[go: up one dir, main page]
More Web Proxy on the site http://driver.im/
IDEAS home Printed from https://ideas.repec.org/a/vrs/ngooec/v70y2024i3p1-20n1001.html
   My bibliography  Save this article

Assessing Fiscal Sustainability with Panel Unit Root, Cointegration, and Granger Causality Tests: Evidence from the Broader Groups of Countries

Author

Listed:
  • Fir Nejc

    (University of Maribor Faculty of Economics and Business, Maribor Slovenia)

Abstract
The question of fiscal sustainability of countries has become one of the central topics in economic policy, especially in times of increasing public debts. One way to assess fiscal sustainability is to examine compliance with the intertemporal budget constraint, which involves testing the stationarity of government revenues and expenditures, the primary budget balance, and the first differences of public debt. Part of this approach includes testing cointegration and causality among different pairs of variables. Under this approach, the paper is focused on both first- and second-generation panel unit root tests, cointegration, and Granger causality test. This paper focuses on assessing the fiscal sustainability of four panels of countries divided by continents: Europe, Asia and Oceania, Africa, and Latin America, the Caribbean, and North America. It has been found that fiscal sustainability is present in all the broader groups of countries considered but in a weak form. Fiscal sustainability was confirmed when considering a constant in calculations, while deviations were observed among groups of countries when both a constant and trend were considered. The study serves as a starting point for a more extensive analysis of fiscal sustainability. For more accurate findings, it would be necessary to categorize countries into smaller and economically more homogeneous groups and analyze them using other fiscal sustainability methods as well.

Suggested Citation

  • Fir Nejc, 2024. "Assessing Fiscal Sustainability with Panel Unit Root, Cointegration, and Granger Causality Tests: Evidence from the Broader Groups of Countries," Naše gospodarstvo/Our economy, Sciendo, vol. 70(3), pages 1-20.
    • Handle: RePEc:vrs:ngooec:v:70:y:2024:i:3:p:1-20:n:1001
    DOI: 10.2478/ngoe-2024-0013
    as

