Manuscript received 4.4.11; final version received 22.4.12.
UK FISCAL POLICY SUSTAINABILITY, 1955–2006*
Article first published online: 29 AUG 2012
© 2012 The Authors. The Manchester School © 2012 John Wiley & Sons Ltd and The University of Manchester
The Manchester School
Volume 81, Issue 6, pages 961–991, December 2013
How to Cite
FAN, J. and ARGHYROU, M. G. (2013), UK FISCAL POLICY SUSTAINABILITY, 1955–2006. The Manchester School, 81: 961–991. doi: 10.1111/j.1467-9957.2012.02319.x
- Issue published online: 8 OCT 2013
- Article first published online: 29 AUG 2012
We test for fiscal policy sustainability in the UK over the period 1955–2006. We find evidence of sustainability with three structural breaks, respectively occurring in the early 1970s, early 1980s and late 1990s. UK fiscal policy was not sustainable between 1973 and 1981. Within the fiscal regimes correction of fiscal disequilibrium occurs through adjustments in public revenue. Changes in fiscal regimes, however, occur through shifts in public expenditure. UK authorities do not react to relatively small deficits but correct exceedingly large deficits relatively fast. Finally, the recent financial crisis may have caused a substantial deterioration of UK fiscal dynamics.