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| Ehrhart Christophe and Matthieu Llorca |
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| ''Fiscal Sustainability in Central and Latin America Countries: Evidence from a Panel Cointegration Approach'' |
| ( 2017, Vol. 37 No.4 ) |
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| This empirical study aims at assessing sustainability of fiscal policies in twenty Central and Latin American countries over the period 1990-2012. We employ the second generation panel unit root test proposed by Pesaran (2007) to take into account for cross-section dependence and it is found that the fiscal variables are integrated of order one. Using the panel cointegration tests suggested by Westerlund (2007), econometric results show that there is a long-run relationship between government revenue and spending. The estimate of the panel cointegrating regression in an error correction model indicates that the budget deficit turns out to be weakly sustainable. |
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| Keywords: public debt sustainability, panel data unit-root and co-integration tests, Central and Latin American countries |
JEL: H5 - National Government Expenditures and Related Policies National Government Expenditures and Related Policies: General
H6 - National Budget, Deficit, and Debt: General |
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| Manuscript Received : Oct 04 2017 | | Manuscript Accepted : Oct 26 2017 |
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