicate clearly that for all countries, except Malaysia, current account deficits were not on the long-run steady state in the pre-crisis era. This leads us to conclude that the current accounts of these countries were unsustainable and did not move towards external account equilibrium. Moreover, the persistent current account deficits might serve as a leading indicator of financial crises. In contrast, we find strong comovement between inflows and outflows in Indonesia, the Philippines and Thailand in the period including the post-crisis years, while Malaysia was on an unsustainable path. This is because macroeconomic performance of most of the ASEAN countries has changed dramatically since the onset of the Asian crisis in mid-1997. The evidence suggests that action to prevent large appreciations should have been taken prior to the 1997 crisis. JEL classification: F30, F32

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“…The subsequent studies refined the analysis by incorporating the possibility of structural changes that are associated with different degrees of sustainability (e.g., Quintos, 1995;Martin, 2000;Afonso, 2005) and have also generalized the definition of sustainability to distinguish between strict and weak sustainability.…”

Section: Theoretical Underpinnings and Review Of Empirical Literaturementioning

confidence: 99%

Budget Deficit Sustainability and Revenue Expenditure Linkages in Major South Asian Economies

Shastri

Giri²

2017

EJBE

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US deficit sustainability: a new approach based on multiple endogenous breaks

Cited by 123 publications

References 33 publications

Government spending and revenues in Sweden 1722–2011: evidence from hidden cointegration

Government spending and revenues in Sweden 1722–2011: evidence from hidden cointegration

On the sustainability of current account deficits: evidence from four ASEAN countries

Budget Deficit Sustainability and Revenue Expenditure Linkages in Major South Asian Economies

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