    Download full text from publisher

    File URL: https://doi.org/10.2478/ngoe-2024-0013
    Download Restriction: no
    File URL: https://libkey.io/10.2478/ngoe-2024-0013?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Mauro, Paolo & Romeu, Rafael & Binder, Ariel & Zaman, Asad, 2015. "A modern history of fiscal prudence and profligacy," Journal of Monetary Economics, Elsevier, vol. 76(C), pages 55-70.
    2. António Afonso & José Carlos Coelho, 2022. "Fiscal sustainability, fiscal reactions, pitfalls and determinants," Working Papers REM 2022/0219, ISEG - Lisbon School of Economics and Management, REM, Universidade de Lisboa.
    3. Beqiraj, Elton & Fedeli, Silvia & Forte, Francesco, 2018. "Public debt sustainability: An empirical study on OECD countries," Journal of Macroeconomics, Elsevier, vol. 58(C), pages 238-248.
    4. Cansin Kemal Can, 2023. "Estimating Bohn's Fiscal Sustainability Model with Temporal Variation: Evidence from Turkey," Prague Economic Papers, Prague University of Economics and Business, vol. 2023(1), pages 61-83.
    5. Bohn, Henning, 2007. "Are stationarity and cointegration restrictions really necessary for the intertemporal budget constraint?," Journal of Monetary Economics, Elsevier, vol. 54(7), pages 1837-1847, October.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. António Afonso & José Alves & Oļegs Matvejevs & Oļegs Tkačevs, 2023. "Fiscal Sustainability and the Role of Inflation," CESifo Working Paper Series 10843, CESifo.
    2. María del Carmen Ramos-Herrera & Simón Sosvilla-Rivero, 2020. "Fiscal Sustainability in Aging Societies: Evidence from Euro Area Countries," Sustainability, MDPI, vol. 12(24), pages 1-20, December.
    3. Olumide Olusegun Olaoye & Phillip A. Olomola, 2023. "Sub‐Saharan Africa's rising public debt stock: Is there a cause for concern?," South African Journal of Economics, Economic Society of South Africa, vol. 91(1), pages 85-115, March.
    4. Gnangnon, Sèna Kimm, 2021. "Tax reform and public debt instability in developing countries: The trade openness and public revenue instability channels," Economic Analysis and Policy, Elsevier, vol. 69(C), pages 54-67.
    5. de Groot, Oliver & Holm-Hadulla, Fédéric & Leiner-Killinger, Nadine, 2015. "Cost of borrowing shocks and fiscal adjustment," Journal of International Money and Finance, Elsevier, vol. 59(C), pages 23-48.
    6. Piotr Ciżkowicz & Andrzej Rzońca & Rafał Trzeciakowski, 2015. "Windfall of Low Interest Payments and Fiscal Sustainability in the Euro Area: Analysis through Panel Fiscal Reaction Functions," Kyklos, Wiley Blackwell, vol. 68(4), pages 475-510, November.
    7. Olaoye, Olumide Olusegun & Olomola, P.A., 2022. "Empirical analysis of asymmetry phenomenon in the public debt structure of Sub-Saharan Africa's five biggest economies: A Markov-Switching model," The Journal of Economic Asymmetries, Elsevier, vol. 25(C).
    8. MATSUOKA, Hideaki & 松岡, 秀明, 2024. "Real-Time Detection of Hidden Fiscal Unsustainability in the EU," Discussion Papers 2024-02, Graduate School of Economics, Hitotsubashi University.
    9. Park, Danbee & Sung, Taeyoon, 2020. "Foreign debt, global liquidity, and fiscal sustainability," Japan and the World Economy, Elsevier, vol. 54(C).
    10. António Afonso & José Alves & Olegs Matvejevs & Olegs Tkacevs, 2024. "Impact of Sovereign Debt Maturity on Fiscal Sustainability," Working Papers REM 2024/0358, ISEG - Lisbon School of Economics and Management, REM, Universidade de Lisboa.
    11. Canofari, Paolo & Marini, Giancarlo & Piergallini, Alessandro, 2020. "Financial Crisis and Sustainability of US Fiscal Deficit: Indicators or Tests?," Journal of Policy Modeling, Elsevier, vol. 42(1), pages 192-204.
    12. António Afonso & José Alves & José Carlos Coelho, 2023. "Determinants of the Degree of Fiscal Sustainability," CESifo Working Paper Series 10225, CESifo.
    13. Lawrence Ogbeifun & Olatunji Shobande, 2020. "Debt sustainability and the fiscal reaction function: evidence from MIST countries," Future Business Journal, Springer, vol. 6(1), pages 1-8, December.
    14. Afonso, António & Coelho, José Carlos, 2023. "Public finances solvency in the Euro Area," Economic Analysis and Policy, Elsevier, vol. 77(C), pages 642-657.
    15. António Afonso & José Carlos Coelho, 2024. "Budgetary Constrained Governments: Drivers of Time Varying Fiscal Sustainability in OECD Countries," CESifo Working Paper Series 11137, CESifo.
    16. Gilles Dufrénot & Carolina Ulloa Suarez, 2019. "Public finance sustainability in Europe: a behavioral model," Working Papers halshs-02356400, HAL.
    17. Vicente Esteve & María A. Prats, 2021. "Financial bubbles and sustainability of public debt: The case of Spain," Working Papers 2111, Department of Applied Economics II, Universidad de Valencia.
    18. Karsten Staehr & Olegs Tkacevs & Katri Urke, 2023. "Fiscal performance under inflation and inflation surprises: evidence from fiscal reaction functions for the Euro Area," Bank of Estonia Working Papers wp2023-3, Bank of Estonia, revised 20 Jun 2023.
    19. Vladimir Andric & Dusko Bodroza & Mihajlo Djukic, 2024. "A Commentary on US Sovereign Debt Persistence and Nonlinear Fiscal Adjustment," Mathematics, MDPI, vol. 12(20), pages 1-33, October.
    20. Maureen Were & Lekinyi Mollel, 2020. "Public debt sustainability and debt dynamics: The case of Tanzania," WIDER Working Paper Series wp-2020-112, World Institute for Development Economic Research (UNU-WIDER).

    More about this item

    Keywords

    Cointegration tests; Fiscal sustainability; Granger causality tests; Intertemporal budgetary constraint; Unit root tests;
    All these keywords.

    JEL classification:

    • H61 - Public Economics - - National Budget, Deficit, and Debt - - - Budget; Budget Systems
    • H62 - Public Economics - - National Budget, Deficit, and Debt - - - Deficit; Surplus
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:vrs:ngooec:v:70:y:2024:i:3:p:1-20:n:1001. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Peter Golla (email available below). General contact details of provider: https://www.sciendo.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.