Is fiscal policy sustainable in developing economies?

Ghatak, Subrata and Sanchez-Fung, Jose R. (2006) Is fiscal policy sustainable in developing economies? (Discussion Paper) Helsinki, Finland : Valtion taloudellinen tutkimuskeskus. 31 p. ISBN 9515616034

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This paper investigates fiscal policy sustainability in Peru, the Philippines, South Africa, Thailand, and Venezuela using competing methodologies. Standard unit roots and cointegration analyses do not endorse the validity of the intertemporal budget constraint. In contrast, to varying degree across-countries, alternative testing employing a fiscal policy reaction function indicates sustainability defined as surplus adjustments in response to higher debt to income ratios. Corresponding debt-dynamics analyses show that corrective measures were put in place to revert non-sustainable trends in government debt. However, ancillary variables in the debt modeling produce statistically weak evidence of procyclical fiscal behavior in the Latin American countries.

Item Type: Monograph (Discussion Paper)
Additional Information: VATT Discussion Paper no. 384. This paper is also published as a journal article.
Uncontrolled Keywords: fiscal policy sustainability, fiscal policy reaction functions, developing countries
Research Area: Economics and econometrics
Faculty, School or Research Centre: Faculty of Arts and Social Sciences (until 2017) > School of Economics (until November 2012)
Depositing User: Susan Miles
Date Deposited: 02 Mar 2010 10:03
Last Modified: 16 Jul 2012 21:48
DOI: 384

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