Article ID | Journal | Published Year | Pages | File Type |
---|---|---|---|---|
5056002 | Economic Modelling | 2008 | 11 Pages |
Abstract
In this paper we test how the primary surplus in two countries of the euro area, Germany and Italy, reacts to changes of public debt. Our theoretical part demonstrates that a positive reaction on average gives strong evidence for a sustainable debt policy. In the empirical part, we perform semi-parametric estimations using penalized spline smoothing. The results suggest that there is evidence for sustainable debt policy in Germany, however, with a declining tendency. Italian public debt does not seem to be sustainable although consolidation efforts in the nineties have stabilized Italian debt. However, the conclusion as regards Italy must be made with caution because the statistical significance is small.
Related Topics
Social Sciences and Humanities
Economics, Econometrics and Finance
Economics and Econometrics
Authors
Alfred Greiner, Göran Kauermann,