Multicointegration and sustainability of fiscal practices

Journal Article (Review;Journal)

Using multicointegration methodology, we develop criteria for testing sustainability of fiscal budgeting processes across all states of nature. Criteria are derived from the optimal control literature where levels and rates of change of a system of variables are determinants of policy response. The appropriate policy response mechanisms are outlined and linked to the multicointegration methodology. We then test government spending and revenue systems of 15 industrialized countries for the presence of such mechanisms. We find that only Norway and the United Kingdom exhibit policy responses that are consistent with our criteria. © Western Economic Association International.

Full Text

Duke Authors

Cited Authors

  • Leachman, L; Bester, A; Rosas, G; Lange, P

Published Date

  • September 12, 2005

Published In

Volume / Issue

  • 43 / 2

Start / End Page

  • 454 - 466

International Standard Serial Number (ISSN)

  • 0095-2583

Digital Object Identifier (DOI)

  • 10.1093/ei/cbi031

Citation Source

  • Scopus