Arghyrou, Michael Georgiou ![]() ![]() |
Abstract
Corsetti and Roubini [Corsetti, G., Roubini, N., 1991. Fiscal deficits, public debt and government solvency: Evidence from OECD countries. Journal of Japanese and International Economies 5, 354–380] reported that the government finances of Greece, Ireland, Italy and the Netherlands (now all EMU countries) did not satisfy the intertemporal budget constraint (IBC). We re-examine this issue by utilizing a new empirical approach and extended data sets. Issues of structural shifts and non-linear fiscal adjustment are tackled. We find that: (i) the fiscal path of these countries went through multiple shifts; (ii) most of these shifts correspond to important policy changes and/or external shocks; (iii) the government finances of all four countries satisfy the IBC across different time horizons; and (iv) fiscal disequilibrium adjusts non-linearly. We also find a clear positive Maastricht effect on the IBC of all countries.
Item Type: | Article |
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Date Type: | Publication |
Status: | Published |
Schools: | Business (Including Economics) |
Uncontrolled Keywords: | Intertemporal budget constraint; Strong and weak form sustainability; Structural breaks; Non-linear adjustment |
ISSN: | 01640704 |
Last Modified: | 17 Oct 2022 09:14 |
URI: | https://orca.cardiff.ac.uk/id/eprint/2520 |
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