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- Title
Nonlinearities, Co-Trending and Budget Balance Sustainability.
- Authors
Holmes, Mark J.
- Abstract
The study provides new evidence on the sustainability debate concerning the US budget balance. Existing studies are often only able to reject non-cointegration between government expenditure and revenue once structural breaks or regime changes are allowed for. Using a testing procedure advocated by Bierens, this study provides a different perspective on this issue. Government expenditure and revenue are both found to be stationary around a nonlinear deterministic trend, and they are co-trended insofar as they share a common nonlinear deterministic trend.
- Subjects
UNITED States; UNITED States federal budget; PUBLIC spending; GOVERNMENT revenue; ECONOMIC trends
- Publication
Economic Analysis & Policy, 2010, Vol 40, Issue 3, p369
- ISSN
0313-5926
- Publication type
Article
- DOI
10.1016/S0313-5926(10)50036-5