Home >> FinanzArchiv: Public Finance Analysis, Volume 65, Number 2

Using Panel Data to Test for Fiscal Sustainability within the European Union

Authors: Prohl, Silika; Westerlund, Joakim

Source: FinanzArchiv: Public Finance Analysis, Volume 65, Number 2, June 2009 , pp. 246-269(24)

Publisher: Mohr Siebeck

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Abstract:

Most empirical evidence suggests that the sustainability hypothesis, stating that government revenues and expenditures should cointegrate with a unit slope on expenditures, does not hold within the European Union, a finding at odds with many theoretical models. This paper argues that these results can be attributed in part to the use of inappropriate time-series techniques, and that the use of panel data can generate more accurate tests. By using newly devised panel unit-root and cointegration techniques it is shown that the sustainability hypothesis cannot be rejected when applied to a panel composed of 15 European countries between 1970 and 2004.

Keywords: FISCAL SUSTAINABILITY; PANEL UNIT ROOT; PANEL COINTEGRATION

Document Type: Research article

DOI: http://dx.doi.org/10.1628/001522109X470612

Publication date: 2009-06-01

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  • FinanzArchiv founded in 1884 is one of the world's oldest professional journals in public finance.

    FinanzArchiv publishes original work from all fields of public economics which are of interest to an international readership, e.g. taxation, public debt, public goods, public choice, federalism, market failure, social policy, and the welfare state. Special emphasis is on high-quality theoretical and empirical papers on current policy issues.

    FinanzArchiv is a well-established, internationally oriented journal in the field of public economics, widely read in Europe and all over the world.

    FinanzArchiv is listed in the Social Science Citation Index (SSCI, JCR impact factor 2007 0,296), in Current Contents/Social and Behavioral Sciences, in IDEAS and RePEc (IDEAS/RePEc simple impact factor 2008 1.177), in the Journal of Economic Literature (CD and online), and in the International Bibliography of the Social Sciences.

    FinanzArchiv is a fully peer-reviewed journal committed to a prompt turnaround of submissions. No more than four months should pass between online submission of a manuscript and the editor's decision on acceptance, revision, or rejection.
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