Article ID | Journal | Published Year | Pages | File Type |
---|---|---|---|---|
965652 | Journal of Macroeconomics | 2006 | 13 Pages |
Abstract
In this paper, we re-examine the long-run sustainability of budget deficits, when fiscal policy is conducted as a non-linear process. Our empirical methodology makes use of recent developments on threshold cointegration that consider the possibility of a non-linear relationship between government expenditures and revenues. The analysis is applied to the case of Spain, a country that has recently accomplished an important fiscal consolidation. Overall, our results suggest the presence of significant non-linear effects in Spanish fiscal policy, so that fiscal authorities would cut deficits only if they are 'large', which would assure in turn their long-run sustainability.
Related Topics
Social Sciences and Humanities
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Economics and Econometrics
Authors
Oscar Bajo-Rubio, Carmen DÃaz-Roldán, Vicente Esteve,