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- Title
MEAN REVERSION OF THE FISCAL CONDUCT IN 24 DEVELOPING COUNTRIES.
- Authors
BAHARUMSHAH, AHMAD ZUBAIDI; LAU, EVAN
- Abstract
In this paper, we examine the mean reverting behaviour of fiscal deficit by analysing the fiscal position of 24 developing countries. Using annual data over the period 1970-2003 and the series-specific panel unit root test developed by Breuer et al. ( Oxford Bulletin of Economics and Statistics, Vol. 64 (2002), pp. 527-546), we found the budget process for most developing countries fails to satisfy the strong-form sustainability condition. Further investigation shows the budget process for a majority of the countries is on a sustainable path (weak form) when a one-time, structural break is allowed in the model. Therefore, our empirical results suggest that the budget process in most of the sample countries is in accordance with the intertemporal budget constraint.
- Subjects
REVERSION; BUDGET process; FISCAL policy; EMPIRICAL research; ECONOMIC models; DEFICIT financing; DEVELOPING countries
- Publication
Manchester School (1463-6786), 2010, Vol 78, Issue 4, p302
- ISSN
1463-6786
- Publication type
Article
- DOI
10.1111/j.1467-9957.2009.02140.x