THE RELATIONSHIP BETWEEN DEBT LEVEL AND FISCAL SUSTAINABILITY IN ORGANIZATION FOR ECONOMIC COOPERATION AND DEVELOPMENT COUNTRIES |
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| Authors: | Mariam Camarero Josep Lluís Carrion‐i‐Silvestre Cecilio Tamarit |
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| Affiliation: | 1. +34 964728590Fax +34‐964728591;2. Professor of Economics, Department of Applied Economics, Jaume I University, 12071 Castelló, Spain.;3. +34 934024598+34 934021821;4. Professor of Economics, AQR‐IREA Research Group, Department of Econometrics, Statistics and Spanish Economy, University of Barcelona, 08034 Barcelona, Spain. |
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| Abstract: | In this article we unify the traditional approaches to testing for fiscal sustainability considering the stock‐flow system that fiscal variables configure. Our approach encompasses previous ways of testing for sustainability. The results obtained for a group of 17 Organization for Economic Cooperation and Development (OECD) countries point to weak fiscal sustainability, as well as to the existence of cointegration between deficit and debt, confirming the relevance of the stock‐flow approach. Allowing for structural breaks and multicointegration turns out to be of critical importance to assess whether the fiscal authorities apply their policies looking for sustainability and whether, simultaneously, they try to stabilize real debt target levels. (JEL H62, E62, C22) |
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