Fiscal shocks and budget balance persistence in the EU countries from Central and Eastern Europe\ud \ud \ud \ud \ud

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Cuestas , J.C. ; Staehr, K. (2011)
  • Publisher: Department of Economics, University of Sheffield

This paper analyses the time series properties of the fiscal balance in the 10 EU countries from Central and Eastern Europe. The persistence of shocks in the variable has been analysed by means of unit root tests that account for the possibility of non-linearities and structural changes. The results of the linear and non-linear unit root tests find only mild evidence in favour of the stationarity hypothesis, with asymmetric effects present in a few cases. After controlling for structural changes in the data generation process, the results point to stochastic stationarity of the series. Thus, in spite relatively steady headline figures, the public balance processes exhibit substantial instability in the EU countries from Central and Eastern Europe.\ud
  • References (2)

    Afonso, A. and C. Rault (2008): “3-step analysis of public finances sustainability. The case of the European Union”, European Central Bank, Working Paper Series, no. 908.

    Afonso, A., C. Nickel and Ph. Rother (2006): “Fiscal consolidations in the Central and Eastern European countries”, Review of World Economics, vol. 142, pp. 402-421.

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